For starters, traders have access to a number of brokerage options that charge varying rates. Many brokerage firms provide free trading promotions for new accounts, and depending on the size and frequency of trades, advisors can negotiate rates or ask for period rebates. Some brokerage firms also provide commission-free trades on select ETFs. [Six Popular Commission-Free ETF Trading Platforms]
Furthermore, the bid-ask spread also provides investors an opportunity to negotiate better trades. While ETFs with tight spreads don’t offer much to negotiate over, some ETFs that don’t trade as often can allow investors the opportunity to execute more efficient trades through limit orders. [The Total Costs of Owning, Trading ETFs]
“For an advisor, it’s important to recognize that ETF analytics or grading services that use posted spreads do not fully realize that the actual cost of the transaction can be—and often is—significantly better,” Hamman added. “This is the value add that advisors bring as actual practitioners of ETF trading and execution.”
For more information on ETFs, visit our 101 category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of SPY.