In a move that will save our clients money and give us more flexibility in building low-cost, diversified portfolios, Charles Schwab & Co. just unveiled a new commission-free, no-transaction-fee ETF (exchange traded fund) marketplace.
The new platform debuts with 105 exchange traded funds from leading providers including Charles Schwab Investment Management, State Street SPDR®, Guggenheim Investments, PowerShares, ETF Securities, and United States Commodity Funds.
Why is this important to clients? Exchange traded funds often offer lower investment costs than traditional mutual funds. By including more ETFs in client portfolios, we can frequently save you money by cutting your investment costs, meaning more potential account growth over time.
Until now, Schwab charged a small transaction fee or commission (ranging from $8.95 to $19.95) to buy or sell most ETFs. While these charges are small, they add up over time, and limited our ability to dollar-cost-average or make periodic investment purchases.
Now, many ETFs (although not all) can be purchased with no transaction fee, meaning we can use more ETFs, make gradual periodic purchases, or reallocate more frequently without costing you money on transaction fees.
Here’s what reporters at Investment News are saying about the new initiative:
“The program may well rock the ETF world. When Schwab launched its OneSource mutual fund platform nearly 20 years ago, only 80 funds initially participated. Other discount brokerages were quickly forced to follow suit and introduce their own similar platforms. Today, there are about 4,600 funds in Schwab’s OneSource program.”
We’re excited about the new ETF marketplace, which will enhance our portfolio design capabilities. Still, clients should note that not all ETFs are currently available in the no-commission marketplace. The two largest ETF providers, Vanguard Group and BlackRock iShares, are not yet included. Even so, this is a step in the right direction and a win-win development which will expand investment choices and lower costs for all our clients.