The Next Online Brokerage - Built By You

[WTMHouston]

Okay, since you asked and want to go there, let's take the statements from your original post that I quoted and suggested were inaccurate, as well as the ones I did not mention, and take them apart piece by piece. You said:

<<Foliofn is charging $39.95 a month plus, $3.95 a trade, plus all the other minimums requirements [sic] people neglect to address when they post new “lower” rates advertised by another on-line firm. However Foliofn is charging nearly $500.00 a year on it's monthly plus the $3.95 a trade which will be well over a $1000 is [sic] you are a [sic] active trader.>>

1. Folio FN is not charging "39.95 a month plus." There is no "plus" on the base fee. At worst, the $39.95 (or less, not more or plus), includes 10 free trades, which with some simple math sure seems like ~$4 a trade for those 10 trades. For someone who does not churn their accounts or trade heavily, this sure seems like a pretty reasonable deal especially considering the other feature discussed below.

2. You conveniently ignored that it is available for as little as $199 a year, although that admittedly results in far larger commissions for even a semi-active trader. You also omitted that the annual rate for the $39.95 a month plan is only $399 a year, not $500 a year as you suggested.

3. You also spun your point in a misleading way by quoting only the highest possible base fee, an amount that is easily lowered by 20 percent or more.

4. You left out of your conclusory analysis that the $39.95 or less base price also includes 600 free window trades a month. For many folks who have no need to hit a precise price to the penny at a precise moment and for whom a few cents one way or the other makes no difference, this would be extremely beneficial and far exceeds anything else that appears to be available from anyone else. Even if someone wants to hit a precise number, they can do so at the window trade times and have programmable control over the limits within which they will accept adverse movement. As an aside, although not directly relevant to the point, do you think that MS would really be happy with you or anyone else processing 600 trades a month, 7200 trades a year, of fractional shares or would do so in dollar amount increments rather than in non 100 share increments for its $250 a quarter? Anything is possible, but, in my opinion, I seriously doubt it. I do suspect, though I have not looked and could be wrong, that one of MS's hidden requirements is a minimum trade size of at least 100 shares to qualify for their flat fee and that trades of less than that amount may incur additional fees. Edit -- I went and looked at your MS comparison and will discuss it below.

5. The $39.95 or less, not plus, a month is not "plus 3.95 a trade." The $3.95 a trade only kicks in after 10 trades for the $39.95. An accurate statement would have been $4 or less for every trade not "39.95 a month plus, plus $3.95 a trade...."

6. There is no factual basis for your statement "plus all the other minimums requirements people neglect to address when they post new “lower” rates advertised by another on-line firm," at least to the extent that you implied, which seemed to be the purpose, that there were any such "other minimum requirements" associated with Foliofn. Were you aware of any "other minimum requirements" or were you just interested in trashing potential competition, or a company with which you were really not familiar enough to be making factual statements, without a true factual basis for doing so? Trying to find some now, although I don't think there are any, when you were not aware of any before would just make my point.

7. You apparently spent little to no time looking any further than Folio-fn's rate page (and, it seems, incompletely at that) to reach your conclusions about Folio-fn's value, from a cost perspective, to people who want to own stocks. There is far more to the trading universe than day traders. Let me start by conceding that for someone who plops down $50K and who only trades (or wants to trade) in 100 share or greater increments and who trades one or more times each day, 50 weeks a year, the $1K a year flat fee of MS may be a better deal than Folio-fn (but, see below) -- especially considering the service and research available (although some would, and many have over the last few years, questioned the value of big brokerage firms' research, but that is not really the point and I know nothing about MS's research and do not mean to imply it is anything but first class). For an equivalent $1K, and considering only regular market orders and not any of the other features or benefits of Folio-fn, which you did not consider anyway, the break even point between Folio-fn and MS is around 250 trades a year. Thus, in that situation your analysis had some facial appealability, but again see below. But, for anyone who trades less than that 250 times a year or who does not "put 50 large" down, Folio-fn is superior on a pure cost of trade basis. By the same token, Folio-fn may also be a far better deal than most other non flat fee brokerage houses out there. Do you really think that all other things being equal, it is better to pay $5 or $10 or more dollars per trade when you can pay $4 per trade? I doubt it. In this connection, you were not asked initially to compare Folio-fn only to MS or to even rate it for active day traders. Indeed, although you made the comparison, the post to which you were replying initially conceded that "Foliofn is geared more to the SS crowd than day traders." Given the premise from which the inquiry originated, one wonders why you trashed it for the purpose for which it was already conceded that it might not be the best. Your comments and analysis completely ignored the groups to which is might be beneficial -- even though they were spelled out in the post to which you replied, and instead chose to focus, and inaccurately at that, on their quality, which you had and have no factual basis to question. I doubt you would be very thrilled with someone questioning the quality of OC's business to be without knowing anything factual about it, much less someone assuming that it was trash simply because of the fee structure.

8. More importantly, I suspect (that means I am making a calculated though not fully educated guess), and think I am fairly safe in doing so, that the majority of people who own stocks do not plop down $50K, do not trade once a day or more, and would love the ability to diversify by being able to trade small lots of less than 100 shares or make dollar denominated investments, without being killed on commissions from a percentage standpoint. In fact, I would hazard to guess that this group of consumers probably far exceeds in quantity, perhaps even by a large multiple, if not 10 or more, the size of the 250+ trades a year group or the group who will or can plop down $50K. I realize that may not be your ideal target audience, but that is no reason, much less a rational or factually based one, to trash another brokerage firm's cost, fee structure, and services or to suggest that their services are somehow substandard or that real costs are hidden -- again statements and implications for which you had and have no factual basis.

9. In fact, I would suspect that a very large amount of the consumer trading universe, and probably the IHUB universe as well, executes no more than 10 trades a month. Of course, it appears that in your zeal to out-of-hand dismiss Folio-fn as irrelevant to active traders, which itself was not necessarily accurate (again, see below), you failed to take a look at anything more than price. For example, for someone who wants to start with say $10,000 and invest in multiple stocks (perhaps 50-100) and wants the ability to add a few hundred each month or split it up into purchases several times a month in dollar denominated investments rather than 100 share lots, Folio-fn appears to be a far better deal than the alleged $1K a year flat fee at MS or the fee structure at any other brokerage house with which I am familiar.

10. Please pay particular attention to this part. I have no qualms with an expression of opinion, everyone is entitled to theirs, and I know that like noses, everyone has one. I do have qualms with expressions of fact that are inaccurate either because they are expressed without any meaningful investigation into the facts or because they intentionally choose to ignore the real facts in order to make a point beneficial to some other point they wanted to make. I am willing to presume that the former applies in this case or that you were simply expressing an uniformed opinion -- you just should not have represented it as fact.

11. In that same context, I have a question for you. Given your method of cost comparison of MS to Folio-fn, would it be fair for folks to also assume, if not expect, that OC's cost structure will, if someone plops down $50K or more, allow them unlimited annual trading for $1K -- or less considering that OC will likely not have "the best research of one of the best wire houses" and may not have "[y]our own broker to call and bitch at when you need some paperwork for your accountant or if he/she gives you a bad idea or limit." If so, then I have no further point to make. If not, then there sure seems to be yet more reasons to question the validity of your comments regarding Folio-fn.

12. Since you mentioned the rest of your original post as an example of your completely accurate factual statements and assessments, and even though I had not questioned its factual accuracy before, I will do so now. Thanks for the link to it. First, let's start with your statement, "And for $1000 a year or $250 a quarter I trade stocks and options absolutely free." That is not quite true, at least based on their fee structure as set out on their web site. http://www.morganstanleyindividual.com/accountoptions/choice/fees/ Someone who plops down $50K and invests it in equities, appears to pay $1125 a year, not $1000. I will grant you that it is not a huge difference, but it may be to the person paying it -- especially if they are running (or making) cost comparisons with another brokerage firm (like MS to Folio-fn). The difference gets larger if someone has say $75K instead of $50K -- that person will pay $1687.50 a year, not $1K: the difference is getting greater. For equities, the amount they pay of the first $250K is 2.25% of the amount in the account, not a flat $1K a year. Thus, the person with $250K would pay $5625 a year, not $1K -- a HUGE difference. Second, and amazingly, MS also appears to charge .5% for keeping a portion of that $50K or more in cash. I am not aware of many places that charge for holding cash -- and Folio-fn sure does not. Most places don't charge fees for keeping cash balances or sweeping excess cash into a money market account. Third, you omitted to mention a significant restriction on the Choice account: "Morgan Stanley Choice is not for day trading or other extreme trading activity, including excessive options trading or trading in mutual funds based on market timing." So much for your suggestion that the MS account would be better than Folio-fn for day traders. That also pretty much makes most of your other comparisons suspect, if not equally inaccurate. Fourth, your post stated "Your own broker to call and bitch at ... if he/she gives you a bad idea or limit." MS sure seems to view this account a bit differently since they expressly state that the Choice Account "is not an investment advisory account; any investment advice is solely incidental to Morgan Stanley's business as a broker-dealer." I guess you can literally bitch all you want, but that was not the suggestion or implication of your point. I would bet that I would find more things if I took the time to read the Client Services Agreement. Four inaccurate things is enough for this purpose -- especially given the nature of them.

12. There were other problems with your comments but this is more than sufficient to make the point. I sure hope your stock selection research and the way you will run your business are more thorough, complete, and accurate than the research you did before commenting on Folio-fn and representing what was available from MS.

I stick by my initial, and in hindsight rather kind and tame, assessment of your remarks regarding Folio-fn.