1) The Latest in the Brokerage Wars: Charles Schwab Will Allow People to Buy Fractions of Stocks CNBC | 10/17/2019
Because… On the heels of eliminating commissions, Schwab will allow fractional share trading. Currently, some small brokerages, such as Stockpile, Motif, M1 Finance, and Betterment, support fractional trading. Schwab will be the first major online broker to offer this service. The feature has multiple benefits. It will give investors with small assets access to expensive stocks/funds. It will help advisors further diversify their clients’ portfolios. Most importantly, this will pave the way for ETFs to make inroads into 401(k) plans. ETFs have not been widely used in retirement plans, despite their success in non-retirement accounts, because of their inability to make fractional share purchases. If this limitation is removed, the ETF industry will experience exponential growth, which will pose another formidable threat to mutual funds.
2) ETFs Reach a Record High for September Close ETF Trends | 10/21/2019
Because… While U.S.-listed ETF sales did not reach a record high in September like global ETFs, inflows of $48.8 billion improved significantly from outflows of $2.0 billion in August. This year through September, U.S. ETFs garnered $202.2 billion, down from $216.0 billion during the first three quarters of 2018. At the asset class level, U.S. Equity raised $88.4 billion, largely unchanged from a year ago. Taxable Bond and Municipal Bond raked in $106.7 billion and $6.3 billion, respectively, up 61.3% and 77.4%, respectively, from the previous year. Sales of International Equity dropped from a positive $27.6 billion in the prior year to a negative $3.8 billion, whereas Commodities registered the most pronounced increase from outflows of $1.5 billion to inflows of $8.8 billion. Given the current pace, ETF sales may end the year just short of the 2018 total of $310.4 billion.
3) Bank of America Announces Unlimited Commission-Free Stock, ETF and Option Trading for Preferred Rewards Members Bank of America | 10/21/2019
Because… Besides Bank of America, Raymond James also moved to free trading, as reported on Monday by CNBC. However, all the zero-commission trading, including offerings by discount brokers at the beginning of the month, only cover stocks, ETFs, and options. Mutual funds that are not already in a no-transaction-fee (NTF) program are not part of the deal. TD Ameritrade charges $49.99 for purchasing no-load mutual funds. At Schwab, the cost is up to $49.95 for non-NTF mutual funds. The transaction fee at Fidelity for non-proprietary funds is $49.95 ($75 for certain funds). ETF sales of $202.2 billion nearly tripled mutual fund inflows of $69.0 this year through September. Commission-free may entice more investors to switch from mutual funds to ETFs.