More victims in the broker wars
Illustration by Elias Stein
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What is better than a low-priced listed fund with no associated trading fee? For several years, the marketing height of fund companies has been pushing commission-free ETFs.
But as commissions disappear across the board, the fund industry needs a new way to differentiate its products. In a zero-tax world, a commission-free ETF is just an ETF.
The ETF giant BlackRock embraces free trade. "Removing investment barriers means that more and more investors will use ETFs," the company told Barron & # 39; s. "As an ETF market leader, this is good for BlackRock."
Investors are not so sure. Shares in BlackRock are down 5.7% since Schwab eliminated commissions in its online brokerage in early October. ETF rivals State Street and Invesco are down 4% and 9.4% respectively. Broker shares have been hit much harder, it's worth noting. Schwab is down nearly 14% in October, while
TD Ameritrade
has dropped 26%.
The change of fee goes beyond commissions, of course. Expenditure ratios for many ETFs are already on the rise to zero, as investors are increasingly shifting assets from actively managed mutual funds to index-tracking ETFs with lower costs. By 2019, investments want to be free, and shareholders are anxiously trying to understand the new landscape. They'll get a few answers this coming week when BlackRock and State Street report their third-quarter results. For the quarter, Wall Street expects asset managers' earnings to fall 7% and 25%, respectively.
Next Week
Monday 10/14
U.S. Bond markets are closed during Columbus Day, while Canadian bourses are closed during Thanksgiving.
Allergan holds a special shareholders' meeting in Dublin to seek approval for the proposed acquisition of
AbbVie .
The two drug companies agreed to merge on June 25 in a cash and stock deal worth $ 63 billion.
Tuesday 10/15
BlackRock,
Johnson & Johnson
United Airlines Holdings
and UnitedHealth Group report quarterly results.
Federal Reserve Bank of New York releases its Empire State Manufacturing Index for October. Economists predict a reading of 0.4, roughly even with data from the previous month – all of which suggest weak growth in the region's industrial sector.
Wednesday 10/16
Abbott Laboratories
Bank of America
Bank of New York Mellon
Crown Castle International
CSX
IBM
Netflix
PNC Financial Services Group
and
U.S. Bancorp
reports earnings.
The Census Bureau reports September retail data. Consensus estimates are for 0.3% gain after a 0.4% increase in August. Apart from cars, retail sales are expected to jump 0.2% after a flat August.
The National Association of home builders release their NAHB /
Wells Fargo
Housing Market Index for October. Expectations are for a 68 reading, even with the September figure.
Thursday 10/17
Honeywell International
Morgan Stanley,
Philip Morris International
Taiwan Semiconductor and Union Pacific report on revenue.
The Census Bureau reports new housing construction data for September. Expectations are for a seasonally adjusted annual rate of 1.35 million building permits and 1.3 million homes starting. Both figures will be about 5% lower than August's data.
Friday 10/18
American Express
Coca-Cola
Kansas City Southern
Schlumberger and State Street hold conference calls to discuss quarterly results.
Charles Schwab sends his Fall Business Update. CEO Walt Bettinger and CFO Peter Crawford will update the investment community on the company's strategic focus.
Conference Board releases its leading economic index for September. Economists predicted a reading of 112.2, little changed from the data for July and August. "The latest trends in LEI are consistent with a slow but still expanding economy," according to Ataman Ozyildirim, senior director of economic research at the conference board.
Write to Evie Liu at evie.liu@barrons.com
