Techcrunch profiled the upcoming launch of a startup called Zecco that aims to bring free stock trading to the online brokerage world, along with throwing more community features into the mix in true 2.0 fashion.
The Techcrunch article is a bit negative on Zecco because of three reasons:
1. Most people don’t trade that often, so free trades don’t matter.
This is true, that a large percentage of investors don’t trade that often. However, I’d say a strong reason people don’t trade more is commissions! I know personally I trade less than I would if I had free trades, and I’m not alone.
2. Discount brokerages already expect commissions to go to $0.
So? A couple of reviews I read all are pitting Zecco up against Schwab, Merrill Lynch, eTrade, and others and thinks that it needs to dominate those companies to be a success. It doesn’t. If Zecco keeps their costs low, they can have a great business by winning customers from other discount brokerages.
PlentyOfFish.com is a great example of this concept as it’s a dating site that came along when all the dating sites had paid memberships and offered a free membership, and they also kept their overhead very small. Did it kill Date.com? No, but the guy running PlentyOfFish.com is making a ton of cash and it’s a great business for him.
3. Just because it’s cheap, it doesn’t mean people want it. Relationships matter.
Relationships do matter, to some people. The thought here is that because their trades are free, they can’t offer the great service of Schwab and others. Guess what, I’ve been trading and paying commissions for years and never talked once to a single human at three different brokerages. Where’s the relationship? Sure, I’m probably way too small of a customer to warrant the personal attention, but that’s exactly why I think this reason won’t hold Zecco back.
Zecco also is building in many community features that may make it have a different kind of relationship with it’s customers, they’ll actually feel like part of a community instead of feeling like they’re just another one of a big company’s customers.
Good luck to Zecco, I’ll be watching to see if they can shake up the brokerage industry a little, and if they don’t, they can still make a nice business out of it.
Hi. I’m part of the team that created Zecco … and we are certainly getting a lot of attention from savvy netizens these days. Zecco.com Alexa ranking before we leaked the story that we will be offering zero-commission trading = 412.000. Zecco.com Alexa ranking 36 hours later: 3.160! And climbing. Also comparisons with E*Trade, Amex, Schwab etc is fun at the moment …
Obviously rankings alone will not get the job done. We open our doors for business on October 9th and what we need is customers. Plus all the friends we can get. Launching a frontal attack on a 160 billion industry is fun and scary at the same time. But the good news is that the big boys will not be able to follow us into zero-commission territory. Take E*Trade as an example … they had revenues of around 1,5 billion last year … of which $500 came from commissions. But they had expences of around$1,2 billion so doing away with commissions would leave them some $300 in the hole.
A lot of people have asked how Zecco.com can offer zero-commission trading and still hope to survive … but the answer is relatively simple. A trade costs around $2 and we are willing and able to absorb that as doing businesss with you the customer because we do not spend the approx $6 per trade in sales and marketing costs that the big guys like Schwab, E*Trade etc. do.
Instead we believe a great deal and word of mouth is all we need to get the publics attention … after all, why pay as much as $15 a trade for something that should and can be made free?
Another question I have gotten from many people is whether their money will be safe with Zecco.com and whether the trade-execution will be as fast as our competitors. The answer to both of those questions is yes.
Zecco.com uses Penson as our settlement and clearance house — one of the largest such institutions in the US. Customers money are kept at Penson and trades are executed on their infrastructure (incidentally the same infrastructure used by many of our larger competitors). Equity and cash in accounts at pension are heavily regulated and insured … so your money is just as safe with Zecco.com as with any other US online brokerage. You can check out pensons website here. http://www.penson.com — one reason we chose these guys over several other possibilities was their phenomenal trackrecord!
Hi Soren,
Thanks for the further detail and comments. I’d love to check it out as soon as possible and do a write up.
Regarding customer service, I am a new customer to Zecco, and I HAVE been on the phone with actual representatives who have been very happy to resolve and questions or concerns that I may have. I have even received follow-up calls from management asking me if I was satisfied with the level of service provided to me by the Zecco representative. I think this company has a bright future, and it may not be 0 to 60 instantly, but their customer base will gradually rise until they are one of the “big guys”.
Good to hear Mert. It will be interesting to see if they can keep up that level of support with lower revenue from allowing free trading.
Interesting twist on the relationship aspect of most brokerages. I agree that relationships matter, and I have no problems calling up Fidelity or Tradeking to ask questions. They always provide top notch service, and reasonable answers to my queries.
So in order to test out Zecco, I signed up for an account, and am waiting to make my first trade within a few days. Because of your post, I will make sure to call them up “just to test out” their customer service. It’s very important to me that any question (no matter how small or insignificant) gets answered in the best way possible.
My first impression of Zecco was “wow, they need a lot of info,” and I jotted down a few more first impressions in my latest zecco review.
I’ve also heard rumors of poor Zecco customer service, but that’s most likely haters and not actual customers.
The Zecco Customer Service is very poor. They’ve lost my paperwork. And nobody is able to follow a simple problem.
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 “maybeâ€. 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…â€. I asked them to be specific, then no response…
This is a joke service, I will recommend everyone to leave this crazy scam ASAP.
I am an actual zecco customer and the service has become non-existent. I think they got rid of all their employees since nobody responds to voicemail or e-mail anymore.
I am a real customer at zecco.com i have called them on friday twice and got my called answered in about 9 or so minutes its not bad i got satisfying ansewers btw i swithhed my account from td ameritrade and waited about same time before taking to a real person.
yes there website need some update and features needed to be added but it is a year old company provind free trades donnt be comparing them with a $10 per trades companies and give them a year more and every one will see the diffreence
i am glad with them but the only problem with them is there is no extended hours trading avaliable
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 IRA 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.