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November 02, 2009 |
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Schwab To Unveil Eight Commission-Free ETFs |
In a move that could change the competitive dynamics of the ETF universe, Charles Schwab's investment management arm is introducing eight new ETFs with razor-thin expense ratios and commission-free trading for Schwab retail and institutional accounts. Four of the ETFs will start trading tomorrow with the remaining four vehicles scheduled to go live in December.
With 20% of all ETFs held in custody at Schwab, the move appears to set the stage for intensified competition in the fast-growing ETF market. Schwab CEO Walt Bettinger said the strategy bore certain similarities to the firm's OneSource no-load, no transaction-fee program that was introduced in the early 1990s.
"We think this is game-changing," Bettinger said at a press conference.
With annual expense ratios as low as eight basis points, many of Schwab's new ETFs charge investors an equal or lesser annual expense than major competitors such as Barclays, Vanguard and SSGA. Industry observers expect them and other players to respond.
According to Bernie Clark, senior vice president in Schwab's advisor services unit, 83% of financial advisors affiliated with Schwab use ETFs, though these products represent only 10% of advisor clients' total portfolios. "We think that will rise," Clark said.
The four ETFs debut tomorrow are: Schwab U.S. Broad Market ETF, Schwab U.S. Large-Cap ETF, Schwab U.S. Small-Cap ETF and Schwab International Equity ETF. Next month, these vehicles will be followed to market by ETFs targeting large-cap growth and value, international small-cap equity and emerging markets equity. Dow Jones indexes and FTSE Group indexes underlie the new ETFs. |
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