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Schwab Boosts New Trading Accounts 31% After Fees Go to Zero

John Gittelsohn

(Bloomberg) -- Charles Schwab Corp.’s free trading offer is turning out to be a hit, drawing in new customers at a fast clip.

Clients opened 142,000 new trading accounts in October, a 31% jump over September’s pace , according to a report Thursday before markets opened. Total brokerage accounts climbed to 12.2 million and firmwide assets grew to a record $3.85 trillion.

Schwab escalated the brokerage industry’s price war on Oct. 1 when it eliminated commissions on U.S. stocks, mutual funds, exchange-traded funds and some options. The move is likely to hit revenue but is aimed at wooing new assets to the San Francisco-based firm, which has been generating most of its income from interest earned on client cash holdings.

Average interest-earning assets were $266 billion in October, little changed from September and up about 1% from a year earlier. The gain in brokerage accounts is just 7% more than October 2018.

Other brokerages that cut commissions have reported divergent trends in October client activity:

E*Trade Financial Corp., which announced zero commission trades shortly after Schwab, posted 9% month-over-month and year-over-year jumps in daily average revenue trades, or DARTs, a key measure of customer activity.TD Ameritrade Holding Corp.said DARTs were 11% higher in October than September but down 8% from a year earlier.Interactive Brokerage Group Inc., which announced commission-free stock and ETF trading in September, said DARTs dropped 5% month-over-month and 19% year-over-year.

A more detailed picture of the bottom-line impact of the fee change will be available in January, when Schwab reports fourth-quarter results.

(Adds interest earning assetsd in fourth paragraph.)

To contact the reporter on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Josh Friedman, Alan Mirabella

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