Investors Hit With E-Brokers' Fees

NEW YORK (AP) - As if you haven&#39;t been battered enough in the stock market&#39;s collapse, now your online broker is raising fees on your account. <br> <br> It could feel like a case of getting kicked when you&#39;re down. <br> <br> While Wall Street has taken a nosedive in recent months, online trading firms have begun tacking on additional costs to process orders and handle accounts with small balances or little trading activity. <br> <br> So investors, who are already reluctant to open their account statements for fear of the steep losses they&#39;ll see, may very well find another unpleasant surprise lurking inside. <br> <br> ``It&#39;s times like these that investors put their head in the sand, and they don&#39;t want to even know what is going on with their stocks,&#39;&#39; said Jaime Punishill, a senior analyst at Forrester Research in Cambridge, Mass. ``At the same time, the brokerages have to run businesses and need to find ways to make money.&#39;&#39; <br> <br> E-brokers were built during the dot-com boom of the late 1990s, tapping into the public&#39;s attraction to the Web. If Americans eagerly shopped and planned vacations online, why not buy and sell stocks, too? <br> <br> Newcomers like E-Trade and Ameritrade joined the fray along with traditional firms, including Charles Schwab and TD Waterhouse. <br> <br> Their businesses quickly thrived, helped by the record-setting push into the stock market. Investors liked that trading online cost less - a fraction of the price of using a traditional broker - and allowed them to trade wherever and whenever they wanted. <br> <br> But the good times have come to a grinding halt. <br> <br> The two-year stock-market selloff has sidelined many investors, who have watched their portfolios plunge in value and have refrained from making any moves until they see where Wall Street is headed. <br> <br> That has crippled online brokers, which make much of their money from commissions they charge investors for buying and selling stocks. <br> <br> At E-Trade, commission revenues plunged 29 percent in the first half of the year, compared with the same period in 2001. Ameritrade said its clients averaged only eight trades in the first nine months of its fiscal year, compared with 15 trades a year ago. <br> <br> To offset that reduced volume, online trading firms are looking to raise revenues any way they can. <br> <br> Their target: clients with smaller account balances with little or no trading activity. <br> <br> They claim these idle accounts still cost money to operate. Among the expenses are the printing and mailing of account statements, salaries of customer service representatives and headquarters staff and, in some cases, maintenance of branch offices. <br> <br> ``We have to be able to provide on a regular basis services that investors want, regardless of what the market is doing,&#39;&#39; said Melissa Gitter, spokeswoman for TD Waterhouse. <br> <br> At TD Waterhouse, per-trade commissions jumped this month by $3 to $17.95 for anyone who makes less than 18 trades a year or has less than $250,000 in holdings, down from $500,000. <br> <br> In June, E-Trade began charging an order-handling fee of $3 on every trade except for customers who make more than 75 trades a quarter or have minimum account balances of $100,000. That fee followed the March increase in the ``inactivity&#39;&#39; fee from $15 to $25 a quarter for any account with a balance under $5,000 or one that hasn&#39;t traded twice in the last six months. <br> <br> Schwab, which also initiated a $3 order handling fee last spring, will begin in October charging $45 a quarter for customers with balances below $10,000. The only way to avoid it is to trade more than eight times a year. If you deposit more than $500 a month in a Schwab account, the fees are reduced by 50 percent. <br> <br> Schwab will also add an annual $40 fee to IRA accounts between $10,000 and $50,000 and $50 to those below $10,000. There currently is only a $40 fee for accounts under $10,000 and no fee for anything above that. <br> <br> All of Schwab&#39;s rate increases will also be applicable for transactions at its 400 branches. <br> <br> Ameritrade is considering higher prices after its expected merger with rival e-broker Datek closes this fall, CEO Joe Moglia said during a conference call with analysts last month. <br> <br> ``It&#39;s not worth it to these companies to have accounts with very low balances and no trading activity,&#39;&#39; said Daniel Goldberg, an analyst at Bear Stearns. ``They are using the higher fees to cover their costs, and hopefully prompt people to start trading again.&#39;&#39; <br> <br> So far, added costs have worked, at least giving some lift to revenues. And there&#39;s a good chance that the fees will continue to rise, even if stock prices rebound. <br> <br> That means investors who have small account balances or trade infrequently will have a hard time finding many cheap deals online again. With all the added fees, the Web brokers&#39; costs are inching up to those of the traditional firms, making convenience the only draw of trading online. <br> <br> ``In the booming market, the online brokerages could afford to charge less, but it was never a profitable way of doing business,&#39;&#39; Forrester Research&#39;s Punishill said. ``Those days are over.&#39;&#39; <br>