May 1st Marks 30th Anniversary of Brokerage Commission Deregulation
April 28 2005 - 10:55AM
PR Newswire (US)
May 1st Marks 30th Anniversary of Brokerage Commission Deregulation
Birth of 'Discount Brokerage' SAN FRANCISCO, April 28
/PRNewswire-FirstCall/ -- The Securities Acts Amendments of 1975
ushered in the most comprehensive securities legislation in
decades. A key change included in the amendment was ending fixed
trade commissions, a practice that had been in place for over 183
years. On May 1, 1975 negotiated trade commissions became law, a
day known within the brokerage industry as "May Day." 1975 was an
important fork in the road for financial services firms. In the
face of deregulation, many brokerages took the occasion to leave
alone or even raise commissions for smaller individual clients,
while reducing commissions for large institutional clients. For
many individual investor clients of those firms, trade commissions
stayed at their high levels for years to come. Charles Schwab &
Co., Inc. and a handful of other start-ups seized the opportunity
to pursue a new kind of brokerage that provided lower cost
transactional services, ushering in the birth of what came to be
known as "discount brokerage." "We probably didn't know it at the
time, but May 1st 1975 was a watershed moment for individual
investors and for the markets," said Charles R. Schwab, Founder and
CEO of The Charles Schwab Corporation. "With the sudden arrival of
negotiated stock trades that were less than half the cost they had
been, a major barrier to investing went away for the average
American." According to Schwab: "It took some time, but a radical
transformation took place and a flood of new investors -- most of
them independent-minded investors -- began entering the markets and
changing the landscape forever. The impact can't be overstated. In
1975 there were approximately $1.75 trillion of investable assets
held by individuals, with less than 45 percent of it invested in
securities. Trading was fixed-price, done through highly paid
intermediaries, and very expensive. Today that number has grown
tenfold to $17 trillion, with 73 percent of it invested in
securities and over half of the adult U.S. population now holding
equities in some form." The discount brokerage category itself
evolved, to the point that today many of the distinctions between
them and old-line full commission brokerages have disappeared. At
Schwab, for example, in addition to low priced trades, clients have
access to personal service and investment help, portfolio guidance
and stock recommendations, thousands of mutual funds at their
disposal, as well as referrals to special expertise such as
independent investment advisors, wealth managers, and trust
services. Clients also get the same level of value and service in
banking, mortgages, and credit card through Charles Schwab Bank.
"The power that the competitive marketplace unleashed is simply
remarkable, and hasn't stopped," said Mr. Schwab. "For example, on
May 1st, 1975, the discounted broker assisted trade at Schwab was
$70 compared to hundreds of dollars at Wall Street firms. Today a
client with household assets of $50,000 or more at Schwab pays just
$12.95 per online equity trade, up to 1000 shares. In 1975 only 2
percent of the nation's investable assets were held in mutual
funds, today it is nearly a quarter. Back then, 55 percent of
investable assets were held in bank deposits, today only 2 percent.
In 1975 there were virtually no assets in IRAs, today there are
over $3 trillion, with 40 percent of the adult population having an
IRA. The number of registered investment advisors has skyrocketed
from just a few thousand to near 14,000 in 2003." "These last
thirty years have been marked by constant innovation and
improvement of services for individual investors," said Mr. Schwab.
"The choice today isn't either or -- either low cost or high
quality investment service. Today, investors can get both. It is
exciting to consider what the next 30 years will bring." About
Charles Schwab The Charles Schwab Corporation (NYSE / Nasdaq: SCH),
through its operating subsidiaries, provides securities brokerage
and financial services to individual investors and the independent
investment advisors who work with them. With over 7 million
individual investor accounts and more than $1 trillion in client
assets, The Charles Schwab Corporation is one of the nation's
largest financial services firms. Its subsidiary Charles Schwab
& Co., Inc. (member SIPC) provides a complete range of
investment services and products, including an extensive selection
of mutual funds; financial planning and investment advice;
retirement plans; referrals to independent fee-based investment
advisors; and custodial, operational and trading support for
independent fee-based investment advisors. Its subsidiary Charles
Schwab Bank, N.A. (member FDIC and Equal Housing Lender) provides
deposit and lending services and products. The corporation's other
operating subsidiaries include U.S. Trust Corporation (member FDIC)
and CyberTrader(R), Inc. (member SIPC). These companies' Web sites
can be reached at http://www.schwab.com/,
http://www.schwabbank.com/, http://www.ustrust.com/, and
http://www.cybertrader.com/. (0005-7375) DATASOURCE: Charles Schwab
CONTACT: Glen Mathison of Charles Schwab, +1-415-636-5448, or Web
site: http://www.schwab.com/
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