An executive at Charles Schwab & Co. announced at a panel discussion on exchange-traded funds in New York City Tuesday that the company will continue to offer commission-free trading to its brokerage clients that use its lineups of exchange-traded funds.
The firm created commission-free ETFs to open up the investment vehicles to smaller investors, Peter Crawford, a senior vice president at Charles Schwab, said during the event.
The trend has caught on and other companies have followed suit. In May, Vanguard Group announced it would offer commission-free trading to its brokerage clients that use its lineups of 46 proprietary ETFs. The company said it would also offer its customers $7 trades on stocks and $2 trades on non-proprietary ETFs.
“It seems like it’s a race to the bottom,” said Sue Thompson, managing director of iShares.
The consensus on the panel seemed to be that no transaction fees are good for both advisors and clients.
One concern that Scott Burns, the director of ETF analysis at Morningstar, hears a lot about is the sheer number of ETFs. Many investors think there are just too many. But Burns pointed out that there are only 1,000 ETFs and 20,000 mutual funds.
If all an investor is looking for is a U.S. large-cap ETF than that person only needs one ETF, said Benjamin Fulton, managing director of Invesco Powershares. But if the investor wants more control and variety they need more ETFs.
“There will be more products even if you think there are too many,” Fulton said. “Be warned: There’s more coming.”