Schwab opens platform to more than 100 ETFs commission-free

Move is welcomed but iShares, Vanguard missing from new lineup

Feb 7, 2013 @ 4:48 pm

By Andrew Osterland

ETFs, schwab, ishares, vanguard
+ Zoom
(Bloomberg)

Charles Schwab & Co. Inc. is launching an expanded platform to give investors and financial advisers the ability to trade more than 100 exchange-traded funds commission-free.

Schwab ETF OneSource, which went live today, allows Schwab customers to trade a roster of 105 ETFs across major asset classes from providers including State Street SPDR ETFs, Guggenheim Investments, PowerShares, ETF Securities, United States Commodity Funds, as well as Schwab's own stable of 15 ETFs.

For financial advisers who hold clients assets in custody with Schwab and use ETFs in their investment strategies, the move is a welcome development.

“This is a win-win for advisers and their clients,” said Thomas Meyer, president of Meyer Capital Group, who holds assets in custody with Schwab. “We use Guggenheim funds, so we're pleased. I think this is going to very good for the industry.”

Whether Schwab's move changes the landscape for investors, however, remains to be seen. Notably absent from the product provider list are the two industry heavyweights — BlackRock Inc's iShares and The Vanguard Group Inc. Together, the two companies account for nearly 60% of all assets in ETFs.

“We spoke to a number of providers,” said Beth Flynn, vice president of the ETF platform at Schwab. “The arrangement isn't for everyone.”

The arrangement is that providers pay a two-part fee for access to Schwab's platform. First is a flat annual fee and second is an asset-based fee on new purchases of the funds to help Schwab cover shareholder servicing and marketing costs, according to Ms. Flynn.

The opening fund lineup covers 54 of the 89 investment categories identified by Morningstar Inc., and Schwab plans to add to the offerings going forward.

“This a great value proposition for our clients, and this is just the start,” said Ms. Flynn. “MutualFund OneSource started with eight providers and 80 funds. Now it has hundreds of providers and about 4,000 mutual funds on the platform.”

Schwab isn't exactly a trailblazer on this front. In fact, it's catching up to TD Ameritrade Inc., which already offers commission-free trading on more than 100 ETFs.

The fund lineup, while covering a wide range of investment categories, still is a little thin, suggested Michael Rawson, a fund analyst for Morningstar. “Schwab itself has a pretty broad lineup of ETFs, and it looks like they didn't put many funds on the list that compete directly with their own funds,” he said.

The list also doesn't include some of the participating providers' most popular funds, such as the SPDR S&P 500 ETF or the SPDR Gold Shares ETF — both of which trade actively and generate significant commissions.

“This is good for investors and advisers, but I probably wouldn't call it a game-changer for the industry,” said Mr. Rawson.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Stephanie Bogan: How financial advisers can achieve more by reframing their realities

By revaluating the choices they make and the outcomes that result from them, financial advisers can make sure they're properly serving those most important to them — their clients, according to Stephanie Bogan, founder of Educe Inc.

Latest news & opinion

Morgan Stanley says recruiting and attrition have slowed down

If wirehouses can successfully reduce their reliance on signing bonuses to recruit brokers, they could increase profits.

Managed accounts look attractive to 401(k) advisers, but how do you measure performance?

The customization that makes them a good investment option presents a benchmarking challenge.

National Holdings' acquisition of broker-dealer WFG Investments and its 200 advisers called off

Under an alternative plan, WFG's advisers will be relocated to three broker-dealers, including one owned by National Holdings.

House committees ready two assaults on DOL fiduciary rule this week

One is a vote on a bill to kill Labor's rule and replace it with a disclosure-based best-interest standard, while the second is legislation to prevent funding for enforcement of the regulation.

Can Buckley run the house that Bogle built?

Maintaining a lead in a low-margin business brings unprecedented challenges for Vanguard's new CEO.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print