Brokerage

In a previous post, I wrote that Tradeking is holding my money hostage.

Basically the issues started after I indicated my intention to transfer my business elsewhere. Tradeking started a lock-down on my account, restricted my account and then told me that any money that I transferred by ACH to them cannot be returned for 60 business days.

60 business days! That’s a minimum of 12 weeks or almost 3 months. I wouldn’t have ACH my money to any broker if I knew that my money is going to be stuck for 3 months!

Anyway, Tradeking sent me an email that pointed me to the following link:

http://content.tradeking.com/wiki/display/tkservice/Funds+Availability

[Link to screenshot]

The link states

ACH Deposits
– 5 business days to clear for trading
– 60 business days from date of deposit to release funds from the account – return funds via ACH only

From the wording in the email, it is intended to inform me that the ACH holding policy of 60 business days had been in place for a while. It’s my fault that I did not see it.

After I checked carefully, I noticed that the page in question was modified on 12/08/08 (see bottom of the page: 12/08/2008 Version 003) AFTER my issues with Tradeking started. I then hunted for the previous version. The previous version, which is still in Google’s cache currently (cache date Nov 24, 2008 12:44:48 GMT), stated a ACH holding time of 10 business days.

ACH Deposits
5 business days to clear for trading.
Allow 10 business days from date of deposit to release funds from the account – return funds via ACH only.

To see this, type

site:content.tradeking.com ACH availability

into Google’s search box, and then click for the cache version in the first search result.

You can also access it via this DIRECT LINK. Note that since this is in Google’s cache, it will be overwritten in the next cache update and you might not be able to view it a few weeks after the date of this post. So I have kept a screenshot HERE.

I understand that Tradeking can probably change the terms and conditions at any time they like (most likely covered in the client signup agreement), but in this case, I don’t think that this is a fair or reasonable business practice, especially it appears that the modification were made to discriminate against me.

I also don’t consider it a reputable business practice to change the terms and conditions without advance notification to all other investors. I am now really getting concerned with the integrity of this brokerage firm.

For investors who already have an account with Tradeking, I urge you to consider carefully before you ACH new money to Tradeking. You might not be able to see your money again before waiting for 3 months. You probably might also want to evaluate if you want to continue using them.

By the way, the ACH holding time stated at the point of the ACH transfer page is still showing a 10-day holding period:

They should change this to 60 business days to avoid misleading investors.

Keywords: complain, complaints, sucks, issues, problems, cash balance, ACH, wire, review, overview, shady.

Recently, due to my tax loss harvesting transactions, I decided to move part of my portfolio to Tradeking and try them out.

Because Tradeking has an ACH limitation of $10,000 per transaction, I had to split up my transfers into chunks of this size or smaller to have my money transferred. Tradeking happily accepted the money without complaints. According to their website, all incoming ACH transfers are subject to a 10-day hold before withdrawal:

After several rounds of ACH transfers, I found that trying to keep track of which ACH has gone through, which has not, and keeping a constant reminder to submit an ACH everyday is too much of a chore. I called their customer service to see if they could initiate a transfer in a larger amount. This was flatly denied, never mind this is what their website says:

Next, I checked to see if they could reimburse my wire transfer since before sign up, their customer told me that this could be arranged in an earlier email:

We would cover the banks wire fee for your first wire, and depending on how much you fund with perhaps future wires as well.

This was also denied.

Frustrated, and deciding not to deal with a company that says one thing in their statements but in reality does another, I decided to take my business elsewhere. I wrote out two checks from my account and starting withdrawing my money by ACH, back to the financial institution which originally funded the Tradeking account.

All this went OK for a while until the day when I called to ask about and then requested to DTC out a position I have with Tradeking (DTC is an electronic transfer of shares from one broker to another). In the same phone call, I indicated my intention to move my business out from Tradeking. BIG MISTAKE.

From that point onwards, Tradeking essentially placed a lock-down on my account. They cancelled my ACH withdrawal requests without any notice. The online ACH withdrawal requests would be marked “processed” but money was never transferred. They then told me that they are going to put a 60-day hold on any withdrawals from my account and would freeze my DTC transfer out. The stated reason was “risk management” but I suspect the main reason is that this is one of those brokers which would drag its feet and give hell to any clients trying to transfer their assets out to another firm.

My account is flagged as restricted.

I am stuck with a sizeable cash balance being held hostage at Tradeking. While being stuck at Tradeking, they will earn a miserable 0.05% APY (see below) whereas I could have easily gotten at least 3.5% from one of the many online savings accounts. Obviously, Tradeking will gain from this freeze on my cash balance at my expense because kick-backs / 12b-1 / rebate arrangements from the cash sweep firm back to the brokerage firm are fairly common.

Crappy Sweep Account Yield of 0.05% APY at Tradeking

I have already tried a few times to get Tradeking to at least return my cash balance but without success.

My only choice now seems to be to wait out the 60 days and then DTC out the position. I am wary however, because I don’t know what other tricks Tradeking will throw at me when I re-submit the transfer out request 60 days later.

If you are planning to sign up with Tradeking or even already have an account with them, I urge you to re-consider carefully because you might have to go through a lot of hassle getting your money back. When you ACH your money in, at the point of transfer, you are told that there is a 10-day hold before you can withdraw it. But if they do not like you in future, they will conveniently cite some “risk management” reason and hold your money hostage for a long time.

In my opinion, Tradeking should not mislead investors by stating a 10-day hold for ACH transfers. They should state clearly that there is a 60-day hold on ACH deposits before it can be withdrawn. At least investors would be able to decide for themselves beforehand if they want to ACH their money to Tradeking and do business with such a broker. If this 60-day hold statement was there, I wouldn’t touch Tradeking with a 10-foot pole.

Weblinks: [1] [2]

Keywords: complain, complaints, sucks, issues, problems, cash balance, ACH, wire, review, overview, shady.

Recently I looked at two discount brokers in an effort to move my ETF holdings to a broker which can provide specific tax lot identification. The first broker is Just2Trade.com, and the second broker is TradeKing.com.

These two brokers are very similar. They both clear through Legent Clearing and both offer the MaxIt tax manager system, which allows you to specify a certain tax strategy (“Minimum Tax”, “First-In First-Out”, “Last-In First-Out”, “Maximum Gain” or “Average Cost”) for every security trade. This system is great when you want to sell only specific tax lots to minimize on taxes.

In terms of commission costs, Just2Trade wins hands down. Their stock / ETF trading commission is only half that of TradeKing ($2.50 versus $4.95) and their margin interest rates is also at least 0.25% lower than TradeKing.

Margin interest rate is also lower at Just2Trade (by at least 0.25%). Current margin interest rate for amounts less than $10,000 is 3.50% at Just2Trade while is it 3.75% at TradeKing. For a margin balance between $10,000 to $250,000, Just2Trade’s margin interest rate drops to 3.5%. The margin interest rate at TradeKing is fixed at 3.75% for all balances.

At Just2Trade, you can also trade mutual funds cheaply for $2.50 per transaction. At TradeKing, the fee is 6 times more, at $14.95.

I also tested their customer service with questions and requests using email, and both replied quickly (in 2 hours or less on a business day). However, unlike Ameritrade’s customer service, which you sometimes can get a break on certain fees or free trades, I found TradeKing’s customer service to be basically useless when you try to request for some concessions. They can only reply with a canned message that repeats their company policy. I have yet to try asking for any concessions from Just2Trade.

Looking beyond the fees, each broker has a severe shortcoming. For TradeKing, it is their online-ACH transfer limitation of $10,000 each day. I called them, and tried to reason with them to let me transfer in a larger sum of money for investment, but they were very stubborn about it and it was a no-go. In my opinion, their $10,000 transfer limit per day is way out-dated, as most brokers typically have $100,000 ACH transfer limit a day.

For Just2Trade, they do not have a $10,000 ACH transfer limitation per day; their disadvantage is in their cumbersome trading system. Specifically, it does not allow you to change the order once it is submitted. To change the order, the only way is to cancel it and re-submit. This means that if you want to change the price of a limit order, you have to first cancel it, and then re-key and submit all the order information again. This is a big swithc off for me.

In the end, I am inclined to stay with Tradeking for the moment. But if Just2Trade can update their traking system to include order modifications (customer service said that this improvement is in the pipeline), I would probably say good bye to TradeKing and move everything over to Just2Trade in a heart beat.