Schwab is cutting costs, again, this time for all retail investors and for clients of advisors who custody at Schwab Advisor Services. Charles Schwab Corp. announced January 7 that it will begin charging a flat $8.95 per online equity trade commission or non-Schwab exchange traded funds to retail investors, including clients of Schwab Advisor Services-affiliated advisors who use Schwab's E-Delivery Services, along with other clients who have certain Schwab retirement or Designated Brokerage Services accounts.
In addition to the pricing move, which follows Schwab's rollout in November and December 2009 of a now growing family of its own ETFs for which commission-free trading is available and other price cuts, Schwab introduced Schwab Managed Portfolios - ETFs, a fee-based advisory service that launches January 19 with an investment minimum of $100,000 that will use ETFs representing up to 20 asset classes, including equities, fixed income, real estate, commodities, and TIPS. In the release announcing the new service, Schwab said the managed portfolio services will "make it easy and affordable for the individual investor to get access to broad diversification in a single account with the low cost that ETFs provide."
In announcing the moves, Schwab said it expects the lower fees may reduce its Q1 2010 consolidated revenues by "$15 to $20 million."
The move may be a reflection of both the popularity of ETFs among retail investors, but their underutilization among institutional investors. In its most recent Vision Focus report released January 11, State Street Corp. noted that ETFs now account for almost $1 trillion in assets, but points out that "institutional investors often do not take full advantage of these flexible investment tools." State Street held more than $200 billion worth of ETF assets as of December 31, 2009.
Click here to view the complete Schwab press release.