Schwab to Offer Commission-Free ETFs

Will roll out eight of its own funds over the next month

Schwab Investment Management Services announced November 2 that it is launching a platform of Schwab ETFs--four now and another four in December--with low expense ratios that Schwab clients of advisors can trade for free. Schwab CEO Walt Bettinger likened the new ETFs to Schwab's revolutionary OneSource mutual fund platform. "When we looked at how ETFs are distributed," said Bettinger, "we saw some limitations" that the commission-free trading could help solve, "making dollar-cost averaging possible in ETFs." Bettinger noted that "15% to 20% of retail ETF trading goes through Schwab already," and that the November 2 announcement was only "a first step" in the arena from Schwab.

The four ETFs available now are:

  • ? the Schwab U.S. Broad Market ETF (SCHB), with an expense ratio of 0.08%

    ? the Schwab U.S. Large-Cap ETF (SCHX), a blend fund, also with an 0.08% expense ratio

    ? the Schwab U.S. Small Cap ETF (SCHA), with an expense ratio of 0.15%; and

    ? the Schwab International Equity ETF (SCHF), also with expenses of 0.15%.

In December, Schwab will roll out large-cap growth, large-cap value, small-cap international equity, and emerging markets ETFs.

Peter Crawford, Schwab Investment Management Services senior VP, said the no-commissions apply to trades made by advisor clients on Schwab.com and its StreetSmart.com trading platforms. There is no limit on the number of trades, said Crawford, and the more than 800 non-Schwab ETFs will retain their standard commissions.

Bernie Clark, head of national sales and relationship management for Schwab Advisor Services, Schwab's RIA custodial arm, said the move was "a natural" for Schwab, considering the growing appeal of ETFs for advisors, particularly because of their liquidity, transparency, and performance, and said advisors had told Schwab "how important this is to them."

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