Don’t celebrate just yet.

The elimination of trading commissions for stocks, ETFs and options at Schwab and TD Ameritrade, and now E-Trade, is being touted as great news for investors, but the outcome may be more mixed.

Both Schwab and TD Ameritrade admit that these free trades will reduce revenues — 3%-4% of net annual revenues for Schwab, 15%-16% of net revenues for TD Ameritrade and about $75 million per quarter on a pro forma basis for eTrade — which probably explains the negative reaction on Wall Street. 

Schwab, TD Ameritrade and eTrade shares all fell sharply on Monday following the Schwab announcement, even though TD Ameritrade didn’t announce the cut until after the market close and eTrade hadn’t announced any change yet, and they were down slightly more than the broader market on Wednesday.

The question now is how will brokerages who trashed commissions make up for the loss in revenues? And how will those moves affect investors?

Nicholas Colas, Co-founder of DataTrek Research, expects more consolidation in the retail brokerage industry, much like other industries have experienced after “a disruptive shift that makes its products/services cheaper, better, or more responsive to customer needs.”

He adds that “retail brokerage firms will have to consider merging in order to maximize economies of scale … [but] scale may not return an industry or its participants back to returns on capital that existed before the disruption came along.”

Will Trout, head of wealth management at Celent who focuses on innovation and disruption in the financial industry, agrees that scale is the “only way out” for brokerages losing revenues in “this race to zero,” and he expects consolidation among the larger players. 

More consolidation means less competition, which is not necessarily good for investors in terms of cost and service.

The other way brokerages may try to make up for lost revenue due to no-fee trades focuses on individual investors: pushing in-house products and incremental services or reducing interest paid on cash balances, which would cost investors, says Josh Rowe-Heupler, the general manager of investing at LendingTree.

Individual investors could be harmed in other ways as well.

“Free trading doesn’t help investors, it only encourages bad behavior,” says Daniel Wiener, chairman of Adviser Investments and co-editor of Independent Adviser for Vanguard Investors.  “Let the industry go all goo-goo eyes over this latest fee compression nonsense but the bottom line is still the bottom line — trading is a fool’s errand.”

And trading involves more than commissions. “There are bid/ask spreads that are costs for investors,” notes Allan Roth, founder of Wealth Logic LLC, a boutique financial planning and investment advisory firm. 

“Anything that lowers fees is great but the more you trade the less you earn.” Roth notes that Schwab and TD Ameritrade have not eliminated mutual fund costs, such as 12b-1 fees, which will put those funds at a competitive disadvantage to ETFs. 

Moreover, the free trades for ETFs, stocks and options could encourage more people to manage their own portfolios and trade on their emotions. “Investing is about minimizing expenses and emotion. It’s easy to minimize expenses when everything is free but that could make it harder to minimize emotions.”