The New Financial Bundle: Checking + Savings + Credit Card + Brokerage + Retirement Advice

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allytk

Last week, Ally Financial announced that they are acquiring TradeKing. What made this interesting was that they didn’t refer to TradeKing as a discount brokerage firm, but a “digital wealth management company”. This another move from independent start-up (TradeKing merged with Zecco earlier) to big, corporate “bundle”. The traditional communications bundle includes TV, home internet, home phone, cellular phone, and cellular data. The new financial bundle will include:

  • Checking account – Daily cash management, paycheck target, online bill payment, ATM access, debit cards.
  • Savings account – Liquid savings, higher interest rate.
  • Credit card – Easily-accessed credit line.
  • Self-directed brokerage account – DIY investments including individual stocks, options trading.
  • Professional portfolio management – Managed accounts including advice regarding asset allocation, taxes, retirement income, and more. Both lower-cost robo-advisor and higher-touch human advisor platforms.

Here’s my opinionated rundown on some of the bigger firms in this new area. Some of the “pros” aren’t that strong, and some of the “cons” aren’t that bad, but it helps organize my thoughts.

Ally Financial / TradeKing

  • Pros: Competitive interest rates on checking and savings, ATM fee reimbursements, $5 brokerage trades.
  • Cons: No physical branches. No credit cards (yet). Robo-advisor program is still relatively small and new.

Bank of America

  • Pros: Huge physical branch and in-house ATM footprint. Merrill Edge commission-free trades starting at $25k minimum asset balance, $6.95 trades otherwise. Credit card rewards bonus with minimum asset balance.
  • Cons: Low interest rates on banking products. Merrill Lynch advisor network is big and uses traditional fee system, so I’m not a huge fan but others may like it. No robo-advisor program (yet).

Fidelity

  • Pros: Decent cash management account with ATM fee reimbursements, selected commission-free ETFs, somewhat limited but low-cost index fund selection, $7.95 trades otherwise, 2% cash back credit card.
  • Cons: Low interest rates on banking products, human-based Portfolio Advice is relatively expensive and pushes expensive actively-managed funds. Lower-cost robo-advisor is probably coming soon, but yet released.

Schwab

  • Pros: Decent cash management account with ATM fee reimbursements, commission-free Schwab ETF trades with low-cost index options, $8.95 trades otherwise, 1.5% cash back American Express, low-cost robo-advisor via Intelligent Portfolios.
  • Cons: Low interest rates on banking products.

Vanguard

  • Pros: Large selection of low-cost funds and ETFs, commission-free Vanguard ETF trades for all, $7 non-Vanguard ETF/stock trades (or less based on asset level). Portfolio advice includes robo-component plus available human representative.
  • Cons: Limited availability and features on banking accounts. Limited portfolio support for buying non-Vanguard products. No credit cards.

I still believe that the self-directed investor is best off picking individual products a la carte, but it will be interesting to see how things change in the coming years. Each financial mega-institution will likely improve upon their weaknesses, and offer significant perks and discounts for keeping all your money with them.

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Comments

  1. I love the allusion to telecommunications bundling! It’s so similar! Guess every industry is becoming dominated by just a few large firms these days…

  2. I see this a lot in my practice so I thought I would just add this thought – most of the discount brokerage houses (e.g., Schwab, E-Trade, etc.) are *awful* at processing paperwork when the investor dies. I had one client fax, fedex and mail the necessary paperwork to E-Trade on at least five occasions. At one point, he even went to an actual E-Trade office, had them fax the paperwork and the back office still lost it. The family didn’t have access to these funds for well over 4 months. E-Trade is not alone in this. I have seen it as a recurring theme when I handle estates.

  3. This is an interesting development. I had a Zecco account, which became a TK account, and now an Ally account.

    It makes sense to combine brokerage and banking into one bundle. If Ally has extra funds to loan, it could offer margin loans to its brokerage clients.

    Plus, they may more efficiently use the cash amounts in brokerage client accounts to squeeze in an extra buck.

    But either way, to compete in todays marketplace you have to be big and offer a lot of services..

    What fascinates me is how many people still use traditional advisers that sell them expensive funds and charge them a separate annual fee as well. So the DIY probably hasn’t even scratched the surface…

  4. Interesting…, and in August 2015, TradeKing acquired MB Trading, which offered stocks, options, futures, and forex. But, they still have not integrated it yet.

  5. You might as well include Capital One/ old Sharebuilder,INGdirect/electric and e*trade/bank.

    • Capital One comes about the closest to this “full suite” vs. any of the competition right now. They have very competitive no fee checking, high yield savings, rewards credit card products, as well as a reasonable self directed brokerage option. Also let’s not forget all the loans options they have too: personal, auto, mortgage, etc. They’re in the lead with “digital” transformation and are building digital wallet products that will replace all of the old paper/plastic options we rely on today.

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