A few days ago, I posted about Schwab’s venture into “Commission Free ETFs.”
While I think that this move is a great step in the right direction, most readers who commented missed my point entirely by being more concerned about venting petty grievances.
In case you don’t remember, back in 1992, Schwab was the innovator when they created the mutual fund market place, which allowed you to have one brokerage account and invest in thousands of mutual funds, many on a no transaction fee basis. It was an unheard concept, which caught on quickly and has since become the standard for any brokerage firm.
While Schwab for a number of years, due to internal policy and management changes, lost that leadership, I believe that they now have stepped up to the plate again by being the first to offer commission-free ETFs with very low annual fees.
To be clear, this is not meant to be a plug for Schwab on my part. I believe that if they can succeed with their efforts of offering a wide variety of commission-free ETFs over the next couple of years, they will have an impact on all competitors. It may lead to others having to follow in the same footsteps, which eventually may result in no commissions (or extremely low ones) at all brokerage houses.
Looking at the big picture, every investor will be served well by this potential outcome no matter where you prefer housing your assets.
Comments 4
Ulli,
Way to go, this is a very good point you are making about commission free ETFs. Yes Schwab is an innovator now and has been for a number of years and I am quite sure they will have a profound effect on other popular brokerages. The only problem with commission free trading is that people may become compulsive traders (gamblers) and lose lots of money in the process.
Ulli,
I think most of us got it the first time. Those that aired complaints were not petty to them. Its a pain and chore to switch brokers and when Schwab was starved for increased earnings the lil guy was the sow to provide more bacon not unlike credit card and bank fees today. No real options since they successfuly destroyed the S&L; no fee savings.
I personally dont think the reduced fees will happen. ETF use to mean exchange (index) funds. Now as mutual fund evaporate those creative types are now ginning up fees with managed ETFs (a mutual fund in granny's clothing. Fees will continue to go up. We have CEF closed end fund and index ETF. Thee new products shud be MTF or managed traded funds but that will never happen.
Schwab was asleep at the switch (not unlike AOL or any other outfit that loses its competitive advantage) and is so late getting into ETFs they need a huge inducement to generate any funds. As one writer has said, this will only last until their funds are established if that ever happens and then they will turn to the sow first for a bit more bacon.
Forgot to mention that I believe what Schwab doesnt get in trading fees they will eventually make up in fees on the ETF itself
AND these comission free ETFs are only for 5 funds out of 10000 or more funds, This is pure bait and switch. And quite disgusting to me. Discount brokers are far better than CS. Try just2trade or thinkorswim or mbtrading..
Big giant megabanks are sharks……