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By Scott Burns | 11-04-2009 03:45 AM

Schwab: Commission-Free ETFs Not a Gimmick

Schwab's Peter Crawford says the firm's move to waive ETF commissions is not a teaser.

Scott Burns: Schwab makes a big splash in the ETF market. Hi there, I'm Scott Burns, director of ETF analysis with Morningstar. I'm joined today by Charles Schwab's Peter Crawford, who is the senior vice-president of Investment Management Services with Charles Schwab. Peter, thanks for joining me.

Peter Crawford: Thanks for having me.

Burns: So, Schwab entering the ETF market. A couple things. One, incredibly low-cost funds that you're coming out with. Let's talk about why ETFs, why now, why Schwab.

Crawford: Right. Well thanks, Scott. Schwab is actually not new to the ETF market. We're already a major player in the ETF landscape. Roughly 20% of the retail ETF assets are held by clients of Schwab and the independent advisors that we work with.

So we saw an opportunity, as the popularity of ETFs has been exploding in the last several years, to move from that really strong foundation of being a major distributor to being a manufacturer as well. And in doing so, to provide our clients with an exceptional value, which is market-leading expense ratios on our ETFs, coupled with free online commissions for Schwab clients when they trade these ETFs in their Schwab accounts.

Burns: Right. That's really, I think, the biggest news of this. Not only did you come out with some really nice core funds that are really low cost, you have waived the trading commissions for anyone on the Schwab platforms trading Schwab ETFs.

So I guess the question is, is this a teaser rate? What are we looking at here?

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