Bank Of America Enters Fray

Even though this is a column, I still don't want to open myself to complaints of favoritism. For the record, I also bank at Bank of America. My main reason for going with Wells Fargo had to do with meeting account minimums.

But I also feel that no matter how big of a nest egg is involved, the idea of making investors leave $25,000 on the table in a checking or savings account seems rather half-baked. The other problem I've got with the Bank of America offer is that it doesn't let you include any of your mortgages in the equation. Wells Fargo does, although it's a somewhat meager percentage.

Bank of America started offering free trading in ETFs in the second half of 2006. It's allowing 30 free trades a month, which is more than Wells Fargo. But those free trades are per account holder, not account. That can make a big difference depending on your style of investing.

Still, Bank of America is bigger and might have more branches in your area. I'd argue that shouldn't be a priority since the free-trading investment platform is Internet-based. And the banking sides at both operate fairly separately from the brokerages.

On the electronic end, Bank of America wins hands down. Its Web sites are much better than those of Wells Fargo. In terms of customer service, I'd give a slight edge to Bank of America.

Bank of America isn't making public any growth numbers for assets in its free-trading program. But a spokesperson did say: "We've seen significant growth in the number of new accounts being opened. New clients in the past year are bringing in larger account balances and trading more actively."

Don't Need $25,000

If you can't meet either brokerage's minimum, or want to stay away from dealing with big banks in general, there's another good option. Online broker Zecco.com is offering 10 free trades per month per account. The free-trading program requires only a $2,500 minimum, and started before Wells Fargo or Bank of America went down the same path.

"We've certainly seen various types of promotional pricing plans within the brokerage industry from time to time," said Michael Feser, president of Zecco Trading Inc. "But when the big banks made free trades a permanent part of their pricing models, it really validated what we were doing."

Zecco says it now has about 70,000 individuals trading through its platform. "ETFs are a very popular part of our online community," Feser said.

He estimates that a common benchmark among online brokers is that banking activity generates about 55%-60% of total revenues. Zecco offers savings and checking accounts as well as other financial services. It also makes money on the trading side through options and other types of investment vehicles.

Feser, who also has served in the past as an online brokerage executive at E-Trade, JPMorgan's BrownCo and USAA Investment Management, says that trading costs keep dropping as technology improves.

The firm also doesn't maintain a brick-and-mortar presence, which helps it to limit overhead.

"Costs keep being driven down as Internet trading increases," Feser said. "Free trading is definitely the wave of the future."

A business that combines profit streams of traditional banks with volume-based Web discount brokering services is "very sustainable nowadays," he added.

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