Schwab’s Primary Goal Is To Lure Investors From Other ETF Competitors

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November 5, 2009 1:34pm ETF BASIC NEWS

schwab“Charles Schwab Corp.’s (SCHW) plan to waive brokerage fees for investors in its new exchange-traded funds won’t just help it compete in a crowded ETF


 market. It could put some heat on conventional index funds, too. When Schwab launched its first four ETFs Tuesday, it said investors could trade them on Schwab’s brokerage platform without paying the usual $12.95 trading fee, a feature it promises to make permanent,” Ian Salisbury Reports From The WSJ.

“Although Schwab may be primarily trying to win customers away from ETF competitors such as Barclays PLC (BCS), State Street Corp. (STT), and Vanguard Group Inc., the decision removes what has long been the biggest obstacle to making ETFs more attractive than conventional index funds to everyday investors who sock away a few hundred or a few thousand dollars every month,” Salisbury Reports.

“While ETFs are a fast-growing corner of the investment management business, with more than $700 billion in assets, the vast majority of that total represents holdings of institutions such as pension and hedge funds and of financial advisers. The fees individual investors must pay each time they trade an ETF, even through a discount broker like Schwab, have ensured that it’s far cheaper for them to buy conventional index funds that don’t involve that cost,” Salisbury Reports.

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