Why Charles Schwab Is Letting Customers Trade For Free
The Charles Schwab Corp. has taken a page out of Google’s playbook in order to widen its customer base.
“I always had somewhat of a passion for what the success of Google (free search engine) has been,” said Charles Schwab, founder of the eponymous financial services firm. “Similarly we think we will go very well offering our services free for transactions,” he told on Bloomberg’s The David Rubenstein Show.
The company started the zero-fee strategy in October last year. It has helped the firm add 433,000 new brokerage accounts in the December quarter, bringing the total to 12.3 million. Trading revenue, however, plunged 58 percent to $86 million in the period.
Schwab said the group is expected to suffer a 4 percent loss in terms of its overall revenue on account of the move. However, the $3.7 trillion asset manager will continue charging for other services such as investment advice and portfolio management services.
Starting Spring, the financial services firm also plans to launch ‘fractionisation’ of shares—an option where one can also hold less than one unit of security— targeting young investors, he said.
Watch the full interview with Charles Schwab.