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Schwab Increases Mutual Fund Commissions to $74.95 to Counter Freeloading by Vanguard, Fido, and D&C
“Freeloading” is in the eye of the beholder. If Vanguard, Fido, and D&C don’t want to pay Schwab its shelf fee then that’s good for their fund owners. Why should I pay extra fees because someone else wants the convenience of buying their funds through Schwab?
Judging by another discussion thread on this board Vanguard seems lacking in customer service through their own organization and in addition they don't think it's necessary to subsidize another organization (Schwab) for doing it for them. Good plan.
I have found TD Ameritrade's customer service to be exceptionally good compared to either Vanguard, Fidelity or Schwab. With this week's announcement that Schwab has "eliminated" 40% of TDA's marketing staff I wonder what will happen to customer service. TDA almost always answers my phone calls by the third ring and puts me through to a live rep right away.
With this week's announcement from the chairman of the SEC that the elimination of the practice of compensating brokers for "order flow is on the table," I wonder how long brokers will offer zero commissions.
“Freeloading” is in the eye of the beholder. If Vanguard, Fido, and D&C don’t want to pay Schwab its shelf fee then that’s good for their fund owners. Why should I pay extra fees because someone else wants the convenience of buying their funds through Schwab?
Do you own any funds (aside from Vanguard, Fidelity, D&C) that are available (with or without TF) at Schwab, or Fidelity, or TDAmeritrade, or most any other brokerage?
Then you're paying an extra fee to own those shares, whether you bought them directly or not. Funds sold through brokerages pay for shelf space. Those payments are spread across all the fund shareholders, whether they buy them direct from the distributor or via a supermarket.
The cost may be broken out as a 12b-1 fee or an account servicing fee, or it may just be buried in "other" expenses. But it's there and it's costing you money. And since you are paying that fee regardless, you might as well buy the fund through a supermarket if that is more convenient for you.
Do you own any funds (aside from Vanguard, Fidelity, D&C) that are available (with or without TF) at Schwab, or Fidelity, or TDAmeritrade, or most any other brokerage?
Then you're paying an extra fee to own those shares, whether you bought them directly or not. Funds sold through brokerages pay for shelf space. Those payments are spread across all the fund shareholders, whether they buy them direct from the distributor or via a supermarket.
The cost may be broken out as a 12b-1 fee or an account servicing fee, or it may just be buried in "other" expenses. But it's there and it's costing you money. And since you are paying that fee regardless, you might as well buy the fund through a supermarket if that is more convenient for you.
I will fully admit that for convenience’s sake I use brokerage fund supermarkets and am fully aware of the extra cost involved. If I want to pay a TF, that’s my choice and I don’t expect other fund holders to subsidize me.
But even though it would cost me the same, I would argue that buying directly from the fund would benefit the fund because the extra fees go directly to the fund not the brokerage.
If I want to pay a TF, that’s my choice and I don’t expect other fund holders to subsidize me.
But they are subsidizing you. That's what I'm trying to say. Even if you pay a transaction fee to the supermarket, the fund company is still paying the supermarket for shelf space. Just not as much as an NTF fund would pay.
The money for those payments comes from all the shareholders, including the ones who buy direct. They're subsidizing you the same way as they're subsidizing those buying NTF funds through supermarkets.
I would argue that buying directly from the fund would benefit the fund because the extra fees go directly to the fund not the brokerage.
The extra fees are kept by the fund company. They don't go back into the fund. Same as when buying a fund with a load. The load is usually used to pay the selling broker. But should you buy directly from the fund, you'll still pay the load, and the fund company will get to keep it.
Comments
Then you're paying an extra fee to own those shares, whether you bought them directly or not. Funds sold through brokerages pay for shelf space. Those payments are spread across all the fund shareholders, whether they buy them direct from the distributor or via a supermarket.
The cost may be broken out as a 12b-1 fee or an account servicing fee, or it may just be buried in "other" expenses. But it's there and it's costing you money. And since you are paying that fee regardless, you might as well buy the fund through a supermarket if that is more convenient for you.
But even though it would cost me the same, I would argue that buying directly from the fund would benefit the fund because the extra fees go directly to the fund not the brokerage.
But they are subsidizing you. That's what I'm trying to say. Even if you pay a transaction fee to the supermarket, the fund company is still paying the supermarket for shelf space. Just not as much as an NTF fund would pay.
The money for those payments comes from all the shareholders, including the ones who buy direct. They're subsidizing you the same way as they're subsidizing those buying NTF funds through supermarkets.
I would argue that buying directly from the fund would benefit the fund because the extra fees go directly to the fund not the brokerage.
The extra fees are kept by the fund company. They don't go back into the fund. Same as when buying a fund with a load. The load is usually used to pay the selling broker. But should you buy directly from the fund, you'll still pay the load, and the fund company will get to keep it.