Scottrade’s FRIP And Diversifying Brokerage Firms

scottradeVery recently, Scottrade announced a revolutionary new dividend reinvestment program called FRIP – which stands for ‘Flexible Reinvestment Program’. I currently use Scottrade as my brokerage firm so I took a look at this program and I think it is a great tool for those parties interested in automatically reinvesting dividends, but would also enjoy flexibility as to what securities the dividends get reinvested back into.

As I noted in an article a while back where I talked about why I do not DRIP, or automatically reinvest my dividends back into the equities that paid them out, I pointed out that reinvesting dividends in such a rigid and unthoughtful manner did not make sense to me. If The Procter & Gamble Company (PG) was significantly overvalued and I just kept plowing my dividends back into the shares every quarter regardless of this fact, instead of reinvesting that capital in a more efficient manner by choosing more attractively valued alternatives, I was really saying that value didn’t matter. And, of course, value does matter.

Scottrade’s FRIP allows you to pool dividends together to purchase up to five eligible securities at a time, commission-free. You don’t have to reinvest the dividends back into the company that paid them, and you’re not confined to pick just one company. This program could be especially helpful for those investors that are short on cash, and so instead of letting the dividends just sit idle because the amount of capital is insufficient for a purchase you can selectively invest and simultaneously bypass the $7 commission that Scottrade normally charges for a single purchase transaction. The only downside might be that you can only purchase whole shares. No fractional shares can be purchased with this program.

You can read some FAQ’s on FRIP here:

Flexible Reinvestment Program – Frequently Asked Questions

This program could also work for those that are already financially independent, but typically collect more in dividends than they’re spending. For instance, if my monthly retirement budget is $1,500 and I’m collecting a cool $1,800 per month in dividends I could keep reinvesting that excess $300 without having to incur ongoing commission fees. The flexibility of the plan is really the highlight.

Now that I’ve just talked up a fantastic program that Scottrade has unleashed, I’m going to shift gears a bit and talk about potentially opening up an account with another brokerage firm. I’m extremely happy with Scottrade so far, but I feel the need to diversify between brokerages. The reason being that almost all of my worldly wealth is tied up with one firm. If Scottrade were to go bankrupt at some point in time (highly unlikely, but possible), my account’s funds are protected by the SIPC (Securities Investor Protection Corporation) for up to $500,000. The main issue with this being if I’m one day living off of my dividend income and Scottrade goes under I’ll still be responsible for paying for rent, food, electricity and the like while the SIPC sorts everything out. Not exactly a great scenario to think about. Although I would likely have a margin of safety built up with a cash buffer to take care of monthly expenses, being reliant on that income could be devastating if the situation isn’t normalized quickly. However, if I had investments set up with another brokerage firm I would still have some income coming in while the SIPC cleans things up.

Also, the SIPC only protects up to $500,000 and I’ll very likely have much more than that invested just one decade from today. If my brokerage goes under and I have $800,000 invested in my account with them I’d be exposed to potentially permanent losses on the order of $300k. Not exactly something I even want to imagine. Diversifying between brokerages hedges my bets and reduces my exposure to that kind of risk.

So, lately I have been thinking about diversifying my wealth between more than one brokerage firm. There are a bevy of high quality brokerages available to us individual small-time retail investors these days, which is really a blessing all in itself. I haven’t really settled on one yet, but I am leaning towards TD Ameritrade if only because I’m invested in Toronto-Dominion Bank (TD) and TD Ameritrade is an affiliate of that bank. I really enjoy using the services or consuming the products of the companies I’m invested in. And, as always, I walk the walk rather than just talk the talk.

What do you think? Do you like the new FRIP program? Do you believe in having more than one brokerage firm? Why or why not? What discount brokerage firms should I be considering?

Full Disclosure: Long PG, TD

Thanks for reading.

Photo Credit: Scottrade

Includes affiliate link for Scottrade.

Comments

  1. says

    Took2summit here,

    I like the FRIP in theory but think it falls short. mainly the no fractional share. Say you have IBM at 20% in your FRIP. this means you would need roughly $1000 in there before it would make any purchases. This program really only fits people with large portfolios as it takes the small guys much longer to get a decent pool of dividends collected.

    As far as other brokerages, I don’t think anyone can compete with Merrill Edge at the moment. It’s who I use, the platform is nice, and most importantly, you get 30 free trades a month. What’s not to like about that. I’ve used it for 3 years and am overall happy.

    • SkyInvestor says

      Took2summit,

      You could always temporarily change your % allocation to 100 for IBM for the day you want to purchase, in this case you would only need $191 (as of June 28) to purchase a share of IBM.

      Scottrade allows you to constantly change your securities and the allocation percentages so you really are not limited besides the 2pm transaction time the next day.

      Regards,
      SkyInvestor

    • says

      Took2Summit,

      I can see how the lack of ability to purchase fractional shares can be a drawback for some. Personally, I prefer whole shares anyway so it wouldn’t really matter to me.

      But SkyInvestor did point out that you can allocate as much as necessary to one security so that a purchase is triggered. In the case of IBM you would only require a little under $200 to trigger the transaction.

      I just now looked at Merrill Edge. From what I understand they require $25,000+ cash in a qualified BofA account. Is that correct, or does $25k in securities in your brokerage account suffice?

      Sounds like you have a great set-up there!

      Best wishes.

    • Debbie M says

      Took2summit, I disagree. I have just under 10K in stocks, and my income has been so low lately that I haven’t been able to increase that amount (actually, I’ve chosen other priorities). Yet, with an average dividend income of $19.45/month, I can now buy a new stock every quarter or so. Because the $7 fee is waived, I will actually do that, even though I prefer to wait until I have at least $700 when I do have the fee. So I think it’s great for small investors.

  2. says

    It looks like your argument against DRIP (re-investing in overvalued companies) is still valid with FRIP. It looks nice and I could see it being usefull in big portfolios where it is harder to monitor every stock seperately.

    • says

      Robin,

      Thanks for stopping by.

      As far as the FRIP goes it’s a lot more flexible than a DRIP because you can allocate fresh dividends wherever you want, rather than just the security that paid them out.

      I still will not use this program because I currently combine my dividends with fresh capital and make my purchases from there, but I do see the value in the program and may even end up using it one day when I’m no longer allocating fresh capital to the account.

      Best regards!

  3. says

    I use RBC Direct Investing, and I also do not use DRIPs. If I could get my dividends reinvested without commissions that would be worth celebrating…usually I pool up my dividends and use those funds in combination with additional contributions to make my purchases, maybe a few times a month.

    Maybe I should ask my brokerage if they would ever consider such a plan

    Thanks

    • says

      Dividend Tactics,

      I do the same thing as you. I pool my dividends with fresh cash from my day job and make purchases with the combined sources of capital. I also do this a couple times per month or so, depending on how much money I’ve made.

      I think the new tool definitely has some merits, but I’ll continue doing what I’ve been doing. I won’t be able to avoid commission fees while I’m investing new capital anyhow, so I like to make sure the purchases are as large as possible.

      Take care!

  4. says

    Im also using the FRIP program with Scottrade. Not paying a seven dollar purchase is an awesome benefit. I thoroughly believe it is the small fees that eat into future gains. That is the main reason I abhor the idea of mutual fund investing. I have a pension program at work and my Scottrade accounts keep a smile on my face. As an aside Im late to the realization that I could have invested and saved more to retire young. Keep up the good work .

    • says

      Kevin,

      Great to see someone is getting some value from the program. Good stuff! Glad you like it.

      I’m with you on mutual funds. The less fees the better. Although I’m probably averaging somewhere around $200 in fees per year based on my purchasing frequency, this will drop dramatically once I’m living off my dividend income.

      As far as retiring young, it’s never too late! Keep on living below your means and investing the difference in high quality companies and you’ll see the benefits! :)

      Best wishes.

  5. says

    TD Ameritrade is a very good option. Been using them for many years. You’ll be happy with that choice. I have my company’e brokerage, personal brokerage and two ROTH IRAs (Mine and wife’s). Been happy.

    • says

      Pay off my rentals,

      Hey, a positive vote for TD Ameritrade! I see the fees are a little higher than some other services out there (30% higher than Scottrade), but I’m willing to not let $3 bother me too much if I’m supporting a company I’m invested in.

      Thanks for stopping by and offering up the info!

      Best wishes.

  6. SkyInvestor says

    I think the FRIP really is a great tool with plenty of positives. Although Scottrade mentions you can only have 5 securities registered at a time, you can change these at any time. (at no penalty, which is great)

    I have already made a few transactions with the FRIP as I have seen ownership in some of my securities drop in the past 2 weeks. All I did was add the specific security, allocated 100% to it, and adjust the date so the transaction would go through on the next day. As of 1:51 pm EST the securities were added to my account. I would be interested to see if there is some type of method that determines when around the 2pm mark they purchase them, because my 2 securities each time I used this function were purchased on a dip, while by 2pm they seemed to have recovered in price a bit. (Maybe I just got lucky, has anyone else noticed this?)

    Regards,
    SkyInvestor

    • says

      SkyInvestor,

      Great information there. Yeah, I think the flexibility with this program is fantastic. You can select any five, or one or three or whatever and you can also change them at will. Great stuff.

      I wasn’t aware of the time issue. I’ll try to see if I can get some further information on that.

      Take care!

    • says

      Captain,

      I’m with you. Having that much capital is a good problem to have!

      All major brokerages, as far as I’m aware, are registered with the SIPC and therefore you are covered through them. You’ll want to do your own research on this with your brokerage to confirm.

      Many brokerages, including Scottrade, also purchase supplemental insurance (usually through Lloyd’s of London) which allows additional coverage. However, that additional coverage is very murky. I’m actually in the middle of trying to get some clarification on this and so far have been unsuccessful. I’ve always been conservative, and therefore would only count on the $500k through the SIPC, because the supplemental coverage has institution limits.

      Hope that helps!

      Best regards.

  7. says

    I use tradeking and they offer a DRIP program that reinvest dividends as partial shares for free. The also only charge 4.95 per trade, and have excellent customer service. Highly recommended! Not to mention, if you were interested, we both could get a $50 bonus for your signing up, haha

    • says

      DJ F.,

      Great stuff there! I’ve never really looked at Tradeking. I’ll have to do a little research. I must say that $50 sounds pretty compelling! :)

      Thanks for stopping by.

      Best wishes!

    • says

      Another vote for tradeking, have been satisfied with them for all the above reasons.

      I remember reading a Dividend Growth Investor post http://www.dividendgrowthinvestor.com/2012/08/stress-testing-your-dividend-portfolio.html

      That basically states he is going to diversify brokerages at the $100k level due to continued growth, that will give him a cushion as his portfolio grows to the $500k level. He also has another post about comparing a few brokerages (5/24/13).

      While I can see the value of that, it seems to be a bit overkill, as DGI expects to be generating over $100k/year in dividends he is going to need over $2 million to achieve that, that would mean around 20 investment accounts? Sounds too much like work ;)

  8. Anonymous says

    Hey Jason,

    I have had TD Ameritrade for my ROTH and regular brokerage and they had great tools. Then when I switched jobs to JPMorgan they had me convert to Etrade. I find Etrade tools are even more useful than those at TD, especially the Income Estimator tool which shows what dividends have been announced and expected over next 3,6,12 months.

    Cant go wrong with either firm, Good luck,

    Matt

    • says

      Matt,

      Great info there. Sounds like you really liked both TD Ameritrade and E*trade. I really like the idea of an Income Estimator tool like that. Sounds pretty nice!

      Thanks for the information. Appreciate it!

      Take care.

  9. Spoonman says

    This is a very interesting topic as it is near and dear everyone in the community. I personally have not thought about the 500K cap on insurance, I’ll have to check with Wells Fargo and see what they have.

    Wells Fargo has been great for me because I get 100 free trades per year. For a dividend growth investor like myself, that’s plenty. In the three years that I’ve been investing with WF I have paid $0 in commission fees.

    I’m not a big fan of DRIPing, but it’s good to hear that these companies are coming up with new products. That’ll force all the others to be equally imaginative and hopefully make their products cheaper and more reliable.

    • says

      Spoonman,

      That’s a really nice program. 100 free trades per year would definitely suffice for me. That’s way more than I need. Very cool!

      From what I can tell, however, that the 100 free trades/year program expired April 1, 2013 for new accounts. Existing accounts are grandfathered in. Also, it looks like that plan required a fairly hefty cash balance with a WF checking account. Is that true?

      I’m with you on DRIPing. Not a fan at all, but this new FRIP could revolutionize reinvesting dividends. Very cool stuff. I imagine other companies will follow in suit.

      Best wishes!

    • Spoonman says

      Yeah, the program required the sum of all balances in your WF accounts to be greater than $25K (that includes 10% of debts carried with WF, so a mortgage could get you a over the threshold). It was a great program and I feel lucky to have been grandfathered in.

  10. Craig says

    I like Scottrade and have used them for many years. I was always a little disappointed they didn’t have a DRIP option. I totally get the reasons for not DRIPing, but I’ve always been more conscious of the extra commission to buy shares with the accumulated dividends. I opened a broker account at TradeKing a couple of years ago specifically because of their DRIP option (their lower commission doesn’t hurt either). In hindsight, I think that was a good move from a “diversification” perspective.

    When I noticed the new Scottrade FRIP program on Friday, I jumped all over it for all three of our IRA accounts. This makes a lot of sense to me. Accumulate a pool of money and periodically buy “anything”, currently owned or not, without commission. I’ve got them setup to reinvest quarterly into one specific stock for each account (3 different stocks in total). When the reinvestment time arrives, I will double-check my stock selection and might make a change.

    It can be as “set it and forget it” as you’d like. But I’m happy that it is indeed flexible.

    • says

      Craig,

      Glad to see you really like the new FRIP. I think it offers a lot of value and flexibility to Scottrade customers. Although I won’t be using it right now, I can see myself being interested in it one day (perhaps when I’m FI).

      Glad to see you like TradeKing. That was mentioned earlier. I’ll have to take a look. Cheap transaction fees are nice! :)

      Take care.

    • Craig says

      Jason,

      I think for an active taxable account where you are adding fresh money on a regular basis, using the FRIP is not necessary.

      For our Roth IRAs, I make the annual deposit, make a purchase, then patiently wait for the dividends to accumulate to make another purchase. My Rollover IRA gets no new money. That’s why I’m digging the FRIP… those little eggs are working quicker (and smarter) for me without the extra commission.

      In fact, I’m thinking of turning the DRIP feature off for my TradeKing taxable account. Initially, that account was to park some extra savings and would not receive regular cash infusions. DRIPing made sense in that scenario. I’ve just started funneling more money that way and can now “reinvest” more intelligently.

      Cheers!

  11. says

    I have spent some time looking at SIPC and various online brokerages. I came to the conclusion that Optionshouse is the best deal. $4 trades, no annual fees. The only problem is that I don’t trust these kinds of no-name brokers. I’m not going to trust my life savings with optionshouse, trade king, sogotrade, etc. They haven’t been in business for very long.

    I currently use fidelity and have zero complaints. I have thought about diversifying brokers and think Scottrade would the top candidate for the second account. A name I can trust is the highest priority; then trade commissions/no annual fees. Having the option to DRIP is nice (and I do use it sometimes), but not very high on my priority list. Customer service is also important to me.

    • says

      Compounding Income,

      I’m with you. I wouldn’t want my life savings with some company that I don’t completely trust. Just the same I wouldn’t want to invest in a company I couldn’t trust.

      Glad to hear you like Fidelity. We have a Fidelity office here in Sarasota, so that’s another firm I should consider.

      Customer service is also very important to me. As is physical locations. I like knowing that I can go to an office and actually talk to someone if need be.

      I have been told over and over again that there is coverage above and beyond SIPC limits, but I can’t find the exact nature and amount of these coverages. I’m sure Fidelity offers something similar. Let me know what you find out if you decide to look into this.

      Take care!

  12. says

    I think it’s a good idea. I use two brokers, one for my ETF Dividend Portfolio and one for my Stock Dividend Portfolio.

    TD is the one I use for ETF’s since the commissions are free.

    Love your blog btw, I’ve also been working on increasing dividends and google brought me here. Great stuff:)

    • says

      The Dividend Guy,

      Glad you like the blog!

      Another vote for TD! I perused TD’s site and like the platform. They have won a number of awards over the last few years, usually placing them either #1 or #2 for discount brokerage firms. Scottrade is usually not far behind, so that’s good.

      Best of luck with building your portfolio and increasing the dividends. Your goal of $1,200 was the same goal I had just a couple years ago. The progress can happen quickly!

      Take care.

  13. Steve says

    DM,

    I’m a very satisfied Scottrade customer. I moved from Ameritrade quite a few years ago now. Not because they weren’t a good brokerage but Scottrade had them beat on commissions.

    I’m extremely excited by the FRIP program. Every once in a while I’d complain to my local Scottrade branch about not having a DRIP program and they’d apologize and give me 20 free trades to keep me happy. Somehow I didn’t get around to telling them I was already happy but I just wanted a DRIP program! The free trades made me even happier! :-)

    You mentioned that you won’t use the FRIP because you’re adding new capital. I’m also adding fresh capital every month but I set up the FRIP because I want the dividends being invested in between my purchases. Since I can control where all the dividend money goes, I just set it for the companies I’m currently adding to. Since they are free trades it just means that a few extra shares get purchased in between my larger monthly purchases. It means the dividend cash won’t sit until the next monthly purchase. Seems like a good deal to me.

    As far as diversifying, I’m not there yet but I had already planned to diversify at $100,000. Although there may not be a real logical reason for it, anything past $100,000 makes me nervous. I would also echo what a few have said about picking a larger brokerage that has been around a while. E-Trade and Ameritrade are great companies. Charles Schwab, although pricey, is another one I’d look into. Personally, I wouldn’t feel comfortable with having a large sum in a smaller company like Tradeking. Just a personal feeling.

    The other consideration you may have since you’re closer to FI than I am is that Scottrade currently won’t let you transfer funds electronically directly to your checking account. You have to call the local branch and have them mail you a check. That could be a real problem when you start living off of your dividend income. When you choose your next broker, make sure you can have dividend income transferred directly to your bank account.

    Take Care!

    Steve

    • Anonymous says

      I use scottrade too, and was reading up about the FRIP program. I am not completely clear about it though.
      Say i received a $100 dividend in may (2 months ago). Can i go ahead and set a FRIP tomorrow for a purchase of $100 via FRIP using that money from the past? Or setting the FRIP (or changing the allocation) only applies to future dividend income ?

    • Craig says

      The FRIP pool begins when you enroll in the FRIP and will be $0. The $100 of past dividends would not be included.

    • says

      Steve,

      Great thoughts there! Sounds like I need to complain to my local office to get some free trades. :)

      Yeah, I think the FRIP tool definitely has some advantages. Sounds like you’re taking advantage of it. Very nice!

      As far as transferring funds to my checking account, I’ve looked into that before. It seems like most of them work the same regarding this: they allow you to wire money in no problem, but charge to wire it out. The check, as of right now, is the only option. Not a huge deal, but an inconvenience.

      Keep up the great work!

      Best wishes.

    • says

      Anonymous,

      I understand it the same as Craig. I cannot comment from personal experience as I have not used FRIP yet, but that’s the way I interpreted it.

      Best of luck!

      Take care.

    • says

      Scottrade doesn’t let you take money out easily?

      I have several brokerage accounts to protect myself in case of an SIPC failure, and all of them let me withdraw funds using an ACH link to checking account FREE OF CHARGE.

      I vote for Schwab, which also provides a really really nice online checking account. Or Tradeking is good too. Just don’t own Swiss companies’ stock there – they will charge you the full tax and then you would have to waste 1-2 hours of your time getting it fixed.

    • says

      DGI,

      Scottrade currently only allows check withdrawal as a free service. ACH withdrawals come with a fee right now, unfortunately.

      I’ll have to look at whether TD Ameritrade, Fidelity, Wellstrade and some of the others offer in this regard as it is relatively important for convenience sake.

      I’ll have to take a look at Schwab. Haven’t peeked at them yet. Time to talk to Chuck? :)

      Thanks for stopping by!

      Best regards.

    • says

      me myself and I,

      I’m with you. I don’t really get it either. The only thing I can think of is that they want to discourage you from taking money out of your account, so adding a layer of complexity might keep some people from withdrawing the money. Not really sure.

      Best wishes.

  14. Anonymous says

    I always buy shares direct from the company and reinvest the dividends your way seems better but those frational shares add up what do you think of NJR and GAS stock you seem to be a good number guy im not every good at that all I know is my dividends checks keep getting bigger and some time down the road I will walk down to my mail box and see a dividend check twice a week from some stock I bought five years ago

    • says

      Anonymous,

      Buying shares directly from the company is definitely a great way to do it. I’ve seen many stories where investors purchase direct and set up a DRIP. Nothing wrong with that.

      I can’t really comment on NJR or GAS at this time. I’ll have to research those a bit further and get back to you. I don’t follow them at all.

      I also look forward to the day where I just keep getting checks in the mail. That’s definitely a great spot to be in!

      Best regards!

  15. says

    “Also, the SIPC only protects up to $500,000 and I’ll very likely have much more than that invested just one decade from today. If my brokerage goes under and I have $800,000 invested in my account with them I’d be exposed to potentially permanent losses on the order of $300k.”

    Jason, diversifying against brokerage houses is an intelligent maneuver. It is particularly intelligent if you have between $500,000-$2,000,000 and want to spread it out over three or four brokerage houses. But there is a way to hold more than $500,000 in an account without assuming risk.

    What you would do is this: You’d go to a bank like The Northern Trust and ask to open a global custody account. The appeal of this approach is that the assets are held in “street name” and you are isolated from the bankruptcy of a custodian like The Northern Trust because the shares would be registered in your name. This is how someone like Warren Buffett is able to buy 1,000,000 shares of JP Morgan in his personal account without running around across dozens of brokerage houses. It could be something worth considering as your assets increase and you want to keep more than $500,000 in a centralized location without exposing yourself to a particular risk. Just my $0.02. As always, great work.

    • says

      Tim,

      Thanks for stopping by!

      I wasn’t aware of the global custody account. Very interesting stuff. I’ll definitely have to research this further, especially as my assets get closer to a level where I’m worrying about protection.

      Thanks for the information. Much appreciated!

      Best wishes.

  16. Anonymous says

    added to the above comment I reinvest all my dividends so those statements says my dividends keep getting bigger and no dividend is to small to have $10.00 is $10.00 FIVE more years and I think I can retire

  17. Anonymous says

    Hi Jason,

    Been following your great blog for a while. I’m based in UK. You guys are very fortunate. UK brokerage clients are protected up to £50K ($75K). I’m planning to open 4 or 5 brokerage accounts. I will use my wife’s accounts to double up on that. For transparency, I only use brokers that are listed on the stock market (S&P500 or FTSE100).

    I think its very important to use multiple brokers….. just think of Madoff, Enron, Worldcomm, Lehmans … as Inspector Clousea would say …. always expected the unexpected.

    • says

      Anonymous,

      Well, certainly you never know what can happen. Brokerages do not go under very often, but I would always rather be safe than sorry.

      I don’t blame you for opening many brokerage accounts. Only being covered for $75k is not very reassuring. Best of luck over there!

      Take care.

  18. Debbie M says

    I quite like the new FRIP program. I signed up as soon as I figured out that it was ready (sadly, just after I had received a big batch of dividends). I love that I can get more shares (for free) even when I’m not bringing in enough income from work to be able to afford proper purchases (big enough for the fee to be insignificant). I also like that you get full shares, which makes it easier to deal with at tax time when you sell a position. And I like that I can aim it wherever I want.

    I’ve done a lot of thinking about which position to aim my FRIPs to. Since I have about $700 worth of two positions and the rest are at around $1000, I’ve decided to focus on the two lower ones. Currently I’m set to buy the one with the higher share price to give me time to decide which one is the better value by the time I can afford a new share. I like the idea of always getting a good value, but I’m reluctant to buy a single share in a new company because it would cost too much to sell. And at an average dividend income rate of $19 per month, it would take me a long time to build up a decent amount of that new company, and it might not be a good value during the entire amount of that time.

    In your situation, I would probably ignore the FRIPping, using all the money to help you make your next purchase at a good value as you’ve already decided. Or you could use it if you sometimes wish you could buy just a share or two here and there to help you rebalance.

    I like the flexibility of how often you can change your designations. I will (probably) always want all dividends to go into the pool, but I like that I can change my mind at any time on what gets bought and what day of the month it happens (like right after I get enough dividends to be able to afford a share of something I want).

    In your position, I would get more than one brokerage firm, and not just in case they go out of business, but also in case you get locked out accidentally or some other weird thing happens. In my case, I have hardly any money there (most of my investments are in an IRA with Vanguard, in my house, and in my pension), so I already feel properly diversified.

    About a year ago I learned that some brokerages let you drip (I had always thought you’d have to buy directly from the company to do that), so I did some research and seriously considered switching to TradeKing–they allow dripping, trades cost only $5, and it was recommended to me by a couple of people. In the end, I didn’t go for it. It’s a lot of trouble to move things from one company to another. I think Scottrade doesn’t charge to transfer your money out but TradeKing does (I don’t remember for sure). With my small amount of stocks, the dividends wouldn’t add up to much and I didn’t much like the idea of fractional stocks. I did like the idea of always having all my money working for me, but ended up not going for it.

    So I’m glad Scottrade came up with this new odd feature which seems just about perfect for me.

    • says

      Debbie M,

      Sounds like you’ll get some great value of the FRIP! Sorry your comment just now got published. It went to the spam folder for some strange reason. My apologies.

      That’s some great stuff there. I hope that the FRIP offers you a chance to build up some of those smaller positions slowly, but very effectively.

      Keep up the great work!

      Best wishes.

  19. Anonymous says

    Hi Mantra;

    Just opened another account at Share Builder for same reason. They are owned by Capital One. So far I like them. $6.95 trades and free dividend reinvestment. FYI.

    Bill from Wmspoprt

  20. says

    How is Scottrade making money on the FRIP service? Is their a hidden annual fee accessed to your FRIP pool? Do they loan out your FRIP Pool money as it sits in their banks? Just trying to see the business end of it. That is always good to be aware of.

    • says

      FYc,

      As far as I know, it’s a free service. I’m not aware of any fees or anything else. They could very well be using the capital as a float, but I’m not aware of this. Either way, I think it’s a really nice program that adds value.

      Thanks for stopping by.

      Best regards!

  21. says

    Diversifying between brokerage firms is something I’ve given some thought to recently for the reasons you’ve stated. I still have a long ways to go before reaching that $500,000 SIPC covered limit but at some point in my investing future I most definately expect to have more.

    I always wondered what the super wealthy do in this situation. I like the ease of having only a couple accounts. It will be much more of a hassle if I have to open up quite a few different brokerage and banking accounts to protect my assets. But I guess if I have enough assets to protect, it will be worth the hassle.

    • says

      Dan,

      I still have a little ways to go before I need to diversify brokerage firms, but that time is definitely coming. Even if I never add another penny to the funds I have in my Scottrade account it could likely pass $500k within the next 20 years at a modest growth rate.

      I guess more money, more problems? Good problems, nonetheless! First-world problems and we’re lucky to have them.

      Take care.

  22. Anonymous says

    I’m also from the UK, but also have permanent residence in Canada. I use TD Direct investing in the UK, and currently exceed the covered limit, which I will gradually reduce particularly as they have now increased their commision for North America from GBP12.50 to 17.50.

    In Canada I have an Interactive Brokers account, mainly because I wanted to sell Puts on stocks I wanted to own long term and the commissions are low, I can keep selling them every month until the stock gets Put to me. As each contract is for a 100 shares you do have to be aware of your commitment if they get Put to you, with Apple and other high priced shares you may be able to sell a mini option for 10 shares, but as with Apple your still committed for $4,000 or more should the stock get put to you. And you can collect a few percent per month before you’ve purchased the stock.

    On the point of multiple brokerage accounts, some of the newsletters I subscribe to suggest opening accounts in other countries as well, not all countries will allow this unless you are a citizen or permanent resident though. You’ll need to read the likes of International Man and Sovereign Society to get more info.

    Thanks for a lot of great information from everybody.

    Chexxer (Not keen on being totally anonymous, but don’t have any of the accounts listed)

    • says

      Chexxer,

      Thanks for stopping by and commenting!

      I’m not sure I have a need to open brokerage accounts in other countries, but I do think that over the long haul I’ll have more than one account. I just think it’s prudent.

      Glad you like the content. Please stick around! :)

      Best regards.

  23. Zach says

    I recently opened an IRA with Scottrade. When I was looking around I noticed the FRIP mentioned on several websites, and thought it sounded like a great tool. However, when I tried to find it on the Scottrade website it was nowhere to be found, so I talked to customer service and they said it’s no longer available to new accounts. Any idea as to why they have canceled it? I can’t find any mention of it online. Thanks!

    • says

      Zach,

      To be honest, I just very recently heard that they were having some kind of issue with the program. That’s about all I know, to be honest. I hope they get it back online for new accounts. It seems like a really great program, though I haven’t personally used it. So if there are any glitches with it, I wouldn’t know.

      Best wishes!

  24. says

    Does Scottrade have a checking account option, I want to do both under one company for convenience? If they do, have you used that side of their services? If they canceled the FRIP program for new investors, do they still do automatic reinvesting into the stock that paid them?

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