There's fashionably late to the party... and then there's stupid late. "Don't-call-us-a-discount-broker" Charles Schwab recently registered 9 ETFs with the SEC to be launched in the near future.
Bringing new ETFs to market is a game that every financial giant has, at the very least, looked into playing. PIMCO decided to move forward recently... and while its intial vehicles were uninspiring, there are scores of unique Pimco offerings in the works.
In complete contrast, Schwab is bringing the same Chardonnay to the festivities that virtually all party-goers brought before them. Consider the list below:
1. Schwab U.S. Broad Markets
2. Schwab U.S. Large-Cap
3. Schwab U.S. Large-Cap Growth
4. Schwab U.S. Large-Cap Value
5. Schwab U.S. Mid-Cap
6. Schwab U.S. Small-Cap
7. Schwab International Equity
8. Schwab International Small-Cap Equity
9. Schwab Emerging Markets Equity
With the vast majority of these potential ETFs, Schwab will have virtually no opportunity to acquire significant assets. And that means... any negligible price benefits through offering expense ratios as low as Vanguard will be offset by painfully thin volume for entry and exit.
Yet State Steet SPDRs, Barclays iShares, Vanguard ETFs... heck, even WisdomTree, PowerShares and Rydex may have an edge on Schwab in these broad market areas. I should say, there may be some room to squeeze out competition in International Small Cap. Neither the iShares MSCI EAFE Small Cap (SCZ) or the SPDR S&P International Small Cap (GWX) have significantly captured investor imagination.
Before I dismiss Schwab entirely, I think there's a few ways that Schwab can become a legitimate force. Lower expenses? No... that's a given. High customer service? Only a foolish investor would blindly trot into a new Schwab ETF without recognition that the competition has trade-able, established ETFs in existence.
No... the real opportunity rests with Schwab's advisor network and Schwab's current 401k presence. That's right. Few 401ks, for example, even offer ETFs yet. But if Schwab starts to get Schwab ETFs into Schwab 401k plans, assets could grow handsomely.
Similarly, there are a great many advisors who are just now coming to learn and use ETFs for their clients. If Schwab can offer unique services or pricing to its advisor base for moving towards Schwab ETFs, perhaps "Chuck" has got a shot as a contender after all.