Charles Schwab to Allow Clients to Trade Fractions of Stocks | ETF Trends

In its latest efforts to attract a younger group of investors, online broker Charles Schwab will soon allow its clients to trade fractions of stocks, the founder and chairman told the Wall Street Journal in an interview.

This is the latest offering by the brokerage firm, which recently slashed its commissions on trades from $4.95 to zero.

The firm’s “passion has been to make investing easier and more affordable for everyone,” the founder and chairman of Charles Schwab said in a press release.

“This is our price. Not a promotion. No catches. Period,” added CEO Walt Bettinger.

Many ETFs have now been offered commission free as well, as brokerage platforms are working more closely with exchange traded fund providers in offering commission-free trades to help build tactical asset allocation strategies without extra costs.
The goal of the Schwab promotion is to make it easier to purchase more exorbitant stocks like Apple, that may be out of reach for many younger investors.

It’s a push to attract a younger demographic, Schwab told the WSJ.

“Schwab has been quite focused on younger customers for some time, but we’re sure it’s also been watching the success some of the other free trading platforms have experienced and moving in line on fractional share trading makes sense,” Devin Ryan, managing director at JMP Securities, said in an email.
Other companies have tried offering partial stock trades in the past. Smaller companies like Stockpile, which was founded in 2010, have offered this type of service for 99 cents per trade. However, the considerably larger Schwab, which holds about $3.72 trillion in client assets, is the first major online broker to offer fractional trading. Other companies that offer partial trade include M1 Finance, Betterment and Stash.

“The move is complementary with the commission cut as it removes any remaining friction around single stock trading,” said Ryan.

Shares of Schwab rose nearly 1% on Thursday.

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