Exchange traded funds (ETFs) were the subject of Bank of America Corporation’s recent offer. The bank is allowing 30 free stock trades a month to customers with at least $25,000 deposited in their account. David Hoffman of Investement News reports on the offer and the affect it will have on ETFs.  ETFs have a lower expense ratio than comparable mutual funds so the elimination of trading fees make for more competition.

As an advisor I’m excited about the pressure this will put on the larger players that offer institutional relationships. But any effect the BofA announcement has on the ETF industry will be muted unless other firms follow their lead. This is because the BofA move is aimed squarely at retail individual investors. ETFs are more popular with advisors and institutional investors. First and foremost, this is going to create substantial pricing pressure with large discount brokers. That will be a major boon to the ETF industry.

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.

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