Sunday, November 7, 2010

online discount brokers, part 5: Zecco

On reading reviews such as this one and this comparison, and looking how spiffy is as a site with very Web 2.0-ish features and supporting apps like ZapTrade, I was pretty happy to try out Zecco -- my wife Anna, in particular, really looked forwards to the social networking features of the site, Twitter &c.  Opening a joint account was fast and easy, though strangely the sequence only had a way to indicate one userid for the joint account -- what part of "joint" don't they understand...?!  Ah well, we proceeded anyway, and figured out that customer support would be able to link both of our userids to the account later, as we immediately proceeded to request.

Wrong, and an incredible design bug in their software architecture: they offer no way to have more than one userid on one account, even if that account is a "joint" one.  So the part of "joint" they don't understand is: 100% -- they are absolutely, incredibly, totally, infinitely clueless about what a joint account is all about.  Especially with their social networking features, Anna having to log in as me, or vice versa, in order to access our joint account, is obviously unacceptable.  Suddenly I started having huge doubts about putting any of my money in the hands of people so incredibly clueless about application architecture -- what else had they "oops, forgotten" (or mis-designed) that we'd only find out about later, at some painful and unfortunate moment...?

I can't believe this mis-feature hasn't raised a hue and cry among the users and would-be users of Zecco yet -- hey, even flipping Merrill Lynch (hardly the top technology dog in the online brokerage arena;-) obviously offers the clearly mandatory feature of having two userids co-owning a joint account! I guess most Zecco users must be using individual accounts, not joint ones (or else they're joint just in name, and one spouse actually does all the trading -- but that's not how Anna and I work, thanks be!).

We pushed ahead anyway, figuring the other advantages could maybe make us deal with this one for a while, while we lobbied to have this absurd restriction removed.

Disappointment number 2 was, no foreign exchanges allowed, only American ones.  I guess I must have misread some review or other, because I was under the mis-apprehension that they did support trading on non-US exchanges.  Ah well, guess that's a rare feature for US brokers, and you really need to go with Interactive Brokers (and brave their fearful complexity) if you're keen to do some foreign trading (which for a permanent-resident alien like me isn't really that "foreign" -- e.g., I might have liked to try getting some of Enel Green's IPO stock at the Milan bourse... Milan doesn't really sound "foreign" to an Italian citizen, even though he may be currently residing in the US;-).  Guess I shouldn't really charge this one against Zecco in particular, but it did disappoint me at the time (no doubt because of my misreading from a review somewhere that they did support foreign trading).

Disappointment number 3, and the killer, came the first time we tried to trade options -- and found out that, despite filling all the required fields in the initial application (including trading experience, total income and wealth, the fact that we've read the mandatory brochure on options, &c) and being under the strong impression that we therefore were approved for options trading... we were not!  To get approved for options you need to fill out a paper form, fax it in, and wait -- standard operating procedure for most brokers (and not as bad as ones like Merrill or Vanguard that require snailmail and plenty of phone calls for the purpose), but their initial signup procedure (the one that was so slick, fast and inviting) was definitely misleading in the matter.

Moreover, and worse, to get approved for the "highest levels" of options trading, you need hefty account minimums, like $150,000 for some and $250,000 for others, or the like -- so we couldn't even try option trading on Zecco before fully funding the account with the highest amounts we ever planned to move there.  Worse still, like most brokers, they seem totally convinced that selling cash-secured puts is a very risky, very high-level kind of option trade -- while everybody knows, or should, that it's mathematically equivalent to selling covered calls (which they, and most other brokers, consider the safest kind of option trade).  See Ken Fisher's Debunkery book, point 13, about this idiocy (though Ken wrongly says that it's the options fans that don't get the mathematical equivalence, when it's really the brokers such as Merrill and Zecco!-).

At this point, we were already fully options-approved on OptionsHouse (which we had started at the same time as Zecco -- but OH's signup process, while a tad less fast and slick, had made it perfectly clear from the start what all you needed to get options trading approval at the various levels, so we had faxed the needed forms and docs right from the start and they had processed them expeditiously -- plus, OH had no weirdly high account minima to get approved for, e.g., cash-covered put writing). Plus, this was the third disappointment, and I'm told that (in the US, and especially in California where it's actually a state law;-), "three strikes, you're out".

So we decided to transfer the balance back to our bank account... and were aghast to see the transferable balance marked as $0 (two-plus weeks after we had originally funded the account, and well after Zecco had let us trade stocks based on that very substantial balance).  We immediately contacted customer service and got some mild handwaving about some bug in their system, and how we'd need to get in touch with them on the phone to get our money back (!) -- by this time, this was starting to smell strongly like a mini-sized Madoff case to me... what broker or bank has ever essentially refused to transfer out cash that's available in your balance, except a fraudulent one?!

Of course, the times during which you can actually talk to human beings about your account are always incredibly inconvenient for people who work (almost independent of who's your broker or bank), especially when it's a joint account so both husband and wife need to be on the call, and they work at pretty separate places during the working day -- not to mention the huge delays always involved (again, not Zecco-specific, they're all terrible -- Merrill probably the worst, as in slowest, in our recent experience).  That's a good part of why requiring phone calls (rather than online transactions) is idiotic and hateful (Vanguard is even worse at this than Zecco).

Fortunately the next morning when I tried the transfer again it did go through -- so apparently the customer service person was not lying about there being a bug in their system: looks like there was indeed a horrible, gaping bug making it impossible at random times to get your money out.  If we hadn't already decided to go away, this experience on its own would have been way plenty to convince us to: I just can't work with a bank or broker whose systems, while spiffy-looking, are so incredibly buggy as to stop me from getting my money at times, depending on the systems' whims, and I just can't believe that anybody else could possibly choose to do so, if they realized this possibility.

Maybe one day they'll fix this bug, and at least some many others they have (for example, they say they're entirely reworking their options trading platform, which apparently has many problems today -- I wouldn't know, since as I mention I wasn't allowed to trade options there, but I imagine that if even they admit it needs to be redone from scratch, it must be pretty lousy indeed... and they've been open how long, only deciding to finally fix their options trading platform by 2011?! jeez...).

But I most certainly will not be waiting around for such a time, just as I am not waiting for Merrill to get their act together and at least get me back to the level of service I got back when I did my trading directly on Bank of America (which booted me out, forcing me onto the MerrillEdge platform as they shut their own, in the summer of 2010) -- rather, I want to take my business to competitors who do have their act a little bit more together.

Fortunately, at the same time as Zecco, I was trying OptionsHouse -- and, while perfection is not of this world, I found myself much better there, as I'll tell about in my next post in this series (where I'll also mention what details on OH I found to be not perfect, and what prospects are there to see them improve soon), so that's going to be my main broker going forward (right now I'm gradually liquidating positions on Merrill and moving cash to OH -- generally much easier and faster than transferring an account as a whole; fortunately I'm not adverse to take my capital gains right now, before taxes perhaps go up on Jan 1 unless Congress manages to get its act together to avoid that, though for the same tax reason I'd rather take most of the capital losses next year instead -- that will slow things down a bit, but fortunately I have many more capital gains than losses so most of the account will be moving this year).

Meanwhile, if you're looking for an online discount broker, I recommend the site -- I don't agree with all their reviews (e.g., they give five stars to Zecco, as well as OptionsHouse, Scottrade, TradeMonster, OptionsXpress, TradeKing, QuesTrade -- like a rating agency slapping AAA's on every mortgage-backed derivative, a review site granting the highest stars to seven different brokers is clearly not as selective, and thus not quite as useful, as it could be;-), but they do give many details and mostly well-considered opinions.  I do find their OptionsHouse review to be mostly on-target, though;-).

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