Ally Invest has dropped its mutual fund trading fees for all 518,000 of its self-directed accounts as it looks to offer something that its competition does not offer at the moment: more income opportunities.
With the markets experiencing significant volatility and the fear of a recession looming in the near future, the Charlotte and Detroit-based financial services saw an opportunity to stand out by providing customers with the ability to increase the yield on their investments.
“With the onset of higher rates and yields continuing to climb, coupled with the economic uncertainty in the news headlines, people are looking for higher yield,” said Frank Lietke, executive director and president of Ally Invest Securities.
Last week, the firm dropped its $9.95 fee for mutual fund trades on all self-directed accounts. These accounts, which differ from robo-accounts, are completely self-directed. The investor receives no investment advice from the firm. They get to decide how much they wish to invest and where, Lietke said.
Robo-advisors, which Ally also offers, provide recommendations for portfolios and suitable investments based on questions the investor answers, Lietke said. The fee elimination impacts only those in the self-directed accounts and not the robo-accounts, according to Lietke.
Ally is banking that this latest fee elimination will keep it competitive in the market. It was also a chance to garner more loyalty from customers, Lietke said.
“We believe that this will help us establish loyalty in an account base that wants to be here … having folks who are loyal to the brand as we are loyal to them,” he said.
The firm has been at the forefront of eliminating fees and commissions over the years. It first offered lower commission fees for its broker-dealer before dropping them altogether in 2019. The firm made headlines on the banking side two years ago when it eliminated its overdraft fees.
The latest fee drop is not related to any significant asset change either in or out of the self-directed accounts, which currently have $12.8 billion in assets.
“I wouldn’t say that this change in itself has marked any major customer behavior nor was it designed to,” Lietke said.
Looking ahead, Ally does not have any immediate plans for additional fee reductions or eliminations, according to Lietke. However, the firm is always looking over its platform to find ways to provide better value to its clients.
“We’re continually looking at the competitive market, where rates are, where fees are and trying to eek out as much value as we can for our customer,” he said.
In general, Lietke said there is a wide-ranging trend that will see more firms eliminate fees as the financial services industry changes and becomes more reliant on technology.
“I think the industry overall will continue to experience price compression because technology enables scalability,” he said. “The more that we can have technology make the platform simple and less hi-touch, you’ll see compression on fees.”