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John Waggoner: Mutual Funds Feel The Pinch Of Platform Fees
Fidelity and Schwab both say the fees they charge are a good value for funds and investors. ...
[Schwab VP of mutual fund and ETF platforms] Ms. Fischer noted that fund companies can choose to go on Schwab's transaction fee platform if they don't want to pay the fee for the NTF platform.
What Ms. Fischer didn't say was that in addition to the commissions you pay to trade TF funds, the funds themselves still pay to get that TF shelf space. It's typically 0.10%, but can be as much as 0.25%, plus a onetime entry fee of $10K for the first fund in the family, and $2K for each additional fund.
Sure there's some cost that the brokerages bear for servicing these accounts. But companies like Vanguard, and Schwab and Fidelity, can sell their own index funds for under 10 basis points. That fee includes not only the servicing of the funds but the management costs as well. So 10 basis points for shelf space alone would seem to include quite a markup.
Comments
https://www.schwab.com/public/schwab/nn/compensation_advice_disclosures/schwab_compensation#transaction_fee_funds
Sure there's some cost that the brokerages bear for servicing these accounts. But companies like Vanguard, and Schwab and Fidelity, can sell their own index funds for under 10 basis points. That fee includes not only the servicing of the funds but the management costs as well. So 10 basis points for shelf space alone would seem to include quite a markup.