Wells Fargo aims at Schwab, TD Waterhouse, Ameritrade, E*Trade (SCH, ET, AMTD)

Wells Fargo (ticker: WFC) is running an extensive advertising campaign offering up to 50 commission-free trades for customers with $250,000 in assets with the firm. Will this increase the pricing pressure on Ameritrade (ticker: AMTD), E*Trade (ticker: ET) and Schwab (ticker: SCH)? Details and quick comments:

Wells Fargo's Fees:

For customers with a Wells Fargo Portfolio Management Account (PMA), trading fees are as follows:
    •     $100k+ plus in assets: $9.95 - $2.95 for first 50 trades each year; $9.95 thereafter
    •     $250k+ –Commission-free for first 50 trades each year; $9.95 thereafter

Wells Fargo says:

Unlike other brokerage firms, which typically offer free stock trades for only the first 30-60 days after account opening, Wells Fargo Investments is offering 50 commission-free trades per year.

Forrester's analysis:

Our assessment: Smart move. Its direct brokerage is a peripheral business, so Wells has little to lose by giving away trades. However, the bank will get significant upside from the maneuver. What's in it for Wells? For starters, the attention of attractive banking prospects, as well as additional assets from current customers.

Quick comments:

• Unlikely that Wells Fargo will take meaningful share in the online brokerage market with this offer. Why? Because investors don't view banks as experts in trade execution, and the online brokerages have spent years honing their websites to maximize functionality.
• However, this illustrates an important trend: profitability in the e-finance business will be determined by total account profitability (including interest rate spreads on deposits and loans) rather than trading commissions. As a result, banks and brokerages are strongly incented to bundle trading with other financial services.
• That in turn will drive greater functionality for customers: convenient one-stop-shopping for financial services, with unified online control of banking, mortgages, credit cards and investing.

Which firms are best positioned for this?

• E*Trade has all the pieces and probably the best integrated offering, but its brand is perceived as low-end, so it's having difficulty attracting wealthy clients.
• Schwab has banking and investing and an upscale brand, but its fees and commissions are uncompetitive. As a result, it has consistently lost customers.
• Fidelity has the brand, scale and offering, and has been aggressive in cutting commissions and fund fees.
• Ameritrade lacks banking products, is behind in integration, and is overly reliant on trading commissions, but has strong reputation and brand in trade executions. Ameritrade probably has most to lose as larger firms offer stock trading as a loss-leader to attract assets.

Full Wells Fargo press release here.
Full disclosure: at the time of writing I'm short SCH.