Recently,Charles Schwab (SCHW - Free Report) and Fidelity Investments took brokerage price wars a notch up by announcing plans to double the number of ETFs that can be traded without paying commission on their platforms.
Notably, ETFs are one of the fastest-growing products in the asset management industry. These allow investors the ease of trading the entire portfolio of stocks against trading only one stock. ETFs are often constructed to track a broad market index, which can be done at quite a low cost.
Effective Mar 1, 2019, clients of Charles Schwab trading on its OneSource platform will be able to access more than 500 ETFs covering 79 Morningstar Categories, free of commissions. Also, they will be eligible for no enrollment requirements and no early redemption or activity assessment fees.
Further, the asset manager is introducing 90 iShares ETFs offered by BlackRock (BLK - Free Report) , for the first time in commission-free category. Other funds in the lineup include ETFs from Invesco (IVZ - Free Report) , State Street, WisdomTree (WETF - Free Report) , Standard Life Aberdeen, Alps Advisors, Direxion, Global X, John Hancock, JPMorgan Asset Management and Pimco.
On the other hand, Fidelity, a private asset manager, is raising its commission-free ETF platform to more than 500 as well to include iShares ETFs as of Feb 28. Also, it will provide more options in the smart beta and active ETF categories from more than 10 asset managers and leading ETF providers in the coming months.
The ETFs field is attracting competition from both the banks and brokerage firms. Last year, JPMorgan launched a low-cost digital trading platform — You Invest — that offered free trades on stocks and ETFs for one year to all customers, and permanently to those with money above a certain level held at the bank.
Schwab’s efforts to improve trading revenues and build a client base seem impressive. Further, a rising rate environment will likely boost its profitability. However, continuously rising operating expenses remain a major concern and hurt bottom-line growth to some extent.
Schwab’s shares have lost 2.1% over the past three months compared with the industry’s decline of 4.9%.
Currently, Schwab carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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