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Thursday, February 07, 2013

Schwab Launches ETF OneSource

News summary by MFWire's editors

During a morning fete held at the tony Asia Society and Museum on 70th Street and Park Avenue in Manhattan, Charles Schwab [profile] unveiled a platform for trading 105 ETFs, provided by six ETF sponsors, commission free.

The platform, dubbed ETF OneSource, will be available for free to all Schwab clients, be they advisors or retail clients. It went live as of 11:30 a.m. this morning.

The providers currently on the system are State Street Global Advisors [profile], Guggenheim Investments [profile], PowerShares [profile], ETF Securities [profile], United States Commodity Funds [profile], and Charles Schwab Investment Management.

"This is available to all Schwab clients automatically," said Jim McCool, executive vice president. "We are trying to make this as simple and straightforward as possible. "

For instance, McCool noted that there are no short-term or redemption fees involved.

"Investors can trade a hundred times a day if they want and no pay a commission," he said.

ETF platform vice president Beth Flynn said that providers were paying Schwab to gain access to the platform. Providers pay an annual fee per ETF and an additional asset fee based on new purchases. Flynn also said that providers were investing in this partnership by cutting their fees. Meanwhile, she said Schwab was investing heavily in the development and marketing of the platform. An important initiative noted at the event was the Schwab ETF Education Exchange.

"We absolutely would like to see expansion," of the number of providers and products on the platform, said Flynn

Why would providers invest in this platform?

Jim Ross, a senior managing director for State Street, described the platform as "innovation of distribution," while participating in a panel discussion on the platform and the 20th Anniversary of the ETF. "Innovation of distribution is something that we have to think of in this industry," he said. "This is an investment into our business. Investing with Charles Schwab to bring a benefit to the end user is very important."

Fellow panel participant John Hyland, chief investment officer of United States Commodity Funds, described the platform, and the improved access it would provide to retail investors as the "third stage" of the evolution of the ETF market. The first stage, of course, being the launch of the first ETF, SPY, twenty years ago by SsgA and the second stage being the broadening of asset categories over the past decade. This third stage, he said, is focused on providing education and better distribution to the end user.

"As the industry becomes more mature, I don't think the industry will be focused on bringing out more ETFs. The focus will now be on bringing ETFs to the last ten yards to the goal line, to the end users. This is an efficient, easy to do it," he said. 

Edited by: Tommy Fernandez


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