Hacker News Reader

Comment by dheera | Hacker News Reader

RH is free and doesn't charge commissions.

This should be a BIG RED FLAG that you are the product and not the customer. In general, if you aren't paying, they have no interest in keeping you happy.

View on HN

For regular purchases, most large brokerages don't charge commissions these days on most purchases. Not a particular fan of RH but the fact that they don't charge commissions isn't any more of a flag than in the case of Fidelity.

Where do brokerage firms that don’t charge for trades or membership make their money from then?

Interest on cash/float/loans, management fees on their own funds, "skim" off trades, other fees of various kinds, etc.

it is a red flag indeed. They route orders to market makers that profit from arbitrage (not exchanges), and other shady stuff.

They skim a little bit off each trade, but in a way that doesn't cost the consumer more than the sticker price. It's basically a commission and every broker does it, so no red flag.

Do RH users get worse prices than commission brokers?

Depends on which broker. But generally it's somewhere around a penny so for most trades even if you're paying more per stock it's a better deal than even a very cheap direct commission.

RH isn't free, you can upgrade to a paid account.

Almost no one charges commission these days.

A bit like the forex shops at airports that sell you the pound for $1.47, and buy it for $1.27, but charge "no commission"...

Obviously brokerages still make money in lots of ways such as low interest on cash accounts, fees on their own mutual funds, etc. But the point is that there's noting unique about RH not charging commissions.

Reply on news.ycombinator.com