Displaying items by tag: schwab

(New York)

One of the biggest changes in the advisor-oriented ETF market in recent years has been the sharp rise in broker-owned ETFs, such as those from Schwab and Fidelity. Both have jumped to be major players in the ETF market thanks to their ability to sell these funds on their own platforms. One of the important things advisors need to understand is that a lot of new funds are seeded by the provider itself. Some ETFs have hundreds of millions put into them by their sponsors, which means they are not as liquid, or in-demand as they appear. Hartford and John Hancock are examples of this approach.

FINSUM: Brokers deposit huge sums in new ETFs to make them look established and in-demand. The best way to actually double-check that AUM figures are representative of reality is to look at the volume of shares traded, which is much less likely to be misleading and gives a true picture of liquidity.

(New York)

Investors and advisors—don’t get too excited about the zero fee shift among the big brokers, it is not all that it appeared to be. In particular, mutual funds seem to have been entirely left behind in the zero fee shift. Essentially, none of the big brokers has scrapped fees on mutual fund trades. While ETFs are now free to trade, mutual funds in some cases have transaction fees as high as $75.

FINSUM: This is going to wound the mutual fund market further, as not only do mutual funds have higher fees, but trading them will now be commensurately more difficult than ETFs too.

(New York)

It actually took longer than we expected. Last week there was a big splash in markets and media when Schwab, TDA, and E*Trade all cut their commissions in response to a first move by Schwab. Now, unsurprisingly—except for how long it took—Fidelity has followed suit. The unique part about Fidelity’s move is that in addition to free trades, it is also offering free money market funds for any cash left in accounts. Those are currently 1.58%, and way ahead of the near zero yield you get on cash at Schwab, TDA, and E*Trade.

FINSUM: The whole market has gone to zero on trading commissions. One wonders if the same is going to happen on large ETFs.

(New York)

Charles Schwab may have just changed market access forever. The giant custodian and broker-dealer just announced that it was eliminating all trading commission on stocks, ETFs, and options. It is unclear if it is doing the same for advisors on its platform, but it said it would extend the offer to clients of RIAs who trade on its platforms. TD Ameritrade immediately matched Schwab’s offer within just a few hours. Following the announcements, brokerage stocks plunged. TDA fell about 26% and E*Trade fell 16% to new 52-week lows. Estimates are that the change in fees will depress both TDA and E*Trade’s earnings by 22%.

FINSUM: This is a game-changing move. Hopefully they will extend this to all trades for advisors. This is a brutally competitive landscape and retail investors and advisors are seeing the benefits.

(New York)

There is a new digital custodian in the industry who is promising 90% cost savings to RIAs on their technology and custodial costs. That new company is called Altruist, and is a commission-free custody service that intends to compete with the big players in the space at their own game. “Our goal is for everyone to really pay almost nothing”, says founder Jason Wenk, continuing “How much has really changed over the last 10 years? The change is way overdue. It’s not like this is some epiphany for us”. The new Altruist platform will launch in October and be very easy to integrate with the existing platforms from major competitors.

FINSUM: Technology costs are eating up a huge chunk of revenue across the industry, so anyone that can lower them and still provide stellar service will have a competitive edge.