The online brokers "will probably have to follow suit," analyst Thomas Kaylor, of CRT Capital Group in Stamford, Conn., told Bloomberg News. "By giving away free trades it reduces some of the incentive customers have for moving assets over to online brokers."
Responding to competitive pressures, Charles Schwab, TD Ameritrade, and E-Trade have all cut commissions in recent months, but some industry analysts believe the ease of use of their trading platforms, combined with exemplary customer service, may prevent the loss of business to BofA.
Yesterday's Wall Street Journal broke the news and carried a full-page ad touting the new offer: "Introducing $0 Online Equity Trades." Body copy read: "Consider it our way of saying thanks for doing business with us."
Out-of-home media includes billboards, taxi tops, bus wraps and shelters. "We will continue to focus on advertising in specific markets as the offer is rolled out," said BofA spokesperson Betty Reiss. "We have a strong relationship strategy focused on building customer relations."
BofA likened its latest "relationship-based" offer to free online bill pay, free checking, and free payroll. It will first be offered to customers in Northeast cities, including New York and Boston, before it is rolled out nationally during the first half of 2007.
The market potential is substantial. BofA said some 52 million American households, or 40 percent, would qualify for the free trades offer based on household assets. BofA currently services 20 million active online customers.
BofA is the country's second-largest bank after Citi. A spokesperson said Citi would not, as a matter of policy, comment on BofA's announcement. The price of equity trading through Citi's Smith Barney is variable based on the client.
More than a year ago, Wells Fargo & Co., the fifth-biggest U.S. bank, began offering 50 free stock and mutual fund trades for customers with more than $250,000 in assets at the company.