How do stock brokers make money?

[haid]

I moved my shares from TD to Schwab. Now TD is offering me thousands to move my shares back. My first thought was that it took me leaving to be enticed to come back... But after that, it occurred to me that if they can offer me money to have my shares at the brokerage, they must be making more than that off of me somehow.

They don't make it off of trade commissions; I am a buy-and-hold guy. And I don't think they are loaning out my shares, as I have no such agreement with TD. The TD broker/agent claims that the firms are competitive, but I think this is about more than just chest thumping rights.

How do they make money by having my shares parked in their firm?

 

[austinEV]

How many commas does your account balance have? 2 or 3 and they may want you on general principal. Why does my bank let me have a credit card that pays 1% back? I have been paying off my balance every month for years, so they don't make any money off interest fees. (yes I know they make a small amount on transaction fees). I am a freeloader. I think they want to keep me around against the day I run into trouble and run up my balance and start making min payments. In aggregate, us freeloaders occasionally become dues payers.

Maybe stockbrokers think of it the same way? I was buy and hold for years then I started day-trading TSLA options like a crazy person.

 

[Johan]

Yeah they just want you as a customer so that at one point in time you might use/buy services from them that they profit from: trading fees, margin, funds, loans/credit etc.

 

[Ardie]

To paraphrase an old tagline from Smith Barney,
"They make money the old fashioned way. They churn it."

This happened to my mother. The stock broker kept calling her to buy this and sell that. She never really made or lost money on the stocks because it all sort of evened out, but the brokerage fees were, um, breathtaking.

-- Ardie

 

[haid]

How many commas does your account balance have? 2 or 3 and they may want you on general principal. Why does my bank let me have a credit card that pays 1% back? I have been paying off my balance every month for years, so they don't make any money off interest fees. (yes I know they make a small amount on transaction fees). I am a freeloader. I think they want to keep me around against the day I run into trouble and run up my balance and start making min payments. In aggregate, us freeloaders occasionally become dues payers.

Maybe stockbrokers think of it the same way? I was buy and hold for years then I started day-trading TSLA options like a crazy person.

So paying me 1/1000 of my balance for me to park my shares at TD is like a casino giving away a hotel room... They hope I will go on a bender and start gambling.

I discussed the situation with Schwab 6 weeks ago. Their initial reaction was just wait a month to see what they could do in response (along with pleas like, "if you do so it will hurt my family; I have to make numbers...."). I even returned to repeat the conversation but nothing had changed. When, I initiated the move, I suddenly received a frantic phone call with a similar counter-offer and a "it must stay with us for 2 years", clause.

This is good fun for me, but it must suck to be a broker/agent.

 

[markb1]

Why does my bank let me have a credit card that pays 1% back? I have been paying off my balance every month for years, so they don't make any money off interest fees. (yes I know they make a small amount on transaction fees). I am a freeloader. I think they want to keep me around against the day I run into trouble and run up my balance and start making min payments. In aggregate, us freeloaders occasionally become dues payers.

They actually make quite a bit on transaction fees. For rewards cards, such as yours, they charge the merchant larger transaction fees than for non-rewards card. They're probably charging the merchant 2-3% every time you use your card.