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Schwab makes play for ETF-distribution domination but not without risks

Low margins, a small list of ETFs, plenty of competition and possible trade-spread issues make this OneSource bid no slam-dunk

Author Lisa Shidler February 8, 2013 at 5:03 PM
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Paul Weisbruch questions whether Schwab is providing the same apparent ETF value once trading spreads are figured in.


Stephen Winks

Stephen Winks

February 8, 2013 — 6:07 PM

Weisbruch has a point.

Retail trading desk conflicts have been the primary inhibitor to the brokerage industry developing the neceasary enabling processes, technology, work flow management and more sophisticated approaches to portfolio construction to support expert fiduciary standing in the consumer’s best interest.

Schwab will pick up ETF market share even if the spreads are not in the best interest of the consumer because noone pays attention to the fiduciary duty to minimize cost on behalf of the client as a prudent expert.

It takes a while for the marketplace to awaken to how to win the trust and confidence of the investing public by literally acting inthe client’s best interest. This is why culture (fiduciary standing) always trumps strategy. Schwab’s strategy is a move in the right direction.


Roger Wohlner

Roger Wohlner

February 10, 2013 — 2:56 PM

I applaud Schwab and others who are driving the price of owning and trading ETFs down. As an advisor who mostly uses ETFs as longer-term holdings this won’t impact my behavior in terms of building client portfolios a great deal. I will say that in smaller accounts held at Schwab I have begun to use some of the Schwab ETFs and would likely take advantage of the additional ETFs included in this program if they fit what I was trying to do for the client.

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