Charles Schwab plans to add exchange traded funds by BlackRock's iShares and other asset managers to its Schwab ETF OneSource platform, doubling the number of commission-free ETFs available to investors to more than 500.
BlackRock's iShares funds were not previously available on the OneSource platform, which is made up entirely of commission-free ETFs. Beginning March 1, there will be 90 iShares ETFs available, the company said.
Shortly after Schwab made the announcement, Fidelity Investments also said it planned to double the number of commission-free ETFs on its platform, also to around 500.
Like the discount brokerages that have jockeyed for investors by lowering commissions immediately after a competitor lowers theirs, in the game of zero-commission funds, it's a race to expand the number available. In July, Vanguard announced its decision to eliminate commissions on 1,720 ETFs.
The addition of iShares is "unequivocally good news for investors and advisors on the platform, and iShares," a spokesperson for BlackRock said. "The reduction and elimination of historic barriers to investing enables more people to save, invest and reach their long-term financial objectives using iShares ETFs as key building blocks for their investment portfolios.”
A long list of other fund managers that already have ETFs in the program are adding more. Invesco, State Street Global Advisors SPDR and WisdomTree are significantly adding to the number of funds on OneSource. Aberdeen Standard Investments, ALPS Advisors, Direxion, Global X ETFs, John Hancock Investments, J.P. Morgan Asset Management and PIMCO are also adding funds.
In all, the almost 250 ETFs added will now cover 79 Morningstar categories. In addition to not charging commissions, ETFs in the program have no enrollment requirements and no early redemption fees or activity assessment fees. Both individual investors and financial advisors affiliated with Schwab have access to the program.
In 2018, flows to OneSource were $22.8 billion and assets grew by 10 percent year over year to $115 billion. Over the past six years, Schwab has more than quadrupled the number of funds on the platform, and the total number of asset managers has grown to 16.
“Today, nearly three in four investors tell us that ETFs are their investment vehicle of choice, and portfolio allocations continue to rise steadily," said Kari Droller, vice president of third-party platforms at Schwab. "Against that backdrop, we’re pleased to provide investors with significantly more choice and to welcome iShares ETFs to our family of providers.”
At Schwab's annual IMPACT conference for financial advisors in October, attendees asked Charles Schwab CEO Walt Bettinger if the momentum toward commission-free exchange traded funds would continue. Bettinger was quick to point out that “nothing is free” and that if revenue isn’t coming from commissions, it has to come from somewhere else. Schwab executives had been reluctant to say how far down that path the firm would go, but Tuesday's news was all but an explicit message about the company's attitude toward commission-free funds.
Advisors, pushed by clients, are increasingly seeking out the cheapest, broadest market exposure, and asset managers are eager to deliver products to suit. In August, Fidelity launched two new index funds, both of which have no investment minimum and an expense ratio of zero percent. A month later, the two funds had attracted an aggregate of more than $1 billion and Fidelity said it planned to launch two more similar funds.
