Free Online Trading: Astute Idea, Knee-Jerk Responses

FinancialRx submits:

First Citiwide Change Bank

Narrator: "When you do only one thing, you do it better."

Customer #1: I needed to take the bus, but all I had was a five-dollar bill. I stopped by First Citiwide, and they were able to give me four singles and four quarters.

Narrator: "At First Citiwide Change Bank, we just make change."

Bank Representative: We will work with the customer to give that customer the change that he or she needs. If you come to us with a twenty-dollar bill, we can give you two tens, we can give you four fives - we can give you a ten and two fives. We will work with you.

Customer #2: I went to my First Citiwide branch to change a fifty. I guess I was in kind of a hurry, and I asked for a twenty, a ten, and two fives. Their computers picked up my mistake right away, and I got the correct change.

Narrator: "Correct Change."

Bank Representative: We have been in this business a long time. With our experience, we're gonna have ideas for change combinations that probably haven't occurred to you. If you have a fifty-dollar bill, we can give you fifty singles. [Narrator: "We can give you fifty singles."] We can give you forty-nine singles and ten dimes. We can give you twenty-five twos. Come talk to us. [Narrator: "We can give you twenty-five twos."] We are not going to give you change that you don't want. If you come to us with a hundred-dollar bill, we're not going to give you two-thousand nickels. [Narrator: "We're not going to give you two thousand nickels."] -- unless that meets your particular change needs. We will give you... the change... equal to... the amount of money... that you want change for!

Narrator: "At First Citiwide Change Bank, Our business is making change."

Bank Representative: That's what we do.

But seriously folks, Bank of America Corp.'s (BAC) strategy is an astute move on several levels. Most importantly: They can build their brokerage organically (for which they hope to cross sell other services) a lot cheaper than spending billions for an existing platform (which has been done over-and-over-again with lousy results).

As an aside, I found it amusing to see the online trading firms react in the same exact fashion as my industry did back when those same online trading barbarians were at the gate.

"I don't see pricing as the battleground. I see functionality as the battleground," says Jarrett Lilien, president of New York-based E*Trade Financial. He considers the industry's prices already low, so brokerages must compete by providing better services, such as advanced order types that automatically sell stocks at predetermined price points.

For its part, Charles Schwab said it had no plans "at this time" to change its price structure. "Knowing there is no free lunch, consumers look carefully at the whole picture -- rates on their cash, trading costs, quality of services and investment advice, etc.," founder and CEO Charles R. Schwab said in a statement on Oct. 11.