Can Chase’s New You Invest Service Disrupt the Self-Directed Trading Scene?

by on Oct 31, 2018

With the August 29 launch of You Invest, J.P. Morgan Chase tries its hand at self-directing trading services, joining the ranks of Wells Fargo Advisors and Merrill Edge.

You Invest provides free or discounted trading with an initial $0 account minimum. The firm is attempting to draw more assets by targeting passive investors, Millennials and Chase’s existing banking consumer base. Chase Sapphire checking account users get unlimited free online trades, while all You Invest clients get 100 free trades per year, after which the $2.95 per trade fee still beats out the $4.95-$6.95 range offered by most competitors. You Invest aspires to be seen as the Amazon Prime of investing, offering exceptional value via a simple and user-friendly digital front end.

While You Invest’s free trade approach is not a new move, it has the potential to reignite the price compression that flared up in Q1 2017. Other firms might have the capacity to drop to $0 commissions, and this latest development from Chase may very well inspire the firm to do so.

More than half of Sapphire card holders are Millennials, a clear target audience for the You Invest app. Amazon’s business model—something CEO Jamie Dimon looks to as inspiration for You Invest and Sapphire—gives users access to other mediums such as TV, music and movies when they sign up for Prime. Chase introduced a Sapphire Reserve credit card in 2016, giving card holders a 100,000-point sign-on bonus as the main perk. In an effort to mirror the Amazon model for its services, Chase now offers Sapphire checking account users unlimited free trades on the You Invest app. Clients must deposit $75,000 into the checking account and keep it there for three months to unlock certain perks, such as 60,000 points or tickets to a Drake concert. Additionally, Sapphire users get 75,000 points if they apply for a mortgage through Chase.

Chase essentially kills two birds with one stone with this strategy: nabbing Millennial clients and getting them to start trading right away. Offering unlimited free online trades woos clients away from competitors. Chase is willing to forgo profit—the firm lost $330 million in 2017 when the Sapphire credit card launched—to establish customer relationships. Chase’s loss leader strategy could lose money at the outset, but the losses won’t mean much if Millennial clients continue to sign up and use the bank’s products as they grow older.