RIA Reaction to Zero Commissions: Smiles, Skepticism – Barron’s

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RIA Reaction to Zero Commissions: Smiles, Skepticism - Barron's 1

The inexorable levels of competition to lessen investing expenses has achieved its rational conclusion, with
Charles Schwab,
TD Ameritrade
and E*Trade this week all slashing commissions on stocks, ETFs and possibilities to zero.

Though RIAs say zero commissions are fantastic for them and their shoppers, they are also greeting the information with a grain of salt, studies WealthManagement.com.

In addition to dropping commissions for retail purchasers, Schwab and TD Ameritrade cancelled them for its RIA custodial customers. E*Trade serves as a bank custodian for its advisors and formerly did not cost them for every-trade commissions the newest cost war implies no improve for its RIA interactions.

“I think it’s great for our purchasers, and by extension, for us,” Greg Friedman, CEO of Non-public Ocean, which custodies with Schwab, tells WealthManagement.com. “It lowers the over-all value to the shopper, and I believe that’s good.”

But advisors are also thinking how brokerage/custodians will make up for the misplaced fee earnings. Amongst their thoughts: Will they introduce a basis-issue price immediately after purchasers strike a specified number of trades? And will clients’ trading execution undergo because custodians are obtaining payments for purchase flows?

–Ross Snel

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