You're still probably gong to wind up paying the stock brokers -- just in a different way.
After the news that Charles Schwab Corp. and TD Ameritrade would soon be dropping trade commissions, some financial advisers and market experts say it’s possible mom and pop investors could still end up paying — just in a different way.
The fast-fading fees are another round in an ongoing race to shrink broker fees. But they also come during a time of stiff market headwinds: There’s the ongoing impeachment inquiry into President Trump, the tariff trade war with China and the drumbeat of a recession lurking somewhere around the corner — all things that could rattle retail investors.
‘A commission is the explicit spread or profit a broker dealer charges. When that goes to zero, that naturally means there’s going to have be some other way for them to keep the lights on.’ —Tyler Gellasch, executive director of Healthy Markets Without the upfront commission, “it’s hard to assess service and value provided, and harder for market forces to work their ways to benefit investors,” said Micah Hauptman, financial services counsel at the Consumer Federation of America.
She pointed to commentary from Peter Crawford, Schwab’s CFO, saying the company has “a business model that doesn’t depend on commission revenue, a long-term orientation and a history of being willing to disrupt ourselves based on client needs and competitive dynamics.” The company has been building up its investor education offerings in the past year, she said, adding, “Relevant information, delivered when our clients could best use it, and in the formats they prefer, increases confidence and empowers rational decision-making.”
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