On October 1st Charles Schwab announced that they were lowering commissions on stocks, ETFs, and options to $0 in a move that shook the industry. TD Ameritrade immediately followed and announced that same day they would lower commissions to $0 as well. This is big news and is a continuation of a longer trend of declining costs to the investment public, which is a really good thing.
So why did TD Ameritrade and Schwab eliminate commissions? These firms and other competitors are simply in the midst of changing their business models and have plans to recoup this revenue over time by other means. Examples include providing more robust lending solutions or offering proprietary investment products.
The key takeaway is that they are eliminating costs that are not value-added services and implementing more productive services as a replacement. We are super excited about these changes as it lowers costs for all Watchman Group clients.
Full disclosure: The Watchman Group has a relationship with both TD Ameritrade and Charles Schwab.