E*TRADE: Online Brokerage Competition Expected to Heat Up

February 27, 2018 — 1:44 PM EST

To say that the online brokerage industry is cutthroat would be an understatement in this era of low fees and DIY investing. While the leading discount brokerages slashed commissions and expanded their fee-free offerings last year, the competitive nature of the industry isn't expected to change any time soon. In a filing with the Securities and Exchange Commission, E*TRADE highlighted competition as a risk for 2018.

In its 10-K, which is the annual report that publicly traded companies are required to file with the SEC, E*TRADE Financial Corporation (ETFC) said that the online financial services industry remains "highly competitive," with the company competing with full-service, discount and online brokerages as well as registered investment advisors (RIAs), finance technology startups, internet banks and retail banks.

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"Competition in the financial services industry continues to intensify, particularly amid continued consolidation and recent declines in commission pricing," wrote E*TRADE in the filing. "Our future success will depend upon our ability to continue providing digitally compelling and easy to use products and solutions to retail customers."

The New York-based online brokerage noted that the proliferation of fintechs underscores the shift to digital investing as well as the increasing competitive threat. After all, Acorns, the investment platform that automatically invests spare change, expects 2018 to be a record year for the company, which was on track to add hundreds of thousands of customers in January alone. The company has more than 2.3 million users of its mobile app in the U.S.

Meanwhile, Robinhood, the mobile brokerage app geared toward millennials, was closing in on E*TRADE late last year. Back in November, the company said that it had crossed the 3 million user mark and has more than $100 billion in transaction volume. All told, the company said that it has saved customers $1 billion in trading fees in the time frame. All trades on the platform are commission free.

Recognizing the increasing competition, E*TRADE has been making moves this year to broaden its appeal and bring more low-cost investing to retail investors. Last week, the online brokerage announced that it is opening up access to trading 24 hours a day, five days a week. In the announcement, E*TRADE said that customers can now trade a selection of exchange-traded funds (ETFs) throughout the night Monday through Friday either online or via phone. For this round-the-clock trading, the firm chose a selection of widely held ETFs, including ones that track the S&P 500, emerging markets, the Dow Jones Industrial Average, Chinese stocks and the Russell 2000 Index.

Earlier in the month, E*TRADE also announced a big expansion in the number of ETFs that customers can access without commissions. The discount brokerage said that it has added 80 commission-free ETFs from seven providers since Aug. 1 and now offers 225 commission-free ETFs, which it noted is a 51% increase.