Ah, brokerage … the plague of investors everywhere.
As all experienced investors would know, brokerage is an inevitable part of investments in Australia. Regardless of who you invest, your broker will register your ticket every time you want to make an exchange. It is one of the worst "hidden costs" in investments and is usually added to a sum of princely money if you have been buying shares for a long time.
Nor is it exactly cheap.
Our major brokers – those managed by Commonwealth Bank of Australia (ASX: CBA) e National Australia Bank Ltd (ASX: NAB) will charge you $ 19.95 and $ 14.95 respectively for a trade worth less than $ 5,000. This is equivalent to a 1% or 0.75% cost base for a $ 2,000 trade – earnings that you need to recover from the investment before even reaching a balance.
Of course, there are alternatives to these brokers, but it is likely that you are not moving away from paying at least $ 9 per transaction.
But there are signs that this convenient status quo (for banks) may be coming to an end.
In the United States, a name broker Robin Hood since 2013 it has been offering zero brokerage shares trading. Robinhood is now the most popular broker for the millennium generation and says its mission is "to democratize finance for all". The company now also offers cryptocurrency trading on top of the shares.
Robinhood's entry into the market has been ignored by large US banks for years but starting from last week, several large US banks and brokers like Charles Schwab, Loyalty is TD Ameritrade have now embarked on the "zero brokerage" path – it seems they can no longer ignore the flow of customers moving to Robinhood.
When can we expect to see free exchanges on ASX?
Well, ASX is much smaller than the US market, both in value and in volume. Therefore, it is likely that facilitating an intermediation service is more expensive for us Australians. That being said, Robinhood plans to launch in Australia with commission-free operations at some point in the future, as you can see from the image above.
Once that happens, I expect it will trigger a price war as we have seen in the United States. How long will we have to wait? Well, the jury is still out for that!
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Heterogeneous collaborator Sebastian Bowen owns shares of National Australia Bank Limited. Motley Fool Australia has no position in any of the stocks mentioned. Perhaps all fools do not share the same opinions, but we all believe that considering a wide range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains only general investment recommendations (based on AFSL 400691). Authorized by Scott Phillips.