After trading commissions for stocks, ETFs and options at Schwab, TD Ameritrade, E-Trade and then Fidelity have gone to zero, there’s a “big unknown” but also a likely group of winners in the broker-dealer space and the further strengthening of a significant industry trend, according to veteran recruiter and industry watcher Jon Henschen.
The move to zero commissions represents “huge savings” for advisors’ clients, making it a “huge deal,” Henschen says. “More clients will ask, ‘Why are we paying these ticket charges? Why not zero?’”
The large question mark, Henschen says, concerns the response of the large clearing firms: “It will be interesting to see how clearing firms react to this news, and if we see downward pressure on Pershing and [Fidelity’s National Financial Services], etc., to lower their ticket charges to broker-dealers.”
For advisors, the zero-commission trend “will only fuel advisors to seek out dual-clearing-friendly broker-dealers, where they can save their clients potentially dramatic levels for those advisors that are active traders,” Henschen explained.
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At present, the list of independent broker-dealers with a “friendly” attitude towards the use of more than one clearing firm is short, the recruiter points out. It includes the Ladenburg Thalman IBDs — Securities America, Triad Advisors, Securities Service Network, Investacorp and KMS Financial Services — along with Geneos Wealth Management and United Planners.
“There are some other ones, too,” the recruiter said, “which are [generally] small and midsize, as well as a few larger ones. Most BDs are not dual-clearing friendly,” Henschen said.