Zecco Trading Experience, My First Trades, And Other Investing Thoughts

by golbguru on June 21, 2007

Before I start praising Zecco for it’s $0 trades, I have a few remarks to make about their customer service. My first experience with Zecco was late last year (around early December) when I first applied for an account following the lure of free trades. The enthusiasm didn’t last very long (partly due to the $2500 minimum opening balance), and although Zecco opened an account in my name, it was never enabled for trading (it was put on “hold” as one of their emails later explained).

Recently, it dropped the minimum account opening balance requirement to $0 ~ so I thought of giving it another shot. To avoid messing with the earlier aborted account, I opened a new sub-account (this is subject to special conditions - read this comment by Chuck below, and my reply to it. Following their terms of service, it’s not a good idea to open another account if you have already one that has been cleared for trading). This account was again delayed (due to some complications) - but I was informed about the problem only after a week.

Towards solving the problem, I emailed them the necessary documents - and didn’t get any acknowledgment for yet another week. Meanwhile, to avoid wasting more time, I proceeded to connect my checking account to Zecco via ACH, in the hopes that my paper work would be cleared by the time the money is transfered. Surprisingly, the ACH procedure went smoothly and the funds were in my Zecco account in about 6 working days - but there was still no word about the status of the paperwork.

Finally, as my patience was wearing out, Zecco sent an email informing me that they are still “processing” my documents and it would take a few more days to get things started. Never heard from them after that.

Yesterday, just for the sake of it, I signed in to Zecco to see if things have been cleared and sure enough it didn’t show any outstanding documents ~ finally, I was ready to start some free trading. Goes without saying that I didn’t receive any notification about my account being cleared for trading.

The whole account opening procedure took almost a month.

Oh well…. so much for $0 trades. :)

Fun fact: Zecco doesn’t have a damn toll free number!

In summary, their customer service needs a very serious overhaul. Hopefully they will work on it as they mature.

  • My First Zecco Trades

With that rant out of the way, let’s discuss the trades.

Here is a screenshot of the first trades I placed through Zecco late yesterday night (rather very early today morning). You can see the obvious hesitation (the canceled trade). First, I went for iShares MSCI Australia Index (EWA) on account of it’s strong historical performance and it’s 5-star rating from Morningstar (as displayed on MSN MoneyCentral).

My first trades at Zecco trading

However, later I read some articles on The Motley Fool about emerging markets and decided to cancel the EWA order and go with the Vanguard Emerging Market ETF (VWO). Honestly, I don’t have any technical reason to explain why I did that - I just got swayed by this article on the Fool about VWO.

Update: the trades have been successfully executed - I was a bit worried in that department, given the propensity of things to go wrong with my Zecco experience so far.

zecco trades are done

Hopefully, I will have a good start here. :)

Any opinions on these choices?

By the way, you must have noticed that I am only talking in terms of ETFs for now. I don’t think I am at a position to start messing with individual stocks yet. May be sometime later this year.

  • Some Thoughts on Commission Free Trades

Although their customer service sucks at present, I have to give credit to Zecco for thinking out of the box with respect to commission free trades. I think the idea is awesome.

Here are a few reasons why I think it’s awesome:

  • Commission free trading makes investing a whole lot easier for occasional small-time investors like me. People can actually think about regularly putting their weekly small savings into the stock market without having to worry about per-trade fees. In other words, it will encourage dollar-cost averaging - which is a good thing for a lot of people (I am thinking students) who don’t have large amounts to invest.
  • On similar lines, commission free trades will cause investors to look at ETFs from a totally different point of view (again, think dollar-cost averaging for ETFs). For example, widely accepted statements like the following will cease to have relevance.

    Exchange-traded funds (ETFs), with their often-minuscule expense ratios, would seem to be the perfect vehicles for dollar-cost averaging, but initial appearances can be deceiving. Source: Investopedia

    Exchange-traded funds have many strengths, but individual investors should be wary of investing in small amounts. Transaction fees cannot be avoided with ETFs as they can by going directly to a traditional no-load mutual fund, because ETFs must be bought and sold like a stock through a brokerage house. For substantial purchases, this transaction fee is an insignificant percentage, but for small purchases it becomes unreasonable. Source: Yahoo Finance

  • Personally, free trading will give me the long awaited opportunity to experiment with stocks. For example, without putting in too much money, I want to try out a list like this one on MSN: Top 10 stocks and tweak it over time. Such a thing wouldn’t be affordable in the presence of significant transaction (and/or fixed) fees.

I am not sure how long Zecco can run with it’s promise of $0 trades, but as long as it continues, I am hoping that Zecco’s (hopefully successful) model will encourage other popular online brokerage firms towards commission free trading in time to come.

  • Useful resources:

Zecco Review by Jonathan @ My Money Blog.

First Trading Experience with Zecco by Sun @ The Sun’s Financial Diary.

Related Articles:

{ 3 trackbacks }

Investing on a Budget: How to Get Started in the Stock Market without a lot of Money
07.06.07 at 2:34 pm
I Am Happy When The Market Goes Down
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Cheap Trading: Zecco.com : SavingWithMe.com
09.07.07 at 9:24 am

{ 27 comments… read them below or add one }

1 Christy 06.21.07 at 7:43 am

To go along with this, I’ve had good experiences with eTrade — maybe you’ve already talked about this, I’m new here. If you’re willing to put $1000 in their Money Market account, and buy through their no-load, no-transaction fee program you don’t pay loads, transaction fees, or commissions. I automatically invest in an index fund every two weeks (MDIIX) and it’s worked out well for me so far. If you don’t put at least $1000 into their money market however, they charge you $40 per quarter in account fees. True, there are other ways to get out of these fees, but I didn’t qualify for them. Thanks for the great article.

2 Debbie 06.21.07 at 7:55 am

One problem with no-fee trading is that you might be tempted to trade more often, following the boards and trying to buy low, sell high or–worse–trying to sell before rock-bottom and buy before the peak.

Studies have shown that on average, people who trade less earn more.

It looks like you personally might not have that temptation, but I am mentioning this as a possible negative to free trades.

3 TFB 06.21.07 at 8:14 am

Dollar cost average - open end mutual funds let you do the same without any fees.

Overcome commission problem on ETFs - If the trades are really small, savings from ETFs over regular mutual funds is also small. Might as well stick with mutual funds. For large trades, commission cost isn’t a problem to begin with.

Experiment with stocks - If the experiment worked, you might be enticed to put ever more dollars to the experiment. And you know what might happen then. Just like in casino gambling.

4 satkum 06.21.07 at 8:31 am

zecco customer service is horrible. They lost my paperwork twice. I transferred 2500$ but now I couldn’t make a trade as they said a piece of documentation was missing. I faxed it and mailed it but they lost it again. When I am trying to take my money out, they are not allowing me to do so. They want the missing piece of documentation to be sent again. I hope they do not lose it again. Important moral of the story: nothing comes free.

5 Moneymonk 06.21.07 at 8:47 am

I too did not like Zecco rep tape. I was changing from Sharebuilder to Zecco. But with their Customer Service I just lost interested. I am now with TD Ameritrade.

6 KItty 06.21.07 at 8:50 am

One thing that I was told in an investing class I took a while ago was that deep discount brokers often play more on spread i.e. charging the customer closer to the ask amount on purchases while paying closer to the bid amount and vice-versa. Doing Limit orders may provide a bit of protection against it but then the order may go unsatisfied.

I am only repeating what the instructor said. He was an expensive broker himself from some major company so he wasn’t exactly objective.

Personally I’ve used TD Ameritrade for a while and I’ve been happy with them.

7 Chris Gardner 06.21.07 at 9:04 am

I have a small amount to invest each month, well below the dollars spoken about here, and am and a firm believer of dollar cost averaging. With that I really need Zecco to implement trading in partial shares. I want to purchase as many shares of VWO as $25 or $50 will buy. It may be a policy decision as they really may not want to fool with my business. I won’t be margin trading for the foreseeable future.

8 golbguru 06.21.07 at 12:06 pm

Christy: Thanks for the information; I will check out eTrade option you mentioned.

Debbie: Yeah, I hear you. I will try and avoid frequent trading - I guess my instinct to go for ETFs instead of stocks might be an indication of that. :)

TFB: Good mutual funds have minimum opening balance requirement which I cannot afford at this stage - so free ETF trades offer a rather handy solution at present. Yes, individual ETF trades will be small, but I am expecting to buy ETFs 12~20 times a year for the next several years; overall it might be a significant volume. So probably I would save some nominal amounts because of a lower expense ratio.

Also, I have read that ETFs offer some kind of a tax advantage over mutual funds - however, I need to educate myself more on that matter.

Satkum and Moneymonk: For my first account (opened last year) I had somewhat similar experience and customer service totally sucks. But I think for the convenience of $0 trades I will ignore that for the time being. :)

Kitty: “discount brokers often play more on spread i.e. charging the customer closer to the ask amount on purchases while paying closer to the bid amount and vice-versa.” that is true. However, I am anticipating the trades feasible in spite of the bid/ask spread. Read this for some more details.

Chris: Yeah, I agree with you - it would be much better if they implement partial shares.

I am sort of used to that feature from my existing Sharebuilder account - unfortunately Sharebuilder charges fees, so I don’t use it often.

9 Chuck 06.21.07 at 12:15 pm

I would also be careful opening up multiple accounts at Zecco. From their TOS:

Please keep in mind that only the first account of any account type is eligible for our Free Trading program. Any multiple accounts of the same type with the same registration are not eligible for the free trading program.

Hopefully that first attempt to open an account won’t come back.

10 golbguru 06.21.07 at 1:00 pm

Chuck: Good point. I failed to mention that in the post. I had that in mind before I opened the new account; so I called them up to confirm that I would still have free trading privileges on the newer account. They said it would be fine as long as I didn’t use the other account for trading.

To avoid confusion in future, I have now proceeded to cancel the inactive account (although it wasn’t doing any harm just sitting there). I just had to send an email requesting them to cancel it.

I will make a change in the post right now highlighting this point. Thanks for mentioning it.

11 Super Saver 06.21.07 at 4:45 pm

Golbguru,

Welcome to the world of stock investing. Zecco seems like a good deal with free trades. I’m staying with TD Ameritrade and Schwab for now. While they have commissions, I have been happy with their customer service so far. Not enough incentive to switch, yet.

12 Lazy Man and Money 06.21.07 at 5:27 pm

I think KItty brought up a great point with the spread. It’s definitely still a cost.

Listen to Debbie if, for nothing else, you’ll really have a much more fun come April 15th.

I think that VWO is one of the best avenues for emerging markets. I’m thinking of investing my whole Roth IRA in it next year, to give myself a stake in that area. I’m already in various other geographic and sector slices with that account, so I think it’s a solid choice.

13 Corndogdriver 06.21.07 at 6:35 pm

It always amazes me how much crapola people will put up with and how many obtuse rules they’ll abide in order to do cheap trades.

14 golbguru 06.21.07 at 8:21 pm

Lazy: When I think “frequent transactions” - I am mostly thinking of only *buying* ETFs, not selling them. :) I am aware of capital gains tax implication (although, “aware” does not mean “educated” :) )

VWO sounds good for now; however as I understand, it has a good degree of volatility considering the countries it is spread in. Hopefully it stays as a solid choice for the long run.

15 Ritch 06.27.07 at 11:28 am

Zecco have a very poor customer service.
They have lost my paperwork and it was impossible to solve the problem until sending again all the papers. The customer team is not able to follow a simple problem and to solve it. Very very poor service. Hope that nobody will have problems, because it takes days to solve them.

16 Investing Blog 06.28.07 at 6:51 pm

How many times does this need to be said, “you get what you pay for!” Being a college student, I’m ecstatic to sidestep the commission fees.

I remember the old days with ShareBuilder, paying $15 per real-time sell. That’s just crazy. I mean how is anyone who lacks a full time job supposed to afford investing if it costs $50 to sell 3 stocks?

Customer service is poor because a) the brokerage is young, b) they do not have enough capital to fully staff their offices, and c) they are offering FREE trades. I still pay $20 a pop at Fidelity…real smart, huh? ( I continue a bit of this rant in my zecco reviews)

I’m not in love with Zecco, but I do respect the unique service they offer. It’s not about the broker; it’s about the customer.

17 Kenx007 07.03.07 at 9:43 am

I recently gave Zecco a shot and it’s been great. I submitted my application and information all online and didn’t have to send in any paperwork. I was cleared to trade as soon as I had my money in. The whole process took about a week before I started my first trade. I just finished off my first trades today and they went flawlessly. The bid/spread does seem a little bit higher but all around still fair for no fees.

18 Ivan 07.09.07 at 6:44 pm

Zecco sucks !!!

I have used eTrade, Scottrade for a few years. I have to say Zecco is apparently the worst ! I almost can not imagine any other trading site worse than Zecco. And the worst part of Zecco is its customer service. Their representative are not only not helpful, they are unbelivably ignorant of their rules/policy and they just drive you crazy.

For almost *every* question that I checked with them via email or phone, to my surprise, everytime I get different answers from different representatives, it made me wondering if these representatives are really working for the same company… When I opened my aacount, I followed exactly what they require on the web site, since I am an experienced one, I even called them to check if I need to submit W9. I was told by one person via email saying no, then I called them, another person said yes I do need to; then I called again, this time anothr one said “maybe”. Are they crazy or what ? Not just W9, they messed up a lot of things indeed. When eveyrthing seemed to be fine, I funded my account and I saw the money. Then suddenly the next day I found my account was suspended ! I called them and they spent 2 hours and couldn’t tell me why they suspended it !!! I was really angry and I decided to close my account. Then next day they said my account was reactivated ! Then I tried to withdraw money and stay away from it, then they gave me lot of trouble and sometimes they “pretend” not read your email, their “standard” answer is “you need to complete certain procedure to…”. I asked them to be specific, then no response…

Later they gave me lot of trouble to diallow me to take back money. I feel it is like a rogue company.

This is a joke service, I will recommend everyone to leave this crazy scam ASAP.

19 Tradingguy 08.31.07 at 5:36 am

So, if you keep a “cool head” about verifying your identity (without taking offense, as in an airport security check), send in the paperwork (fax and mail), check-up on your paperwork status (yourself…as you should be consistantly familiar with your account,every aspect/tab), have some patience (1wk-1mth), and don’t setup more than 1 account…I can have a free trade account that I can trade ANY…ANY stock I choose?
Another fact I’ve noticed (and the main reason I went with Zecco) is that Zecco does not determine what stocks I’m allowed to trade. -Unlike my former Sharebuilder account, I mean, its MY MONEY…kewl beans :^)=

20 jk 10.04.07 at 7:23 pm

Zecco cancels accounts over negative feedback over the recent pricing structure change. Zecco did it to me. Lets see how soon this gets edited.

Watch what you say to zecco. BEWARE of ZECCO.com for investing, trading, options and stocks. It took over 5 weeks for them to setup my account and it still has not been created correctly. I don’t even have any stocks to transfer in. When talking to customer service I need to start over every time which takes a lot longer if any problem needs more than one phone call to resolve. There have been reports from people that the setup process is not clear so if you fund your account after they say everything is a go and you have not turned in your government tax papers they will withhold a sizeable chunk of your money.

Recently they changed their policy where if you no longer meet the New minimum balance requirements you do not get free trades. Even though their whole business model is built on free trades you don’t get any. Now my account is halfway setup at this point and I log in and I receive the notice saying everything is changing the minimum requirements for account, and the amount of free trades, and that you must meet the $2500 minimum to be able to receive their now ten (down from 40) free trades a month. I have not even traded my first stock with this service and the terms are changing. On top of that there is a $50 transfer out fee (up from $0) that is imposed now. This seems like bait and switch to me.

Now they contact me because they don’t have the required information that was already sent to them when my account was setup the first time. I send back that I don’t have time to start this process over with and I do not feel confident more or less in the company anymore. I also let them know that I am not happy with their business model now affects me and how I have been treated as a customer since the start. Now I have heard people criticize the company on their site which is always deleted by the moderator’s but also on the internet. I felt that I would make my own decision as their site seemed informative and I thought I know what I was getting into. All I wanted was for them to understand they are pushing customers away and that it would be beneficial to grandfather the people in that have been with the company or just signed up before this was enacted. I was not notified of this change by email or us mail as they stated before it went into affect and I just wanted to use my account with their new restrictions if need be but not be shutout by the new minimum balance.

Now I have my major funds at another broker since I wanted to make sure this company was of the straight and narrow before I brought my whole account over to them (like a lot of people do). Now these people are shunned away which may lose them business.

Now I understand that they are a new company but they don’t need to close my account because I stated I didn’t think I what they were doing was fair to me and to others. Most business owners would like to hear the feedback before it costs them money from customers taking their business elsewhere.

Moral of the story is watch what you say to Zecco they may close your account if they don’t like what you say.

Zecco if you would like to contact me I would be more than happy to talk to you.

Thanks

21 Stork 11.27.07 at 1:51 pm

I would have to agree with the sentiment that “Zecco sucks”. I don’t normally take the time to write such reviews, and I would generally choose different words. But I would not recommend them to anyone. Perhaps they are just experiencing growing pains. I have almost memorized their customer service number - always something wrong. The executions are good, because they use an underlying provider - Penson. But their website, customer service, timeliness will put you at risk. Perhaps they will get better over time. But I would advise you to use someone else… you get what you pay for.

22 Steve 09.19.08 at 7:14 am

Well, now I feel a little ill.

I’m currently a Sharebuilder customer, on their $12 a month “Automatic Investing” plan. This gives me 10 automatic buys a month (on Tuesdays), but I still have to pay 9.95 to sell anything (which hurts, since I still don’t even have $1000 in, total).

So with Sharebuilder asking $10 for me to ever cash in, $.4.50 trades on Zecco seem pretty attractive, even if I’m not in the “free trade” level. A buy/sell on Zecco would cost exactly the same as Sharebuilder - but without the monthly fee.

…but reading that it takes days/weeks to start an account on Zecco? You must be joking.

I signed up last night, honestly thinking I could begin doing business today. What made me think this? Sharebuilder allowed me to get started literally in minutes (the money takes a business day to move, but I was able to get things going).

I guess maybe I should stick with Sharebuilder a while longer…

23 Bo 02.17.09 at 8:02 am

Zecco Trading has so far been my worst experience ever, though I haven’t dealt with many online brokers. I was lured by the concept unlimited of free trades in the past (the $30.00 yearly maintenance Fee wasn’t an issue) & decided to try it with a small account as a test, about $5,000. Shortly after the unlimited of free trades turned into 10 free trades a month which would still work for me, though it did cost me some commissions. With the latest change of $25,000 minimum requirement I decided this wasn’t for me so I transferred the account to an existing account in TDAmeritrade which just arrived today with a $81.00 debit (Zecco’s cost for transferring funds & closing the account). I don’t usually believe that you get what you pay for, but in this example it has been a very costly test with no upside. I would recommend exercising caution on using this low rated broker.

24 John sloan 02.28.09 at 6:18 pm

I researched Zecco as well and i put my money
it it to really check it out and decided it
was a bait and switch. It took over a month
before I could take my money out, so before
you decide to deposit money remember this
old saying (If It Sounds Too Good To Be True
-thats right) so I took a good advice and
signed up with scottrade.com and got 3 free
trades with this promo code: YWEU0574

25 Property Marbella 07.23.12 at 5:20 am

I never do any trading with money, it is the banks who is the winner all the time.

26 Trades Diary 02.20.13 at 11:09 pm

Trades Diary
I like the writing style. It is just perfect. The blog post is very connective and attractive. All the information I found in post is very useful. Thanks a lot.

27 Sherlyn 03.25.14 at 1:53 am

Within this option, you will notice that the Default browser configuration is set to your
network. length;++d)var b=a[d];w(b,”pagespeed_lazy_src”)&&u(b);s[m].

I am now ready to assign a fake mac address to
my USB device. In economic terms, a tax deduction
is exactly the same as government spending.

He has literature written about the safety of web browsing and web security.

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