Scottrade wants in on the exchange traded fund (ETF) custody battle, as they plan to introduce proprietary domestic-equity ETFs to track Morningstar indexes, covering domestic asset classes and sectors. They will launch ETFs through FocusShares, who will sponsor the Focus Morningstar ETFs.
Scottrade plans to offer commission-free trades to clients and advisers who custody their assets with them, reports Jane J. Kim of The Wall Street Journal. The company will launch 15 new ETFs starting at five basis points, writes Jackie Noblett for Ignites.
Fees on the funds will range from five basis points on its large-cap fund to 19 basis points on other sector-based ETFs. The new FocusShares ETFs are competing directly with similar low-priced products sponsored by Charles Schwab, Vanguard and StateStreet and are undercutting the competitors by at least one basis point.
While Scottrades’ move may look like added fire in a price war, Tamara Bohlig, VP of product management at Schwab, remarks, “we don’t feel like we have to be the lowest-cost provider; we feel that we need to be competitively priced.” Nevertheless, Bohlig has commented that low costs and commission free trading on Schwab ETFs have helped attract more inflows.
Joel Dickson, principal and senior investment strategist at Vanguard, argues that Vanguard will not give in to cutting fees to the extent that a fund could become a loss leader. Dickson notes that fees may be lowered when assets grow or expenses drop, or vice-a-versa.
For more information on new ETFs, visit our new ETFs category.
Max Chen contributed to this article.
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.