Firstrade CEO: Ready to Take on Big Guys Thanks to Tech

When it comes to online brokerages,  Firstrade Securities may not be in the top three or even top five. But that isn’t stopping the company from taking on the big guys. Its weapon in a crowded marketplace: technology.

“Technology has improved and advanced so fast that we are able to increase customers’ experiences for all of our services,” said John Liu, Firstrade founder and chief executive officer, in an interview with Investopedia. “For an example, our customers can apply for an account with us in five or six minutes. Even before the account is cleared, they can start to trade.”

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Tech Helps Firstrade Stand Out

According to Liu, technology is not only making it easier for Firstrade’s customers, but it’s enabling the firm to differentiate in the discount brokerage marketplace. Take account sign-up and funding for one example. Liu said that the process typically takes three to five days at the big brokerages because a lot of the processes are manual. However, Firstrade has embraced automation and advanced technologies that streamline that process. If Firstrade is able to open accounts quicker than rivals, that could result in increased business from more impatient investors.

But the technology advantage doesn’t stop there in Liu’s mind. He noted that Firstrade is the only brokerage that can guarantee to execute a trade for all S&P 500 stocks within one second. “That value Firstrade provides to customers makes them more loyal to us,” said the executive.

When it comes to technology, Firstrade isn’t resting on its laurels. The brokerage recently rolled out a new mobile trading app for iOS devices, and it is readying an app for Android smartphones. Recognizing that there is a growing class of investors who are self directed, the company is gearing up to launch a robo-advisory platform in August dubbed Firstrade Wealth that will provide investment recommendations based on algorithms rather than advisors.

Enough Opportunity for Everyone?

Firstrade has been around for years, but more recently, it has been going after the online brokerage market in a bigger way. While it’s still tiny in comparison to The Charles Schwab Corporation (SCHW), E*TRADE Financial Corporation (ETFC) and TD Ameritrade Holding Corporation (AMTD) in terms of customers and assets under management, Firstrade was able recently to trump its bigger rivals by announcing the launch of more than 700 commission-free exchange-traded funds (ETFs) in April, offering the most of any discount or online brokerage.

At the time, Firstrade said that more than three-quarters of the commission-free ETFs have a Morningstar Rating of three, four or five stars. ETFs include offerings from Vanguard, iShares, SPDR State Street and First Trust, which are all known for offering low-cost ETFs and funds. Liu said that the company went with Morningstar-rated ETFs for the majority of the offering so that investors can access investments that they can research and understand. “Not too many ETFs have research reports covered by a major research company such as Morningstar,” said the executive. Firstrade charges $2.95 per trade.

While Firstrade is operating in a competitive market with well-heeled competitors, Liu said that there is plenty of business to go around. As individuals continue to make more money and focus on gathering assets for retirement, the market for online and discount trading will grow, particularly among the younger generations of investors. “The new generation making money will need wealth management,” said the CEO. “Even though it’s crowded, we are confident we can compete with those big guys because we have the tech.”

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