| 08 February 2010

E*TRADE (ETFC) decided to join the "price war" on Friday, with a bit of a "better late than never attitude." This means that the standard price comparison chart, by which online brokers love to brag, will have to be updated across the board. (That means you, TD Ameritrade!)

What has been billed as a price war is turning out to be more of a garden party. As everyone joins together on pricing, they're creating, as TD Ameritrade's Tomczyk called it, "a zero sum game."

Fidelity updated its pricing last Tuesday, and Charles Schwab (SCHW) updated its pricing a month ago. Now that all the major online brokers are hovering around the same $7-$10 per trade, it appears we've traded in the smack talk, back talk and finger pointing for tea and sandwiches.

Or maybe not. Because if this is a garden party, it's a garden party with subtle flanking moves, reparations and troop fortifications. (Stick with us, here.) We see subtle flanking moves from Schwab and Fidelity in the form of fee-free ETF trading -- a great move for individual investors hoping to dollar-cost average and not blow up their accounts at the same time. We see reparations from E*TRADE, hoping to restructure and put the awkwardness of account inactivity fees behind them. We also see Schwab fortifying the troops to build a banking business.

We suggest everyone start looking ahead. If fees truly have become a zero sum game, and payment for order flow and assets mean much less than they used to, then what does 2010 hold for brokers? Will it be the year of execution, simplicity, advice? Schwab has decided that it's about assets and advice fees. Smaller, niche brokers like tradeMONSTER have focused on improving the experience of the trade.

Only one thing is certain at this point: more change is coming. Let's hope the focsus of those changes remains squarely on improving the service and performance for individual investors. It's amazing to us how often brokers forget one simple connection: that if accounts don't do well, the business will falter.