Charles Schwab Brokerage, a San Francisco-based bank and stock brokerage company, has announced they will allow their clients to buy and sell fractions of stocks. The initiative aims at attracting the interest of young investors to Charles Schwab and makes it the first online brokerage that offers its customers such an opportunity.
The announcement follows the company’s decision to eliminate trading commissions for U.S. stocks, ETFs and options trades earlier this month, which led to other brokerage firms such as E-Trade and TD Ameritrade.
The company’s founder and chairman Charles R. Schwab stated:
“I wanted to take commissions out of the formula. We’ve been on that path for 40 years.”
According to the Wall Street Journal report, it is unclear when the service will be finally available. However, Charles Schwab promised that is will probably come together with other programs as the brokerage giant is ‘constantly working on new services designed to appeal to the evolving client base.’
The ability to trade fractions os shares is beneficial for the younger generation of investors who are unwilling to pay quite a lot for companies like Amazon or Google parent Alphabet, which cost $1,787 and $1,252 per share, accordingly. The move will not also increase the number of Schwab’s clients but also add to its competitive advantage
Devin Ryan, managing director at JMP Securities, commented:
“Schwab has been quite focused on younger customers for some time, but we’re sure it’s also been watching the success some of the other free trading platforms have experienced and moving in line on fractional share trading makes sense.”
Trading fractions of shares has been available for long. Such firms as M1 Finance, Folio Investing, Acorns, and Motif have started providing fractional share trading earlier. However, Charles Schwab will be the first online brokerage to offer such an option.
As well as other companies involved in stock trading activity, Schwab leverages its client bases by implementing many of the successful features of startups who strive to gain market share.
For example, a famous investing app Robinhood tried the free trading model long before Schwab reduced their commission fees, while startups like Betterment contributed to popularizing Robo advisors that are now a large part of Schwab’s business, totalling over $40 billion in assets.
About Charles Schwab
Charles Schwab is a US provider of a full range of brokerage, banking, and financial advisory services through its operating subsidiaries. Its broker-dealer subsidiary, Charles Schwab & Co., Inc., offers investment services and products, including Schwab brokerage accounts. Its banking subsidiary, Charles Schwab Bank, provides deposit and lending services and products.
Established in 1971 by Charles R. Schwab, the company is ranked 13th on the list of the largest banks in the United States and it is also one of the largest brokerage firms in the United States that manages $3.2 trillion in assets.