How Low Can Those ETF Fees Go?
January 14th 2010 at 3:00pm by Tom Lydon
Charles Schwab entered the exchange traded fund (ETF) business with a bang, offering commission-free trades on funds traded at Schwab. But now the provider has made another move that could ignite a price war where there’s one winner: investors.
Charles Schwab plans to lower its commissions on all online stock and non-proprietary ETF transactions to $8.95 per trade, reports Jed Horowitz for Investment News.
The reduced commission, which applies only to online trades on stock and non-Schwab ETFs, will take effect Jan. 19, and is aimed at attracting more customers interested in deep-discount brokerages. The target competition is T.D. Ameritrade, which offers $9.99 across-the-board pricing on Internet equity trading and Scottrade which has $7 commissions for online equity and ETF trades. [Is criticism justified?]
Currently, Schwab charges $12.95 per trade to clients who hold less than $1 million in household assets at the firm or made fewer than 120 trades a year. The brokerage also adds charges for orders above 1,000 shares. Schwab noted that the program could lower its first-quarter revenue by between $15 million and $20 million.
This is another example of how more competition within the ETF industry is a great catalyst for the best possible product and service. By offering these lower fees, Schwab has set the customer service bar a notch higher and investors can expect more moves such as these to come from providers across the board if they wish to keep up with their competition. [Is Schwab's entrance into the ETF industry a big deal?]
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.