The Bottom Line EXTRA: Brokers tapping new audience for investing assistance

SECURITIES BROKER Scott Vorhaben is one of scores of entrepreneurial types tapping into a fresh cadre of clients: retirement account day traders.

            "A lot of times, I'll find I'm helping clients buy managed futures with an IRA, rather than with a taxable account," says Vorhaben, who works for GT Futures Group and hails from a background as a financial planner for Merrill Lynch.

            Many self-directed IRA investors have joined the realm of day traders, checking the market daily for spikes, dips and trends.

            "Anyone who looks at trading like a business is a day trader, no matter how frequently they actually trade," says David Nassar, author of "How to Get Started in Active Trading and Investing" (McGraw-Hill, 2004). "Put the energy and research into it that you would into a business, and you'll tend to do well."

            Unlike day traders of the roaring 1980s and 1990s, who became famous mostly for getting in and out of holdings on the same day, these day traders are interested primarily in an entrepreneurial approach to their self-directed savings accounts. Such accounts include traditional and Roth IRAs, Coverdell Education Savings Accounts, health savings accounts or self-employed pension plans.

            The pluses of day trading stocks in a self-directed account held by an online broker include greater control, zero cost to open many of these accounts and the potential for more profit that's either tax-free for Roth accounts or tax-deferred for the others.

            Millions of Americans use such online discount brokers as Scottrade, Charles Schwab, Fidelity, TD Ameritrade and E*Trade to self-trade, the North American Securities Administrators Association says. And the number of new self-directed IRAs is growing at three times the rate of new traditional IRAs.

            "All our accounts are self-directed," says Adam Cohen, Scottrade's Washington Square branch manager. Nationally, Scottrade held $50 billion in self-directed accounts in the first half of 2006. It charges $7 per trade.

            Within an IRA, Cohen says, trading "is very straightforward, just like trading (within) any other product on our Web site."

            There's one difference: IRAs can't borrow money to buy securities, a practice referred to as "buying on margin." That's something day traders of decades past did quite freely outside these accounts.

            Experts say the key to successful day trading within your account is knowledge and confidence in that knowledge. That's why most online brokerages offer stock charting, personalized portfolio management and top-shelf research for their clients.

            "The new information out there is obviously quite helpful," says David Tatman, administrator for Oregon's Division of Finance and Corporate Securities. "But I worry that people will delude themselves into thinking they can take the place of a professional."

            That's why Scottrade employs three local brokers to answer questions and help local investors make trades. In addition, brokers such as Vorhaben step in to assist clients trading through his firm's discount brokerage arm, Act Discount Futures and Options.

            "Without a broker, most small speculators lose money in their attempt to try to make money first off," Vorhaben says. "Because of the intricacies (in futures trading), if you don't understand it, it can really hurt you."

            You can see that day trading futures is a risky venture for most retirement accountholders. Stocks and stock-filled mutual funds, on the other hand, still hold risk but are much better understood. That's why stock-related products make up 83 percent of IRA assets, according to the national Investment Company Institute.

            Stockbroker Chuck Britton, who acquired an Edward Jones office in 1998, taps into this comfort level by offering self-directed IRA account holders only historically well-managed mutual funds and stocks or bonds from established blue chip companies. Fees are determined per transaction.

            "Generally, the folks that are doing their own trades aren't using Edward Jones," Britton says. "We're not a trading company; we're a long-term investment company."

            Edward Jones' average client reportedly holds a mutual fund for 10 to 20 years.

            For those who want to make steady gains through short-term investments, day trading with advice from the experts can be just the thing, says Ken Maxwell, a Portland IRA day trader: "There's tremendous empowerment in controlling your own destiny." 

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