The financial services industry has been rocked with a tidal wave of news this week.
Three of the largest retail brokers, The Charles Schwab Corporation (NYSE: SCHW), TD Ameritrade Holding Corp. (NASDAQ: AMTD), and E*Trade Financial Corporation (NASDAQ: ETFC) all ended commission fees for all online stock, ETF and options trades.
These announcements mark the latest, and perhaps largest, development in the ever-evolving pursuit of client acquisition—what has long been called “the race to zero.” And, admittedly, it was a big one. Share prices of the major brokers tanked on Schwab’s announcement.
But while Wall Street grappled with the news, some members of the online brokerage community were surprised it took them so long to pull the trigger.
In fact, a full two weeks prior to the announcement Anthony Denier, U.S. CEO of zero-commission trading platform Webull, was the featured guest on an episode of Benzinga’s Fintech Focus podcast.
During the episode, Denier relayed an anecdote he remembered from a summit he had attended earlier this year. The quote is included here in full to preserve its prescience:
I was at an online broker summit in Chicago and all the big—we call them big three, right. We had TD, Schwab, Fidelity there on a platform with the mediator and the first thing the mediator said to kick off the discussion was, ‘OK guys we have to get this question off the table it’s the elephant in the room: the race to zero.’
And immediately the first thing that comes to my mind is: What race? The race is over. It’s been over. I mean, look at the success of our competitors, look at our success. Zero commission is now going to be the standard.
The New Normal
However, now that the legacy brokers have finally joined their fintech counterparts, we decided to reach out to Mr. Denier to see whether he could provide any more insight into how the new zero-fee landscape impacts the industry’s new and veteran players.
"The playing field is still far from level," said Denier. "The only thing that has changed is listed stock and ETF trading commissions. Options are still not free, margin interest rates are still way too high, and the younger, less experienced, lower AUM investor is still forgotten. If low cost was a broker's only selling point, then they are in trouble. Expect to see a wave of attrition and consolidation amongst the smaller zero commission startups. Once the smoke clears, we get back to what technology-based brokers do best. Delivering a better product and improved user experience for our clients."
Denier also pointed to Webull’s user base as an indication of the broad array of traders that have gravitated to the platform as a result of its zero-commission structure and emphasized the diversity of news and community resources that Webull provides as key features of engagement among its users.
"Our vision from day 1 has been to create the most robust and tech-forward investing platform for ALL users, regardless of experience or account size. Our users are proud of the fact that Webull helped changed an industry for the better and will continue to lead by example by offering new premium free products. We will continue to disrupt," said Denier
While the big three’s announcements might be the final death knell of trading commissions, it opens up new questions about the retail trading industry. However, if history is any indicator the next incentive won’t come from the legacy side of things, but it might start in fintech.
Webull is a content partner of Benzinga
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