Ironic how my last blog was titled, “How Scottrade Won My Business Back“, but this time around, I’m definitely leaving Scottrade and no longer recommending it to others.

How Scottrade Lost My Business

Scottrade Logo

It all relates back to the ACH withdrawal transfer issue. You see, almost all brokerage services offer an easy way to withdraw funds from your account via ACH. However, with Scottrade, they push you to open a “Scottrade Bank Account” to do a transfer to it, then you can do an ACH transfer from it to your bank. Fortunately, as mentioned in my previous blog, How Scottrade Won My Business Back, Scottrade allowed me to keep check writing privileges on my account which they originally had removed.

My usual way of moving money out of Scottrade, since there’s no ACH withdrawal function on their website, is to initiate the ACH transaction from my bank. On Friday, February 7, I initiated a transfer of $700 (a small amount compared to my account value at Scottrade). I also initiated a withdrawal from my account with TradeKing using their easy-to-use ACH withdrawal tool on their website.

By Monday, February 10, both transfers (from Tradeking and Scottrade) showed up in my checking account. At this point, I figured both amounts had been debited from my brokerage accounts. So that day on Monday, I trade as usual. Recently I’ve become more of an active trader and trade on margin. On Monday at closing, I took a position to carry over into Tuesday. There was some loss on my positions that generated a $100 maintenance call on Tuesday morning. I wasn’t worried about a $100 maintenance call because honestly, it was such a small % compared to my account value and the smallest daily gain would have met the maintenance requirement or I could have closed out a small position easily before market close.

But Then I Get a Call

I get a voicemail at 10:16 am from the local Scottrade branch to call them back regarding my ACH. Within a couple of minutes (10:18 am), I return the phone call. The branch manager had jumped on another call so my conversation originally started out with someone in the office who had to see what the issue was about. Basically I was told that the “ACH was returned” and that if I wanted it to go through, I would have to close out $3,000 in positions immediately. I asked if I could be given until the end of the market day to close out the positions and I was told, “No”.

My first issue is that none of my positions were at a point to close out and with the technicals I was reading, it would have meant taking some losses that would most likely be reduced or eliminated by the end of the trading day. Second… I have no idea how the $3,000 figure was calculated. With the $800 difference (the $700 ACH and the $100 maintenance call generated that morning), it would actually just be $2,666.67 to meet the 30% maintenance requirement. Additionally, I was being asked to meet the call that was just generated that morning immediately instead of the usual two business days.

Things Get Worse

So I’m trying to explain to the person on the phone the situation and that I will meet the 30% maintenance requirement by the end of the trading session, but that didn’t seem to satisfy him. I asked to speak directly with the branch manager (who had originally left the message but had been tied up on the phone all this time). I was put on hold for an extended period of time, I would say about 4-6 minutes.

Once the manager was on the line, she was not accommodating at all. I basically explained the situation that I’m an active trader and would really appreciate having until the end of the market day to trim my positions and meet the 30% margin requirement. She kept saying that it was a “Returned ACH” and that I would have to close enough positions to meet maintenance immediately. Since they kept saying “Returned ACH”, I asked to clarify if the ACH had already been returned or was going to be returned. She mentioned, “Not if you close your positions.” I followed up, “So the ACH hasn’t been rejected yet?” and she promptly followed up, “Well it has now, we’re already past that time.”

Keep in mind, I got the call from Scottrade at 10:16 am. I returned the call at 10:18 am. After being put on hold a couple of times for extended periods, it was around 10:45 am when the manager told me it was already too late. I expressed my frustration and disappointment with the manager on how the situation was handled, to which she replied, “Well, there’s nothing I can do now, what would you have had me do?”

What The Ideal Resolution Would Have Been

I’m glad the manager asked me what she could have done; it gave me an opportunity to tell her. They could have given me until the end of the day to meet that 30% maintenance requirement. The amount that was being withdrawn ($700) + ($100 maintenance call) was a very small % of my total account value with Scottrade (I’m talking less than 3%). They could have seen my account history and see that I’ve been a customer for over 5+ years and have recently become an active trader who has paid about $350 in brokerage fees since the beginning of the year.

How This Could Have Been Avoided

I do take some of the blame on this since I did fail to realize that the $700 had not been debited from my brokerage account yet, even though it had shown up in my checking account. However, in all honesty, this could have been avoided if Scottrade had ACH functionality on their brokerage website like most of their competitors. I had no issue with Tradeking when withdrawing funds. I’m trading almost every day and my positions change constantly; it’s easy to miss that a small % of account value hasn’t been debited.

Adding Insult to Injury

Not only am I going to get hit with a fee on my checking account for the returned ACH, it seems that Scottrade decided to charge me a returned ACH fee as well.

Scottrade didn’t even withdraw the $700 from my account, but yet they see fit to charge me a $25 Returned ACH Fee? This is ridiculous to the extreme. What ever happened to going the extra mile in customer service for customers who are paying a substantial amount in trading fees?

What Scottrade Lost

I’ve accumulated about $350 in fees since the beginning of the year. My account might not have been “large”, but it was enough to qualify for Scottrade Elite and more importantly, I was actively trading, raking up more fees in one month than most buy-and-hold investors with larger accounts. If we extrapolate these figures for a whole year, Scottrade just lost $4,200 in fees per year that they could have earned from me. Not only that, but I was also paying extra for Level 2 / TotalView / and OpenBook quotes.

I purposely avoided doing too many round-trip trades so not to get designated as a Pattern Day Trader while I evaluated different brokerages. Little did Scottrade know that I only had 2/3 of my portfolio with them and 1/3 with TradeKing (who I also have a margin account with). I’ll now begin the process of spinning down my activity with Scottrade, reducing my balances, and making TradeKing my go-to for daily trading. Once the timing is right, I’ll probably move my smaller buy-and-hold investments over to TD Ameritrade. I don’t want Scottrade to have any of my business anymore.

If you’re looking around for a brokerage service, try TradeKing (If you register for TradeKing through this link, we both get $50)… they have an easy ACH withdrawal option.

 

 

Related Posts: