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No. of Recommendations: 12
Several thoughts come to mind here -[Sorry it is the prosecutor side of me coming through]

1) My first thought is that B&H is doing this as a prelude to closing shop.

Consider the following: Buy and Hold reports a big loss [big in terms of the size of its revenue, cash reserves, relative size of the company]. They say they are looking for new round of financing. Recently they imposed a monthly inactivity fee [read free money] to generate money. My guess is that folk with inactive accounts simply left in droves and B&H collect few if any inactivity fees.

Now they impose a flat $6.99 a month fee. They can't possibly think folks are going to stick around and pay this, they just can't. The people they targeted when they opened shop were folks like us here on the DRiP boards. People who were not likely to be sellers and were probably only going to make purchases in few stocks and maybe only one or two a month. But these were going to be long term customers who would be a consistent stream of income. Their targeted customers are not likely to accept a $7.00 a month fee just to maintain an account or to make 1 or 2 purchases. Unless their market research department is brain dead there has to be an ulterior motive here.

Also consider that there are a number of discount brokers that charge no monthly fees and charge only $5 or $7 for a market order. A market order that can be placed any time of day not just during a preset window. For the infrequent trader, these are better deals then B&H despite the ability to buy fractional shares. You can make a buy every couple months to minimize your fees, getting better control over your purchase and skip whole months if you don't have the free cash and not pay a dime.

Given this logic, my guess is these fees are designed to generate a ton of cash right now. If, as I expect, a large number [50% or more] of B&H account holders liquidate their accounts, B&H will generate a huge amount of cash within the next 20 days [20 not 30 days as folks need to close their accounts by May 31 to avoid the fee so the selling needs to be done by around the 23rd for the money to clear]. If half the 200,000+ accounts close out and they have an average of 4 stocks in them [my dad transferred 8 drip accounts and bought 5 other companies through them for a total of 13 stocks] then B&H will generate around a million dollars in 3 weeks, probably a lot more.

This move however will leave them with too few customers left and no credibility with their target market, hence no realistic way to scale their customer base to a profitable level. With cash in hand they can liquidate without needing much or as much cash from their corporate backers. [Ok now you know why I am often called cynical]

I can't see any other logical reason for this move. It is not going to build good will, not going to make them appealing to new customers, not likely to generate long term business. It will provide a quick infusion of cash to allow them to pay back their creditor, i.e their corporate parent. Let me know if anyone sees something else.

Andy


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