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Portfolio > Portfolio Construction

Schwab to Offer Fractional Shares of S&P 500 Stocks

By Janet Levaux

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Charles Schwab says it will soon let its retail investor clients buy partial shares of S&P 500 companies. The news comes nearly seven months after the firm said it planned to move into fractional shares, or dollar-based investing.

Rival Fidelity introduced this service for its investor clients in late January for both stocks and ETFs, while Robinhood did so in mid-December. Folio Investing, though, started selling fractional shares in 2000. 

Schwab gave the example of a retail investor being able to buy partial shares of Apple, Amazon, Facebook, Google and Netflix for as little as $25 total vs. buying a full share of each stock, priced at about $4,500 as of Monday. 

As for RIAs, “Independent advisors told us that the ability to trade fractional shares on behalf of their high net worth clients is not a critical capability,” the firm said in a statement.

“But for their end clients who are interested, we do expect to make fractional shares available in the brokerage accounts of independent advisors’ end clients (via Schwab Alliance) in the next month or so,” it added.

Schwab Stock Slices is set to start on June 9 and will let retail clients buy partial shares of a single stock or up to 10 stocks at once with no commissions.

“Even with the recent volatility, we’re seeing high levels of engagement from many who see this as an opportunity to get into the market, and fractional shares trading through Schwab Stock Slices will provide an easy platform to do that,” according to Neesha Hathi, executive vice president and head of Schwab Digital Services.

According to Apex Clearing’s recent analysis of data from Betterment, SoFi and other firms, investors opened new accounts at a record rate in March. New self-directed accounts were up 83% month-over-month and up 308% over the 2019 monthly average, while new robo-advised accounts increased by 29% and 279%.

“Beyond our Millennial 100 data, we saw investors of all ages flock to digital platforms to take advantage of the volatility, which drove a huge spike in new account openings,” Apex Clearing CEO Bill Capuzzi said, in a statement.

Schwab Updates

As of March 31, Schwab’s Investor Services unit had $1.85 trillion of client assets, for a year-over-year decline of 2%. The Advisory Services unit had assets of about $1.65 trillion, down 3% from last year.

Schwab clients opened 609,000 new brokerage accounts in Q1’20 — bringing the number of active brokerage accounts to 12.7 million, up 8% from March 2019.

The firm said it handled a peak of 4 million trades on March 12, as well as a 217% year-over-year increase in daily average trades in March.

On a call with the media last week, the firm said its $26 billion merger with rival TD Ameritrade is on track. “We fully expect [government] approval in the second half of the year,” explained Bernie Clark, head of Advisor Services.

— Related on ThinkAdvisor:

Janet Levaux

@Think_JanetL

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