Our custodian, Fidelity Investments, recently announced that they will be eliminating trading commissions on all equity trades. This is good news for our clients, because this will save them a little money – but at the end of the day, the new no-commission world is not a game-changer for larger accounts. Smaller accounts will benefit, however. As an Andover, MA based portfolio manager specializing in assembling actively managed investment accounts, the new no-commission world will now allow us to offer expert money management for smaller accounts. Most managers thumb their noses at these opportunities!

The Zero Commission World Means Little at Cox Capital

First of all, we like “free,” but at the end of the day, it doesn’t cost that much money to assemble one of our managed accounts from scratch. For example, a new Cox Capital Management client with a portfolio size of $500,000, would theoretically pay Fidelity (not us) just $321.75 ($4.95 a trade multiplied by 65 stocks) to own our flagship CCM Income & Growth portfolio. The cost to the client is just 6.4 basis points – or a little over 6/100’s of 1%! This is peanuts compared to what some brokers may charge you. Remember the days when brokers would sell you mutual funds that could cost as much as 5% in commissions to buy? In the old days, a new $500,000 account would be worth just $475,000 by 4:00 PM that afternoon!

From our perspective, zero commissions is not going to change the way that we manage your money.  Our portfolio turnover has historically been really low and our trading fees are insignificant to begin with. Portfolio turnover is calculated by taking the total amount of new securities purchased or the number of securities sold over a particular period, divided by the total value of the account. Typically, our trading turnover has averaged 15% – 20% per year – which translates into about a hundred dollars or so per year in trading fees. As our clients know, we consider ourselves business owners and like to own our companies over long periods of time. This 15% – 20% portfolio turnover figure translates to an average holding period of 5+ years. We don’t trade for the sake of trading! While we do make subtle changes to the portfolios from time to time, we view excessive trading as a fool’s game.

More Choices, Lower Costs – No Improvement in Overall Returns!

What Fidelity, Schwab, Etrade, and the rest of the brokers don’t understand is that “the race to zero” in the commission world is a loser’s game – and they are not satisfying what consumers need – sound portfolio management. Granted, no commission is really good for the consumer – but just because they can trade freely does not they should do so!  Think about owning a 747 Jetliner (free trading, portfolio management tools, abundant choice of investment products) but being totally clueless on how to fly it (manage the money). The reality is that most people don’t have the time and patience to manage their own funds properly!

Smaller Investors Now Have Access to High Net Worth Strategies!

No commissions actually mean that Cox Capital can now lower our account size threshold. Pass this along because most managers will NOT manage small accounts (they are snobs). In the past, we have always implemented an account minimum for our proprietary “managed” investment accounts that hold individual stocks and bonds.  Our threshold has officially been lowered to $100,000 – for those wanting to take advantage of our active portfolio management skills. Tell your kids! In particular, young savers and HENRY’s (high earners, not rich yet) don’t have the advantage of having excellent portfolio managers at their disposal. We hope to fill that void. Please let us know if we can be of further help to you, your family or friends!

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This is not an offer or recommendation to buy or sell any security and does not constitute investment advice.