Registered investment advisors (RIAs) have been among the biggest users of various commission-free exchange traded funds platforms and with that demand has come increased availability of ETF platforms that help RIAs skirt commissions.
With more RIAs using ETFs in client portfolios, it makes sense that more custodians are looking to catch advisors’ eyes with expanded commission-free platforms.
“Research from Greenwich Associates earlier this year showed that one-quarter of the largest private defined benefit funds now deploy ETFs, and adoption rates are even higher with public defined benefit funds and endowments,” reports Nick Thornton for BenefitsPro.
As BenefitsPro notes, the first firm to make a noticeable splash into the commission-free ETF arena was TD Ameritrade (NasdaqGS: AMTD). Nebraska-based TD Ameritrade offers over 100 ETFs to both RIAs and retail clients on a commission-free basis.
TD Ameritrade’s commission-free lineup features ETFs from a broad range of issuers, including BlackRock’s (NYSE: BLK) iShares, Vanguard, Invesco’s (NYSE: IVZ) PowerShares, WisdomTree (NasdaqGS: WETF) and AdvisorShares, one of the largest issuers of actively managed ETFs.
When ETFs “can be purchased commission-free, RIAs, who are compensated on a fee-basis, can move sponsor clients into TDFs without incurring costs and having to pass them onto clients — a competitive advantage more RIAs are taking advantage of,” according to BenefitsPro.
Fidelity is another significant player in the commission-free ETF space, offering its advisors and retail clients access to over 70 of its own and iShares ETFs without commissions. Fidelity’s commission-free suite features popular ETFs such as the iShares Core High Dividend ETF (NYSEArca: HDV), Fidelity MSCI Health Care Index ETF (NYSEArca: FHLC) and the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG). [A Look at Fidelity’s Commission-Free Platform]
Following the recent expansion of its Schwab ETF OneSource platform, Charles Schwab (NYSE: SCHW) offers the deepest bench of commission-free ETFs both in terms of number of funds and issuers. In October, OneSource added 65 from various issuers to Schwab ETF OneSource, bring the number of commission-free offerings on the platform to 182. Seven ETF providers — ALPS, Direxion Investments, Global X Funds, IndexIQ, PIMCO, ProShares and WisdomTree (NasdaqGS: WETF) – joined OneSource.
With original members State Street (NYSE: STT), Guggenheim, Invesco’s (NYSE: IVZ) PowerShares, ETF Securities, U.S. Commodity Funds and Schwab’s own lineup of ETFs, OneSource now offers select ETFs from 13 issuers on a commission-free basis. [Popular ETFs on Schwab OneSource]
At the end of the third quarter, ETF assets custodied at Schwab reached $216 billion, a 20% year-over-increase, according to the firm’s third-quarter snapshot.
The growth of the Fidelity, Schwab and TD Ameritrade commission-free platforms has forced rivals to take note.
Last week, it was reported that Raymond James, the Florida-based brokerage firm, will offer commission-free ETFs to its registered investment advisors (RIAs) and their clients. It is expected that Raymond James’ initial foray into commission-free ETFs will feature a combined 120 funds from First Trust, AdvisorShares, ALPS Advisors and Greenhaven. [Raymond James Mulls Commission-Free ETFs]
Last Thursday, Thursday it was reported that Pershing LLC, the clearing firm, prime broker and provider of solutions to registered investment advisors that is a unit of Bank of New York Mellon (NYSE: BK), could be the next big name to provide clients with access to select exchange traded funds without commissions.
ETF Trends editorial team contributed to this post.