OnDemand WTP Pricing Research

The Race To Zero: Price Wars In The Asset Management Industry | Seeking Alpha

Summary

  • Price wars in the asset management business have driven commissions to zero in both the direct investing and managed portfolio segments.
  • Charles Schwab’s price leadership in robo advisory has its advantages in terms of cross-selling and generational capture, but it faces risks related to upsetting industry pricing and alienating advisors.
  • Industry players such as JPMorgan, TD Ameritrade, E-Trade Financial Corporation, and Fidelity investments must seriously consider implications of competing on price.
  • Meanwhile, Raymond James Financial avoids the competition and bets on the benefits of a human personal advisor.
  • LPL Financial Holdings takes it a step further and empowers its advisors to outperform the robots.

There has always been an arms race in the direct investing and asset management industry. As much as companies in the space want to compete on product selection, reputation, or even distribution – the one thing they all seem to be competing on is price. In this article, we want to go in more detail about the industry’s price war and its implications for long-term investors.

The Price Wars

First, let’s take a look at pricing for E-Trade Financial Corporation (ETFC). Stock trading costs $6.95 per trade unless you’re a more active trader in which case it costs $4.95 per trade. It sounds like a good enough deal – especially if you’re an active trader.

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The Race To Zero: Price Wars In The Asset Management Industry | Seeking Alpha.

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