Brokerage giant Charles Schwab & Company may have just changed access to the stock market forever. The giant custodian just announced that it was eliminating all trading commissions on stocks and Exchange-Traded Funds also known as ETF’s. Is this as good as it sounds for YOUR money? Paul Fain, Knoxville Certified Financial Planner and President of Asset Planning Corporation, discusses the effects of eliminating some trading commissions on the brokerage industry this week on WBIR’s Sunday Money.
NO TRADING COMMISSIONS TO BUY OR SELL A STOCK OR ETF, THIS SOUNDS GOOD…
- It is good. Schwab has been gradually reducing commissions for years from $25 to $15 to $5 to $0. So this is a big win for investors.
- Makes investing accessible to more people.
ARE THERE ANY “CONS” TO THIS NEWS?
- Main concern is that no trading costs could promote short-term trading.
- Investors have a dismal track record as short-term traders.
HOW DOES THIS IMPACT THE BROKERAGE INDUSTRY? WILL SCHWAB’S COMPETITORS HAVE TO FOLLOW SUIT?
- Yes. TD Ameritrade immediately matched Schwab’s offer within just a few hours.
- The move escalates a long-simmering price war as investors gravitate toward the cheapest products.
- Firms including Fidelity Investments and Vanguard Group have eliminated fees and commissions on a range of offerings.
- Modern money: more holistic services.
FAST MARKET FACT: Impact on the stocks of brokerage firms
1/3 of TDA’s revenue comes from commissions. Schwab cut 600 jobs this summer.
Brokerage Stocks Tumble
TD Ameritrade -26%
E-Trade -16%
Schwab -10%
QUESTION FOR OUR MONEYMAN?
Want to learn more about trading costs? Do you have other general questions about financial planning, investing, or retirement planning? Send your questions to our Knoxville Certified financial planner Paul Fain or directly to Paul@assetplanningcorp.com!
