Schwab cuts ETF fees again, as expense war with rivals BlackRock, Fidelity and Vanguard heats up

Schwab cuts ETF fees again, as expense war with rivals BlackRock, Fidelity and Vanguard heats up
OCT 18, 2016
Charles Schwab & Co. (SCHW) re-entered the ETF fee war Friday, announcing fee cuts to five of its exchange-traded funds. While the expense cuts were modest — one basis point, or 1/100th of a percentage point — the move underscores the fierce price competition in the growing ETF market. BlackRock announced fee cuts to 15 of its iShares ETFs on Wednesday. Fidelity Investments cut its fees on 27 index funds and ETFs in June. And Schwab has been matching or beating other funds' cuts. “When individuals invest their hard-earned money, they are increasingly searching for low-cost, transparent, enduring products,” said Marie Chandoha, president and CEO of Charles Schwab Investment Management. “It's our mission to deliver on that, and we are proud that CSIM has been the catalyst for helping investors access lower cost ETFs across the industry.” Schwab last cut its ETF fees in June. Like many other discount brokerages, it charges no commissions on select ETFs.
Schwab cuts fees
Fund Ticker Former OER (BPS) New OER (BPS)
Schwab U.S. Small-Cap ETF™ SCHA 0.07% 0.06%
Schwab U.S. Mid-Cap ETF™ SCHM 0.07% 0.06%
Schwab International Equity ETF™ SCHF 0.08% 0.07%
Schwab Emerging Markets Equity ETF™ SCHE 0.14% 0.13%
Schwab U.S. Aggregate Bond ETF™ SCHZ 0.05% 0.04%
Source: Charles Schwab & Co.
"While the iShares news this week appeared to be focused on competing with Vanguard, the second-largest ETF provider, Schwab has gained market share in the past couple of years in part by being a low-cost provider of market-cap weighted equity and fixed income ETFs,” said Todd Rosenbluth, director of ETF & mutual fund research for S&P Global Market Intelligence. How low can fees go? In theory, near zero. After all, many funds make money from securities lending. And some of the largest funds are making tidy sums, even with extremely low fees. Vanguard Total Stock Market ETF (VTI), for example, charges just 0.05%. But on the fund's $469 billion in assets, that's roughly $234 million a year. And a few are actually at zero. Wisdom Tree Global Hedged Smallcap Dividend Fund (HGSD), for example, has a 0.43% expense ratio, but the fund is currently waiving expenses. Cambria Global Asset Allocation ETF (GAA) actually does have a zero expense ratio, although the funds it invests in charge 0.25%.

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