Starting Monday, all Schwab clients will be able to buy and sell stocks, ETFs and options listed in the U.S. or Canada commission-free so long as the trades are done online or via mobile app. Schwab’s already low $4.95 commission for such trades will be eliminated, but options trades will continue to cost $0.65 per contract.
“This is our price. Not a promotion. No catches. Period. Price should never be a barrier to investing for anyone, whether an experienced investor or someone just starting on the investing path,” said Schwab CEO and President Walt Bettinger, in a statement. He noted that the new zero-pricing scheme will apply to the independent investment advisors that Schwab serves.
Beyond that lofty view are the economic realities the discount brokerage faces.
Schwab Chief Financial Officer Peter Crawford explained in a separate statement that since Schwab cut commissions in 2017, new firms have been “trying to enter” the market charging “zero or low equity commissions” and Schwab did not “want to fall into the trap” of waiting “too long to respond. It has seemed inevitable that commissions would head towards zero, so why wait?”
He added that Schwab’s business model doesn’t depend on commission revenue and has a history of focusing on the long term and a willingness to disrupt itself based on client needs and competitive dynamics.
“We’re making these pricing changes because we believe they enhance both our value proposition and our competitive positioning, encouraging the consolidation of client assets and trades at Schwab.”