Cost of Online Stock Deals Keeps Tumbling Down.

THE cost of mainstream investing is coming down - not in a trickle but in a rush. You expect low prices from online brokers. Ameritrade, for one, is offering one month of free trading. But who expected giant American Express Financial Services to offer free trades, too?

At americanexpress.com/trade, you can buy and sell stocks and no-load mutual funds at no cost, if your account is worth $100,000 and up. Accounts under $25,000 pay $14.95 per trade. In between, you can buy stocks free but will pay $14.95 to sell. (At AmEx, as with the other brokers mentioned here, there are limits and exceptions, so check.)

"Pure order execution a commodity that costs very little," says AmEx Senior Vice President Ruediger Adolf. He expects to make money on customers' cash balances, interest on their margin loans, personal investment advice (it costs $44.95 to talk to a broker) and by selling pricey financial-planning services.

The big full-service brokerage firms dismiss Adolf's argument. They think they'll always get affluent clients who will pay for orders.

But people with serious money have "play money," too, and they're in increasingly taking it to online firms. And what about young investors? To them, full-service firms look like their grandfathers' brokers.

To get with it, Morgan Stanley Dean Witter now offers online investing at $29.95 per trade, for people who have at least $2,000 to open an account. At Merrill Lynch, it's $29.95 on accounts of $20,000 and up. At Salomon Smith Barney, it's $19.95, through an account you open with its merger partner, Citibank.

To look more like financial planners, the big firms have also moved toward "fee-based" brokerage. Instead of paying commissions per trade, clients pay an annual percentage of the assets in their accounts. In return, they get unlimited stock trading (through a broker or online), plus access to all the firm's financial services.

Fee-based accounts target people who trade stock portfolios worth around $100,000 and up. Here, too, costs are falling fast.

Merrill drew the latest line in the sand, with a minimum fee of $1,500 a year and a top of 1 percent. What will Smith Barney and PaineWebber do now, with a top of 1.5 percent?

Even now, these fees are negotiable -- at PaineWebber, down to 0.75 percent. Financial planners who charge 1.5 percent to manage individual stock accounts will also find it hard to hold their price.

There's another form of fee-based brokerage -- the "wrap account" -- for people investing as little as $10,000 to $25,000. With wraps, brokers typically put your money into a mix of mutual funds. Instead of commissions, you pay a fee.

The listed wrap fees average 1.5 percent, says consultant John Payne of Cerulli Associates in Boston. But you can generally get a quarter-point off the listed charge. (You also pay the mutual funds' own management fees.)

If you have a full-service broker but don't trade much, stick with commissions. They're cheaper than fees.

At the online brokerage firms, fees are settling at $10 to $15 for a plain-vanilla market trade, says Kenneth Michal of the American Association of Individual Investors in Chicago. The lowest: Brown & Co., at $5.

Instead of cutting prices further, most online firms are working on better, more reliable service, Michal says. That's going to be important when the trading bubble bursts and the unprofitable brokers scramble to stay alive.

David Pottruck, co-CEO of Charles Schwab, believes that all brokers, including those online, will eventually "tier" their pricing, giving better deals to the more profitable accounts.

Financial planners will also have to charge their better customers less, says Mark Hurley, president of Undiscovered Managers. His firm finds money managers for planners who run retirement accounts.

Today, people investing $250,000 and up generally pay 1 percent or more. Hurley expects that, within seven years, competition will slash that cost to no more than 0.4 percent.

Every week, there seem to be more free tools online for budgeting, debt reduction, financial education and investment planning. To help you use these tools, storefront planners might spring up -- say, the way H&R Block delivers income-tax services today.

"It's a golden age for consumers," Pottruck says.

The tougher you are on costs, the faster they'll fall.

Saving for College

If you haven't yet heard about state "Section 529" savings plans, listen up. They're a great way for parents or grandparents to build a college fund.

These plans drip with income-tax and estate-tax breaks, and offer a potential for gain that older college plans can't touch. Many top plans are open to residents of any state.

Until recently, 529s were marketed by the states themselves or by two no-load mutual fund groups -- Fidelity and TIAA-CREF -- that some states have hired to manage their money. Brokers and financial planners who work for commissions weren't paid to sell 529s, so they steered your college money somewhere else.

But now, two big brokerage firms are also in the game, selling state 529 plans to a national clientele. Merrill Lynch hitched up with Maine's NextGen program. Salomon Smith Barney has Colorado's Scholars Choice plan, and will soon offer West Virginia's plan.

This creates an army of brokers prepared to tout this new form of investing to the public. Commercial sales should help get more people talking about 529s.

State 529 plans -- the name refers to a section of the IRS Code -- were authorized by Congress in 1996. You can invest lump sums or make regular monthly contributions The plans come in two forms:

* Prepaid tuition plan. The conservative choice. These plans guarantee that the money you save today will match the growth in tuition inflation at state-run colleges. Currently, that's an effective 3.4 percent return. You can also use the money for tuition at out-of-state schools.

* College-savings plan. Here, you contribute to an investment pool that has the potential of rising faster than the college-inflation rate (although there's no guarantee). You can use the money at any accredited school, for any qualified education expense.

Savings plans are currently offered by 23 states, with nine more starting up this year. If your state doesn't have a savings plan, or has one with unattractive features, you can join one in another state.

Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington D.C. 20071-9200.