Commission-free ETF platforms have been around for some time, offered by firms such as Vanguard, TD Ameritrade and Fidelity. They've opened up the world of ETFs to the retail investor in a major way. Investment advisors and individual investors can trade funds for almost no cost whatsoever, eliminating one of the more expensive aspects of ETF investing.
But perhaps no firm has distinguished itself in this area as much as Charles Schwab, with its OneSource ETF platform, led by Schwab Vice President Heather Fischer.
Fischer joined Schwab in 2006 from Bain, and took her place at the head of the OneSource ETF platform at the start of January 2014, roughly a year after Schwab rolled out the commission-free trading program. According to her, the key factors differentiating Schwab's OneSource platform are simplicity, sustainability and selection.
By simplicity, she means that the program has "no catches," as in no enrollment and no short-term redemption fees. "What you see is what you get," Fischer said.
And by sustainable, she means the OneSource platform is no promotional offer or gimmick; it's something that's here to stay.
"This is something we're committed to for our clients. They've told us that commission-free ETF investing is important to them. We've designed it so we can be in it for the long haul," Fischer explained.
She noted that, in a recent Schwab survey, 64% of investors said the total cost of an ETF is their No. 1 concern, and 85% said commission-free trading is important to them.
But it's selection where Schwab really stands out. The platform has grown to encompass nearly 200 funds from more than a dozen issuers, including Schwab's family of more than 20 core asset-class ETFs. Not only is it the largest and most comprehensive commission-free ETF platform in terms of range of funds offered—covering 64 Morningstar asset categories—it also has more than $38 billion in invested assets.
"We really have a nice wide selection to help all kinds of investors build that diversified commission-free ETF portfolio," Fischer said.
And indeed, investors seem to be responding. Schwab saw $10 billion in inflows to the ETF OneSource platform in 2014 alone. Put another way, 43% of ETF inflows via Schwab's brokerage went into commission-free offerings; those offerings represent just a small percentage of the more than 1,600 available U.S.-listed ETFs, and don't even include popular industry behemoths like the SPDR S&P 500 (SPY | A-98) or the iShares MSCI EAFE ETF (EFA | A-91).