The Catch with Wells Fargo's Share Builder

December 12, 2001 11:13 AM

The Catch with Wells Fargo's Share Builder Some of you may have seen Wells Fargo's ads touting $4 per transaction and unlimited transactions for $12. The main catch is that you cannot trade every day. From their FAQ- "ShareBuilder trades can be made the first, second, third or fourth Tuesday of each month. You select which day you would like your trade to take place when setting up your ShareBuilder Plan. In the event of a month with five Tuesdays, no ShareBuilder trades will take place on the fifth Tuesday." When the rest of the world is going to real-time trading, why do you think Wells Fargo is pushing this? Do you think it is deceptive that this is not mentioned up-front?
posted by SandeepKrishnamurthy (10 comments total)

Digging a little deeper:

With ShareBuilder you can place real-time market or limit sell orders for only $15.95 per trade. Real-time orders are executed when the major exchanges are open. During non-market hours you can enter orders to be executed when the market opens.

Deeper still:

Using ShareBuilder, you can make regular automatic investments in over 4,000 individual stocks and more than 68 index shares.

Most cut-rate trade plans (that I have seen) work this way. The links are obvious and the information is clear. I find nothing deceptive about this.
posted by mischief at 11:22 AM on December 12, 2001

While most retail, or individual investors are moving towards (intra-) daily trading, it's very common in the institutional world, to trade on a weekly or bi-monthly basis. What could be happening here is that Wells Fargo is accumulating the trades into a package on a weekly basis, netting out the sells and buys internally, and then trading the remainder with an institutional counterparty through an external crossing network. They would need regulatory exemption to do this, but they could probably get it done. In this way you can trade virtually free. It's like the ECN's but on a much bigger scale. This is how they can offer it so cheap. So you have a choice, if you can wait, then unlimited free trading, if you can't wait, then you pay. If this is how they are doing it, and I have no information that I'm correct, then you can expect there to be more open days as the service gains subscribers.
posted by prodigal at 12:15 PM on December 12, 2001

I think you are correct, prodigal, about the open days. If you scroll down the page, they have a link for entering promotion codes, which would be one way Wells-Fargo could avoid actually going to the market itself to fulfill orders once the subscriber base reaches some sort of equilibrium.
posted by mischief at 12:24 PM on December 12, 2001

I use a competitor service, buyandhold.com that works in the same way. Trades are even cheaper - from $2 for recurring trades to $3 for one time buy and sell orders.

The trades on buyandhold are done three times per day - 10:30 1:30 and 3:30 (I think) which is plenty for me.

I think this method of trading is both (a) sane and (b) effecient. It forces one to think about fundamentals...

p.s. - I think that the usability of buyandhold.com's site is piss poor. Sharebuilder is better - but stock trading certainly has a lot of 'stickyness' when it comes to switching costs.
posted by zpousman at 12:55 PM on December 12, 2001

It just sounds to me like they're going up against BuyAndHold.com. It isn't deceptive, it is just the polar opposite of day trading, and an alternative to having a dozen different DRIP accounts.
posted by spilon at 12:57 PM on December 12, 2001

I've got an account with these folks, but I think "Wells Fargo Sharebuilder" is some sort of co-brand deal as I know it just as Sharebuilder
posted by owillis at 1:07 PM on December 12, 2001

I've been using Sharebuilder for the past 9 months or so. I knew front up that trading was only allowed once a week. I didn't think this was a hidden "catch".
posted by Darke at 1:36 PM on December 12, 2001

a) not deceptive; b) heavy trading is antithetical to buy-and-hold investing; c) dollar-cost-averaging is most beneficial if you don't eff with it. ShareBuilder, however, may be more expensive and offer "benefits" (such as trading!) that you don't need or can get other ways, compared with DRIPs and other similar types of investments.

Is this really worth a FPP? Next you'll be telling us that local phone service has "hidden monthly charges"!
posted by dhartung at 2:37 PM on December 12, 2001

Sharebuilder co-brands with many institutions... including my Credit Union... but it is a separate entity from your financial institution.
I also understood from the get-go that buying was done once weekly.
posted by mattee at 2:45 PM on December 12, 2001

prodigal: it's actually kind of like the ECNs, but on a much smaller scale.
posted by MarkO at 7:49 PM on December 12, 2001