Bonanza of New Accounts at Charles Schwab After Zero-Commission Trading
Brokerage Charles Schwab added a solid 31% more accounts in October compared to September.
Charles Schwab’s move last month to introduce commission-free trading has paid off in spades. Previously, it charged a commission of $4.95 per trade.
The online broker added 142,000 new accounts in October. That month they stopped charging commission fees for U.S. stocks, ETFs, and options trades. Year-on-year, the number of new clients jumped 7% from October last year.
As a result, assets at the brokerage surged to a record $3.85 trillion.
Charles Schwab New strategy: Commission-free trading
The decision to make trading free was a trade-off: Schwab intended to make money in other ways from the expected surge in new accounts and trading volume. Earning from interest on client cash holdings is a big chunk of the firm’s revenue.
The market-wide commission wars did lead to better volumes across the other major brokerages such as E-Trade, Interactive Brokers, and TD Ameritrade. But Charles Schwab took the honors for the largest number of new accounts added.
Another strategy: get more new young clients
In October, Charles Schwab also indicated it was planning to launch a fractional stock ownership scheme aimed at younger, retail investors. It would allow investors to invest in easy, dollar-specific amounts.
The true impact of Schwab’s market-beating movies on its profitability will, however, be clear on the declaration of its fourth-quarter results.
[Related Story: UBS: Fintech Darling Robinhood’s Business Model in Serious Jeopardy ]
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