Schwab made a much-anticipated announcement Tuesday: the upcoming availability of fractional share investing to its retail clients.
Called Stock Slices, it will be available beginning in June. This follows, most recently, on the heels of competitor Fidelity making a similar announcement in January for its retail clients.
However, fractional share investing is nothing new. Apex Investing, Folio Investing, Interactive Brokers, M1 Finance, Motif Investing (now defunct), Robinhood, SoFi and Stash, among others, all rolled out the technology over the past two years.
What is new is to have a custodial firm and discount brokerage the size and scale of Schwab (especially if the acquisition of TD Ameritrade concludes successfully) offering the service.
During Schwab’s Tech Tuesday conference call, WealthManagement.com asked if the new service would be available to advisors that custody assets with the firm.
“We will be making Stock Slices available to clients of Schwab Advisors through the Schwab Alliance website,” said Andrew Salesky, head of digital advisor solutions for Schwab.
“In terms of Stock Slices being directly available to advisors—that we are looking at as to where we will put it on our list of priorities for our roadmap,” he said, adding that the real impetus for the new service had been driven by demand from investors on the firm’s retail side and brought up the example of grandparents with custodial accounts seeking to gift stock ownership to grandchildren.
The new service will enable Schwab retail investors to own any partial shares of any of the companies in the S&P 500 Index for as little as $5 each, starting on June 9. At that time, retail investors will be able to purchase a single fractional share of a stock or up to 10 different Stock Slices at once, commission-free.
“Even with the recent volatility, we’re seeing high levels of engagement from many who see this as an opportunity to get into the market, and fractional shares trading through Schwab Stock Slices will provide an easy platform to do that,” said Neesha Hathi, executive vice president and head of Schwab Digital Services.
“Whether it’s a new investor who simply wants to get started or someone more experienced who still finds the stock price of some companies daunting, giving investors the opportunity to buy small slices of stocks is an extremely powerful tool to help people get engaged,” she said.
Schwab answered the question of why rolling out the service had taken so long compared with other firms, through a statement from a company spokesperson.
As the firm developed the capability, it sought to balance the desire to make it available as soon as possible, with also building a “great service that meets investor needs and delivers an experience that is easy to use,” the spokesperson said.