ETFs' Free Trade Boost

Others to Follow?

Looking ahead, the real question is whether other companies will follow Zecco and Bank of America. If they do, and ETF commissions start to fade away, it could lead to substantially higher asset flows.

"I definitely think it could have an impact, particularly if other brokerage companies follow suit," says Hougan. He adds that some analysts predict ETF assets will hit $2 trillion by 2011, and if free online trading becomes standard, "we could see upside to that number, and quickly." ETFs had more than $360 billion in assets at the end of September.

The widespread elimination of online trading fees also could cause ETF asset flows to shift more in favor of retail investors.

It used to be that institution money made up the lion's share of ETF assets. But that has been changing. In fact, while it's difficult to find good data on flows, many analysts estimate that retail money -- particularly from the adviser channel -- is far exceeding institutional flows.

"This will likely lead to more [ETF] retail flows and more flow in general," says Hougan.

Allan Roth, founder of investment advisory and financial planning firm Wealth Logic, agrees that these developments could be big news for the ETF industry.

"[It] suddenly makes ETFs appropriate for accumulation, since an investor putting in a regular monthly amount won't have to pay commissions," he says.

However, there are a few caveats that investors need to be mindful of -- and they're not inconsequential.