The country’s largest discount brokerage firm, Charles Schwab, is readying to launch its first four ETFs. The ETFs come with a big hook: they’re commission free.
Peter Crawford, senior vice president of IMS Client Solutions, says the lack of commission is neither a gimmick, nor a temporary promotion. “We think this is an offer that is yet another example of Schwab challenging the status quo in the industry.”
On top of that, Schwab is tacking on competitive fees for its funds. The fees for its first eight ETFs are mostly lower than those of competing funds. Crawford says that the low fees and commission-free trading should appeal to investors of all types.
“Whether you’re self-directed or buy-and-hold, trading is unlimited. There’s no cap on size, there’s no minimum,” Crawford says. Commission-free online trading is available to all individual investors at Schwab, the 6,000 independent investment advisor firms who use Schwab and in Schwab retirement accounts that permit trading of ETFs.
The first four of Schwab’s eight ETFs will begin trading this morning:
- Schwab U.S. Broad Stock Market (NYSEArca: SCHB), 0.08% expense ratio
- Schwab U.S. Large-Cap (NYSEArca: SCHX), 0.08% expense ratio
- Schwab U.S. Small-Cap (NYSEArca: SCHA), 0.15% expense ratio
- Schwab International Equity (NYSEArca: SCHF), 0.15% expense ratio
In December, Schwab will launch four more funds:
- Schwab U.S. Large-Cap Growth (NYSEArca: SCHG), 0.15% expense ratio
- Schwab U.S. Large-Cap Value (NYSEArca: SCHV), 0.15% expense ratio
- Schwab International Small-Cap Equity (NYSEArca: SCHC), 0.35% expense ratio
- Schwab Emerging Markets Equity (NYSEArca: SCHE), 0.35% expense ratio
Charles Schwab, whom Crawford knows personally, is very bullish on the ETF industry. “He’s fired up about ETFs. He’s an ETF investor himself.”
The firm anticipates that as more of the money currently sitting on the sidelines is redeployed back into the markets, a good portion of it will be allocated to ETFs. Studies have shown that advisors are also increasing their awareness of the funds and 38% of them plan to invest more in ETFs in the coming year.