ING Direct Sharebuilder Merger: Review and My Suggestions
In case you haven’t heard, online bank ING Direct ($25 bonus) recently bought the brokerage Sharebuilder. It seems like a promising merger, as ING Direct was a pioneer in making online banking simple and approachable to the general public, and Sharebuilder has been trying to do the same thing for investing. Although I have a Sharebuilder account (for the sign-up bonuses), I’ve never been impressed with them enough to actually use them to manage my investments. This post is a combination of my review of their current setup and what I hope they implement in the future.
Good Things
- Simple, dollar-based investing. Their target audience is a casual buy-and-hold investor who doesn’t want to worry about share prices, limit orders, or real-time streaming quotes. They want to be able to say “take $100 out of my checking account each month, and invest it all for me.” So if you wanted to buy $100 of Apple even though the share price is $180, you could do so with fractional shares.
- Automatic, full dividend reinvestment. An extension of the ability to buy fractional shares is that you can fully reinvest all your dividends. Again, since this is automatic, it’s done without any hassle to the investor.
- No minimums, and no maintenance fees.
Not-so-good things
- $4 trades aren’t “real” trades. They advertise $4 a trade, but you have to remember these are for “window” trades that only process once a week on Tuesdays. Also, it’s only applicable to purchases; to sell you pay $9.95. You can’t set a limit price, or even pick which day to buy.
- Stock-pickers have better options. For traditional real-time trades, Sharebuilder now charges $9.95. But you can already get free real-time trades from several brokers, starting at just $2,500 in account equity. If people are shopping primarily on price, people can go there. If they are willing to pay more for services like advanced software or research data, there are also tons of other better options at $10 a trade.
- Too expensive for buy-and-hold investors. Again, I see the target customer for Sharebuilder as someone putting in a couple hundred bucks every month who wants something on auto-pilot. If you wanted to invest $100 a month in two ETFs, that $8 a month ($96/year) is a big ding. That’s like buying a mutual fund with a 8% front-end load. Put another way, the ETFs would have to earn 8.7% after expenses just to break even again.
This is why I choose to simply buy mutual funds with no transaction fees. In a given year, I only pay about $10 a year including expense ratios for investing $5,000. Again, if you want to stick with ETFs, you can still go with a free trades broker.
My suggestion
First, create an in-house group of index funds or ETFs. ING Direct already sells their own mutual funds, but they are actively managed, high expense ratio, run-of-the-mill mutual funds. I would never consider investing in them. Dump those and open up passive index funds that track broad indexes like the S&P 500 or the Wilshire 5000. Keep it limited to a maximum of 5-7 fund choices. Charge a low expense ratio, but not rock-bottom to create some profit margin. Say, 0.40% annually?
Next, make it easy and cheap to invest in them. The problem with mutual funds is that they often have minimum initial investments like $3,000 or so, and additional investments may need to be $500 or more. Since these are in-house funds, they could let people start with nothing as long as they commit to contributing at least $50 every month direct from their bank account. This is similar to what T. Rowe Price or TIAA-CREF does. Since they own the funds, they would still make money off the built-in management fees (expense ratio).
I believe taking these steps would make Sharebuilder follow the ING Direct mold - a convenient package with a competitive price which welcomes new investors, which in the future might stick around with huge balances. Please, ING? 
December 19th, 2007 at 7:26 am
Great Post. You always do a fantastic job of pointing out pros and cons between choices and in summarizing the hard-to-root-out details ($4 buy, $9.95 sell) that make a real difference.
Much better than my own description of the merger.
Thanks!
December 19th, 2007 at 8:10 am
I too was underwhelmed when I signed up for sharebuilder. On the other hand I love ING for their customer service. I have never had a bank take such good care of me as a customer. I hope this mentality transfers over to Sharebuilder and that they become more competitive as a result.
December 19th, 2007 at 8:15 am
Sharebuilder is the least effficient method to access direct reinvestment programs for regular stocks. Check the Investor page of any company you are interested in and they typically will have the transfer agent listed, BoNY, AMStock, Mellon or others.
Many have low (1 share that you buy on the open market or
December 19th, 2007 at 8:22 am
Deposit money in Sharebuilder once a month and purchase whenever you get enough to make the $4 a small enough percentage of your purchase. If you’re dollar cost averaging, it doesn’t matter when you make your purchases. Make them once a month, make them once a quarter, whatever.
December 19th, 2007 at 8:22 am
take 2
… low initial
December 19th, 2007 at 8:23 am
hmmm seem to have trouble posting today. Ah well.
December 19th, 2007 at 10:48 am
Re: comment problems
The < symbol is probably why - sorry about that. Try either leaving a space after it, or just writing “less than”
December 19th, 2007 at 10:49 am
What’s the consensus out there about Zecco these days? I’m looking to open an account and expect to have ~10 trades a month. I have an ING account and thought about sharebuilder, but after this post I’m thinking more of zecco… I’ve heard some bad things though. Comments much appreciated
December 19th, 2007 at 10:53 am
“Deposit money in Sharebuilder once a month and purchase whenever you get enough to make the $4 a small enough percentage of your purchase. If you?re dollar cost averaging, it doesn?t matter when you make your purchases. Make them once a month, make them once a quarter, whatever.”
That’s a good point, but that could be used with any broker. If I used Sharebuilder, I’d want complete automation for $4 a buy/$10 to sell. That’s kind of their “thing” and differentiating characteristic. Otherwise I could do it for free at another broker or just pay TradeKing $5 to buy/sell/rebalance.
December 19th, 2007 at 11:10 am
I was able to open my Zecco account with no problems and am already trading. I used to be at scottrade and also considered sharebuilder, but having no commissions is great. Anyone know how long it takes to transfer stocks over from Scottrade?
December 19th, 2007 at 11:37 am
What if you sign up for the standard membership like I have where it cost $12 a month and you have have 6 free trades for partial stock purchases (That is $2 a trade). Yes, you have to have a long term hold strategy but I feel the standard membership is the best way to acquire ETF’s. I have over 7 years acquired a very nice sharebuilder ETF account. In terms of direct company purchases I do that for all my non ETF’s but remember some have $10-$25 upfront fees and dividend reinvestment fees.
December 19th, 2007 at 1:23 pm
Thanks Jonathan,
less than $ 250 initial investment and many charge some fee to purchase the stock but it is certainly less than $4. Many have no fee, some even offer a discount on the FMV of the stock. Depending on the company the FMV is typically an average over several trading days to even the share price.
Anyway, I use DRIPS to capture part of my annual raise or rare windfall events and then just let the dividends reinvest. Its very easy to put it on auto pilot similar to the T-bill ladder.
December 19th, 2007 at 3:19 pm
I have a Sharebuilder account and less than one year ago they were charging $15.95 to sell, not $9.95! I couldn’t handle it so I switched to Scottrade.
Their Roth IRA also has a $25 administration fee I don’t like either, so I transferred those assets as well. I love ING and hope that they can change SB for the better. Maybe eventually I’ll start using those accounts again.
December 19th, 2007 at 4:24 pm
I agree with CFO Dad. Great post, Jonathan. One of your best, I thought.
December 19th, 2007 at 4:49 pm
I like to see the commission be lt least less than 2% of the trade value, preferably less than 1%. In my amateur opinion, that’s a reasonable upfront fee.
So if you’re on the $12 a month plan, I hope you’re putting in $600 a month, if not $1,200.
I was going to add that idle cash should earn ING Direct rates, but Sharebuilder’s money market funds seems to be yielding over 4% already.
I don’t think Sharebuilder is a horrible option, there are certainly worse ones. It’s just not the best one in my opinion, and I think this is an opportunity to make it an awesome product.
December 19th, 2007 at 6:16 pm
How about showing a pros/cons comparison of sharebuilder.com with buyandhold.com
December 19th, 2007 at 7:36 pm
Johnathan it is a pretty new feature (less than 6 months old?) so maybe you don’t know about it but you can do what Stephen suggests automatically.
You create a recurring deposit of say $200 a month that goes to the Share Builder money market and then setup your automatic plan to invest funds from the money market account when have $800 or more available (or whatever number you want).
December 19th, 2007 at 9:34 pm
aschmuck - I did not know that, thanks for pointing it out. That feature does make it more appealing. I’ll have to check it out. Funny, this all started when I was debating whether to close out my tiny holdings there.
December 20th, 2007 at 1:22 am
Nice indeed, not on the sb, i opened an orange account with 1000 starting out.. the BoA savings was earning garbage interest.. so i moved some of it.. used your referral link and got 25 bucks .. basically extremely easy and simple to use.. thanks
oh and don’t spend that $10 Jonathan all in one place
December 20th, 2007 at 1:26 am
Also is the interest on savings accounts based on average daily balance, lowest balance per month, or day to day accumulation?
December 21st, 2007 at 12:08 am
Re Zecco, I had a terrible time trying to sign up with them. I really can’t recommend them. Online application wasn’t good enough so they mailed me paper that I signed and sent back with photocopied driver’s license. No word, they go silent. Finally I get them on the phone and they say they need a photocopy of my social security card. That was a first. So I fax it. No word. I wait and wait. Finally I call them again to say WTF and they say Oh it came through too dark, fax again. Was anyone going to tell me? So I scan and email it this time. I wait and wait and they’ve already pulled my ACH long ago at this point and weeks and weeks have gone by and I can’t invest the money because my paperwork isn’t approved yet. So I try to get the money back out but can’t because I’m not approved yet! Arrrrgh! That was the last straw.
Finally I just gave up. This was a two month odyssey. As soon as I was approved, I got my cash out and am now done. Didn’t like their interface anyway. Confusing and counterintuitive controls such as in the funding/cash area. I just don’t trust them. My whole goal was to get away from Sharebuilder’s fees but it just wound up not being worth it. Good luck to you.
December 21st, 2007 at 9:55 am
Catching up here. Nice article. I have both buyandhold and sharebuilder. I initially use to buy stocks direct from the company and set up DRIPs but for some it took a while and was sometimes a hassle. The straw that broke it was when the transfer agent went to computershare. They were horrible. So to make life easier for me, I transferred all to buyandhold and have been with them for several years. I wanted a place where I could consolidate all my drips and be able to purchase more. Service is simple. I am on the unlimited plan 14.99 month. It allows you to buy and sell throughout the month. One nice thing about them is they have 3 open windows daily for stock transactions unlike sharebuilder. They like sharebuilder allows reinvestment of dividends but have a monthly fee (basic or unlimited depending on the plan) For basic plan which allows 2 transaction per month as part of the plan at no cost, if you want to make additional transaction, it is 2.99. One negative I have is getting money out. It takes a while to get any money out, close to 2 weeks.
As for sharebuilder, signed up with them as I wanted to set up a portfolio that just contains ETF and did not want any monthly fees and if I wanted to buy more, it would be cheap. I would not have signed up with them until I saw an advertisement from Costco to get a $55 bonus.
January 29th, 2008 at 8:09 pm
Good luck actually getting the Costco bonus out of Sharebuilder. They have tried to deny mine, claim the number I typed in wasn’t correct. I saved the printout and the number is correct. Seems they’re just trying to avoid paying the incentive.
February 13th, 2008 at 1:38 pm
[...] For more information, see my ING Direct ShareBuilder review. [...]
February 28th, 2008 at 12:29 pm
What is the best investment these days? I have some money I would really like to invest. I’m a beginner & have only messed around with CD’s & online savings accounts but am interested in learning more. Please respond or email me at cibilic@cox.net if you can help.
March 10th, 2008 at 9:34 pm
What do you think about using e-Trade? vs. sharebuilder?
September 3rd, 2008 at 6:15 pm
ING is not worth the trouble!! After opening a joint account, I added a
link to an external bank, which had only one of the joint account holders
name on the external account. We are married and have both joint and
individual accounts. ING accepted the link, verified the account, and
accepted a deposit from that account to the ING account. Then they froze my
access to the ING accounts; I could only transfer money into ING. After two
days of trying to get the fraud department on the phone, they explained
that the external account needed to be in both names or needed to be
deleted. This made no sense, but I gave up and deleted the external
account. Then they froze my account completely and put it through a
sixty-day risk review. I had no access to my money and no recourse. Bank
elsewhere!
September 22nd, 2008 at 3:10 pm
Careful about real-time trades with these guys. I just paid over $100 dollars in commission on a real-time trade due to their large order surcharge. Their customer service says “In addition to the base commission, a large order surcharge of $0.015 for each additional share over 1,000 shares will be incurred. The total commission (base commission + surcharge) is subject to a maximum of 2.5 percent of the principal, but no less than the base commission.”
In my mind that translates into a rip-off for large orders. No more real-time trades through sharebuilder for me!
October 27th, 2008 at 6:19 pm
[...] my review of Sharebuilder a few days ago, I overlooked an important feature that commenter aschmuck pointed out. I had [...]
October 28th, 2008 at 7:23 am
[...] You can read my Sharebuilder review here, as well as a follow-up on a possibly better way to invest with [...]
January 31st, 2009 at 4:32 am
There are too many flaws with the website. On the busiest market days you can’t even access it. The site is extremely slow especially during market hours. It gets worst, you can not under any circumstances get a real-time quote, not even when you are making a realtime market trade. Therefore, when you’re making a realtime trade (unless you are using another source) you have no idea what you are paying for a stock until it’s executed.
Also, even worst, you are limited to purchasing your shares at the delayed quote price Sharebuilder quotes to you. For instance, if you have another source that tells you the realtime price of a stock is $5 dollars and you have just $510 in your account and you want 100 shares, you have just enough to purchase them with commission.
However, Sharebuilder quotes you the price twenty minutes ago and use that price to determine if you have sufficient funds to execuite the trade. Example: Your other source tells you the current market price ask price is at $5, but Sharebuilder gives you the delayed twenty minute quote which was $6. So, we you put in a trade for 100 shares, you are told you have inssufficient funds that you need $610.00, although the realtime trade price is $5.00, and you have just enough. But sharebuilder did the calculations based on the $6 and ask you to adjust your order to less than 100 shares to accommodate the $6 price. THAT IS BAD!!!!!
I’ve become terribly frustrated when I and and too often I cannot access my account. That is even more frustrating during market hours especially when you want to get out a stock. In fact, I ended up at this site losing patiences after trying to access ShareB. The site is heavily flawed.
March 2nd, 2009 at 10:04 am
I opened up a sharebuilder account little over a year ago to ease into the etrading world. Until recently, I’ve had no complaints about the service and thought highly of ING. However, last week I receieved a confirmation statement with another person’s name and account information with MY ADDRESS on it. The said person’s old address was showing as someplace in Sunnyvale California, and now the statement was indicating that my home was her new address. Alarmed, I called the service line at the Sharebuilder. The representative, Dan, was nice enough but when pressed to give me an explanation on how such a revealing personal information can be sent and linked to a wrong address, he merely tried to blame the ‘old administrative system.’ If I can receive a detailed information about someone else’s account, (due to an ‘old administrative system’) it seems very possible for other people to be looking at my information as we speak. Call me old fashioned but this just doesn’t cut it. I am sincerely disappointed at the mishap AND the handling of the mishap
May 20th, 2009 at 7:24 am
[...] Commissions/Fees Stock/options trades: $4 per investment; options: $9.95 + $1.50 per contract. Tiered pricing with monthly plans. Trades must be executed on a predetermined schedule, otherwise, increased charges apply. Broker-assisted orders: Not available. Margins: 4.5%-7.5% Hidden fees? $19.95 for the redemption or exchange of shares of ING Funds that are held less than 90 days. $25 charge if you don’t log into your account for three years. Purchasing stock in real-time or outside of the given schedule costs $9.95 (instead of $4). Surcharge of 15 cents for each additional share over 1,000 shares. Minimum deposit: None. Banking options: Credit card, checking/savings account, and other services available through ING bank. Customer Service: Marginal. [...]
September 8th, 2009 at 3:42 pm
I had a bad experiance where they took 14 minutes to process a transaction. I did not have a lot of shares, so the money factor was not a big deal. (It went up $3 a share in that time period) It was the customer service that bothered me. I am going to migrate my account when I find a company that will pay for the transfer.
Just thought I should share that. Thanks.