Investors have spoken. Trading fees are a major deciding factor in exchange traded fund investments as Charles Schwab’s ETF OneSource platform reveals just how much commissions matter.
In six months, Schwab discovered that the 107 commission-free ETFs on the brokerage platform attracted 40% of Schwab-custodied ETF flows, compared to 20% before the program was launched, reports Jackie Noblett for Ignites. [Six Popular Commission-Free ETF Trading Platforms]
“The flows we’ve seen into commission-free ETFs validate the hypothesis on which this is founded: that commissions are a barrier to ETF investment,” Beth Flynn, VP of ETF platform management at Schwab, said in the article.
Among registered investment advisor clients, over half of asset flows went into OneSource commission-free ETFs.
“As you look at the RIA structure, it’s a fee-based advisory business, so cost matters and any additional savings are certainly appreciated,” Jonathan Wills, RIA sales director at PowerShares, said in the article.. “As we look at Schwab and the RIA community as a whole, certainly it is one of our biggest opportunities in the ETF space.”
Due to its success, Schwab is laying the groundwork for adding more products to OneSource and new sponsors in 2014.
“It’s in the early days but as far as we can tell it’s a win-win,” David Mazza, head of ETF investment strategy for the Americas at State Street Global Advisors, said in the article. “We continue to be very excited about the opportunities that OneSource brings to investors and ETF providers and Charles Schwab itself.”
In February, Schwab announced the ETF version of its mutual fund OneSource platform to provide commission-free trades on 105 ETFs from six firms, including State Street (STT), Guggenheim, Invesco PowerShares, ETF Securities, U.S. Commodity Funds and Schwab’s own lineup of ETFs. [Schwab Unveils Game-Changing Commission-Free ETF Platform]
The fund sponsors pay a fee to participate in the program, but they argue that the costs are balanced against the benefits of added visibility on the Schwab platform.
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.