It will cost Charles Schwab Corp. dearly in the short run. But in an effort to win market share and bring its trading charges more in line with some of its low-priced competitors, the San Francisco-based discount broker has slashed commissions on online equity trades to as little as $9.95 for its best clients. Millionaire clients of advisors who custody at Schwab will receive the same deal.
The $9.95 price for market and limit orders, announced May 25, will apply to clients with more than $1 million in “household assets” at Schwab. Previously, these clients paid $29.95, or 3 cents per share, for trades over 1,000 shares. The new pricing plan has no minimum trade size and includes those in the Schwab Advised Investing program.
Initially, Schwab Institutional President Deborah McWhinney said that most of the 1.3 million independent investment advisor client active accounts trading through her unit will see commissions fall from $29.95 to $19.95 per trade for up to 1,000 shares, with an additional 1.5 cents per share thereafter. Larger advisors, she added, would still be able to negotiate special deals. But spokesperson Kelly O’Brien acknowledged that Schwab received “a lot of feedback” from advisors after its announcement and decided to modify its pricing. “Although our standard electronic equity pricing for most advisors will be $19.95 per trade,” she said, “we will be giving advisors who have clients with $1 million in assets under their management and custodied at Schwab the flexibility to offer those clients the $9.95 per trade, provided that the client assets with the advisor are maintained at that level.”