Many investors and advisors use Charles Schwab Corp.’s brokerage platform to buy and sell exchange traded funds. The firm is also trying to boost assets in its in-house ETFs by offering razor-thin expense ratios on Schwab-managed ETFs.
Schwab has entered onto the scene and started playing the “penny-a-point” game. The financial-services giant has come into the ETF business and become direct competition to Vanguard, and BlackRock’s iShares. [ETF Fees: How Low Can They Go?]
Schwab has purposely priced many of its domestic stock ETFs lower than Vanguard. Mitch Tuchman for MarketWatch reports that while other ETF sponsors are looking for niches, Schwab challenges some of the biggest and most entrenched products. [Schwab Mulls ETF Warnings: Report]
Schwab has a reputation for going against the grain, such as in the 1970s, when Schwab launched the first discount brokerage and drove down broker commissions. Schwab views ETFs as an opportunity to shake up the retirement industry, namely the 401(k) platform. [Retirement Planning: ETFs Can Help]
“For Schwab, ETFs are not ‘funds’ but rather tools for building precisely allocated, sophisticated retirement portfolios more akin to how endowments and pensions invest. Unlike the mutual fund world, where one active manager is pitted against another like jockeys in a horse race, ETFs are tools for getting market exposure. Markets are the ingredients of successful diversification — the more you have, the better,” Mitch Tuchman for MarketWatch wrote.
Schwab has a goal of being a dominant player in the 401(k) industry and leveraging its own ETFs and platform. The belief that ETFs allow any investor with any amount of savings to build a low-cost, diversified portfolio including shares of U.S. companies, stocks in foreign developed countries and emerging markets, U.S. government bonds, real estate, and commodities is motivation enough for the provider. [Schwab Says Equity ETFs Have Room to Run]
Tisha Guerrero contributed to this article.