The fee compression crunch continues, with a major announcement by Schwab that it will eliminate commissions for online stock trades, rattling competitors in a race to the bottom.
While brokerage accounts are still somewhat rare in 401k and related defined contribution plans, the move is part of an industry-wide effort to reduce what was traditionally seen as the excessive cost to invest, which can significantly lower returns for clients over the long-term.
The move will happen on Oct. 7, and is timed with the release of founder Charles Schwab’s latest book, “Invested.”
“From day one, my passion has been to make investing easier and more affordable for everyone,” Schwab, largely credited with beginning the low-fee movement, said in a statement. “Beginning October 7, every Schwab client can trade U.S. stocks, ETFs and options commission-free. Eliminating commissions ensures my ultimate vision is realized—making investing accessible to all.”
The company will reduce U.S. stock, ETF and options online trade commissions from $4.95 to zero and will retain its policy of no minimum account size.
“This is our price. Not a promotion. No catches. Period,” Schwab CEO and President Walt Bettinger added. “Price should never be a barrier to investing for anyone, whether an experienced investor or someone just starting on the investing path. We’re proud to provide clients with a full-service, modern investing experience that delivers on our no trade-offs combination of service, simplicity and superior value—backed by a satisfaction guarantee. In support of the valued independent investment advisors we serve, the same pricing will apply to their clients when trading at Schwab.”
The firm claims $3.7 trillion in client assets, 365 offices, 12.1 million active brokerage accounts, 1.7 million corporate retirement plan participants, 1.4 million banking accounts, and $3.72 trillion in client assets.
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
