Charles Schwab Announces Fractional Shares Platform “Stock Slices”
Last fall, Charles Schwab shook up the brokerage world by announcing that it would be eliminating its trade commission fees. While this model had previously been tried by FinTech startups such as Robinhood, it was a big deal for a traditional discount brokerage to adopt it. Within a week of the reveal, several other companies followed Schwab’s lead, changing the landscape for good and likely influencing the mergers and acquisitions that have followed — including Schwab’s own purchase of TD Ameritrade. Now Charles Schwab is looking to further expand its reach to newer investors with its Stock Slices feature.
This week Schwab announced plans to introduce fractional shares stock trading. With Stock Slices, customers will be able to invest in top S&P 500 companies such as Amazon, Apple, Netflix, Facebook, and more with as little as $5 and purchase up to 10 “slices” at a time. Additionally, like with other trades, Stock Slice purchases will be commission-free. The new feature is expected to roll out to current customers on June 9th.
With the addition of Stock Slices, Schwab joins platforms such as SoFi Invest, Stash, Square’s Cash App, and others in offering partial shares of stock in major companies (Robinhood is currently in the process of introducing support for fractional shares as well). However, there are a few ways in which Schwab’s feature differs from some others. For one, Schwab notes that these slices will be traded in real-time — something that not all others do. Also notable is that Stock Slices will be available for regular Charles Schwab brokerage accounts as well as custodial and even IRA accounts. Regarding the custodial aspect, the company notes that the addition of the new feature will allow parents to teach their children about investing without requiring them to purchase high-dollar stocks.
In a press release announcing the platform and discussing its benefits, Schwab EVP and Schwab Digital Services head Neesha Hathi said, “We developed Schwab Stock Slices to meet two important needs we heard from clients – newer investors who want the ability to buy multiple stocks in small dollar amounts and older more affluent investors who want to more easily gift stock ownership to younger generations.” Additionally, Hathi teased a potential expansion of the feature, stating, “This is our first use of fractional shares, and we’re looking forward to exploring additional ways we can use the functionality to improve how clients invest.
Once again, Schwab’s move in embracing a growing FinTech trend seems like a major step for the brokerage industry. In turn, it wouldn’t be surprising to see other firms rolling out similar features in the very near future. As for the FinTechs that have helped make these features popular in the first place, they may have some added competition on their hands as the disrupted become the disrupters. In any case, the expansion of fraction stock trading could not only serve to bring new investors to the fray now but potentially teach the next generation about stock market investing as well.