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Schwab trading accounts grow 31% after commissions drop to zero

Charles Schwab’s free trading offer is turning out to be a hit, drawing in new customers at a fast clip.

Clients opened 142,000 new trading accounts in October, a 31% jump over September’s pace. Total brokerage accounts climbed to 12.2 million and firmwide assets grew to a record $3.85 trillion.

Schwab escalated the brokerage industry’s price war on Oct. 1 when it eliminated commissions on U.S. stocks, ETFs and options. The move is likely to hit revenue but is aimed at wooing new assets to the San Francisco-based firm, which has been generating most of its income from interest earned on client cash holdings.

Clouds are reflected in the window of a Charles Schwab Corp. location in San Antonio, Texas, U.S., on Sunday, July 15, 2018. Charles Schwab Corp. is scheduled to release earnings figures on July 17. Photographer: Callaghan O'Hare/Bloomberg News

Average interest-earning assets were $266 billion in October, little changed from September and up about 1% from a year earlier. The gain in brokerage accounts is just 7% more than October 2018.

Other brokerages that cut commissions have reported divergent trends in October client activity:

  • E-Trade Financial, which announced zero commission trades shortly after Schwab, posted 9% month-over-month and year-over-year jumps in daily average revenue trades, or DARTs, a key measure of customer activity.
  • TD Ameritrade said DARTs were 11% higher in October than September but down 8% from a year earlier.
  • Interactive Brokerage Group, which announced commission-free stock and ETF trading in September, said DARTs dropped 5% month-over-month and 19% year-over-year.

A more detailed picture of the bottom-line impact of the fee change will be available in January, when Schwab reports fourth-quarter results.

Bloomberg News

Bloomberg News