In addition to cutting its expense ratios, the firm has made the minimum investment for all of its funds $100. Regardless of investment size, all investors will have the same expense ratio. For instance, the Schwab S&P 500 Index Fund (SWPIX, SWPPX), will move from having the lowest expense ratio of 0.19% and the highest expense ratio of 0.36%, to expense ratios for every share class at 0.09%.
Schwab funds will continue to be distributed with no loads, the company said. For financial advisers, the lowered expense ratio will not make a difference in compensation structure, as advisers receive the same compensation regardless of the fund, said Peter Crawford, senior vice president of Investment Mangement Services at, speaking at a Schwab press event in New York City.
In fact, financial consultants/advisers were in mind with this change, noted Randy Merk, president and CEO of Investment Mangement Services. He said the initiative will give advisers something positive to help “mobilize clients.’
The firm’s motivation for the fee reductions is to stay competitive and keep clients invested for the long-term, Merk said. “If we make our clients happy, they’ll tell a friend,’ he said. He emphasized that the changes are permanent and not a promotion.
Last month, Charles Schwab announced changes to its target-date funds, including lower expense ratios and asset allocations that add more exposure to fixed-income beginning 10 years from the target date (see “Schwab Makes Target-Fund Enhancements’).
At today’s event, Merk said Charles Schwab hopes to unveil a series of proprietary exchange-traded funds (ETFs) by the end of the year, pending approval by the Securities and Exchange Commission (SEC). “We’re a major player in ETFs, and we want to be a bigger player in ETFs,’ he said.
Charles Schwab has not yet joined the handful of recordkeepers offering guaranteed income products in the last couple years (see “The Inside Story’). Merk told PLANADVISER.com that Charles Schwab has considered offering a guaranteed income solution, but shelved it last year. He said they feel cautious because it is a product that might offer too much promise. With that said, they continue to be in the “laboratory,’ as plan sponsor clients are interested in access to a guaranteed product, he added.
Photographed: Randy Merk