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Schwab Drops Trade Fees on ETFs to $0, TD Matches

From Investment News, "Just 10 hours after Charles Schwab announced it was eliminating trading commissions on U.S. stocks, exchange traded funds and options starting Oct. 7, rival TD Ameritrade Holding Corp. upped the ante by cutting the same commissions starting Oct. 3."

Mike Genovese commented, "We believe Fidelity will follow suit shortly, so all GBB fee-based clients should benefit equally from these cost reductions from our primary custodians."

GBB's Investment Director, Rich Cheever, commented, "A price war broke out this month between brokerage firms when Charles Schwab announced that it was eliminating commission for online trading of U.S. stocks, exchange-traded funds and options effective October 7th.  TD Ameritrade has followed suit and eliminated online commission for ETFs and U.S. listed stocks as well.  Fidelity has not made an announcement yet, but we expect that they will be forced to eliminate commissions as well to stay competitive.  The announcement doesn’t impact trading of mutual funds.

The announcements continue a trend that we have seen in the market of fees being reduced or eliminated.  Some online-only brokerage firms, such as Robinhood Markets, have built their business with the zero-commission model, but the Wall Street Journal warned last year to be wary of hidden costs that might be obscured by the zero-commission offerings[1].  Last year Fidelity launched some index funds with zero expenses.

In the case of Schwab, TD Ameritrade and – we assume – Fidelity, we think this will have a positive impact for GBB clients, particularly the elimination of commissions for ETF trades. In the past, making small tweaks to portfolios just wasn’t very cost effective.  Now, with the elimination of commission – at least where we use ETF to diversify portfolios – rebalancing a portfolio won’t generate as many fees."


[1] https://www.wsj.com/articles/why-free-trading-on-robinhood-isnt-really-free-1541772001

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