Daily ETF Watch: New Free Trading Program

Raymond James Financial, following a number of other financial firms, said it will begin offering registered investment advisors (RIAs) who use the company’s platform commission-free ETF trading on 120 ETFs, most of them from First Trust.

The program, which begins on Nov. 3, will also involve ETFs from AdvisorShares, ALPS and Greenhaven, a company official told ETF.com in a telephone interview. The Florida-based firm indicated the lineup of available funds is heavy on active choices, making it distinct from a number of commission-free ETF programs that have been introduced in the past few years.

The programs at firms like Vanguard Group, Charles Schwab, Fidelity and TD Ameritrade overwhelmingly target index-based ETFs if they include actively managed funds at all. Another key distinction is that the Raymond James program is only available to RIAs affiliated with the company, while other commission-free programs are also available to do-it-yourself individual investors.

Again, the Raymond James program for now only extends to Raymond James-associated RIAs, not to its employee-brokers or its network of independent broker-dealers. In other words, just $10 billion of the $485 billion in assets managed by advisors and brokers associated with Raymond James are eligible for the free trades. That said, the firm plans to begin extending the free ETF trading to other parts of its business by early next year.

Broadly, the commission-free ETF trading is seen as a tool to attract brokers, advisors and individual investors to exchange-traded funds. Many have come to believe that the ETF may well be steadily emerging as the investment vehicle of the future. ETFs are typically less expensive than mutual funds, they can trade all day and their holdings must be disclosed daily, making it easier for advisors to implement clearly diversified asset allocation strategies.

Total assets in U.S.-listed ETFs are now approaching $1.9 trillion. By comparison, hedge funds manage around $3 trillion and open-end mutual funds have around $13 trillion.