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Schwab’s New Twist on the Fee Wars - by Lewis Braham in Barron’s

edited September 2021 in Fund Discussions
Schwab Raises Fees for Buying Fidelity and Vanguard Funds

“After years of fee wars with other brokers, Charles Schwab is pushing back. Starting on Nov. 1, the cost for retail investors to buy Vanguard, Fidelity, and Dodge & Cox funds at the broker will rise from $49.95 to $74.95—a 50% increase. Similarly, at TD Ameritrade, which Schwab acquired in October 2020, prices for the same fund families will rise from $49.99 to $74.95 on Oct. 1.

“Schwab's stated reason for this shift is covering its record-keeping and other administrative costs. ‘The majority of mutual fund families pay Schwab/TD Ameritrade for necessary and important shareholder servicing expenses, but some do not,’ says Alison Wertheim, a representative for Schwab (ticker: SCHW), in an email. ‘We are applying this different amount on retail mutual fund purchases only for funds from which we do not receive shareholder servicing compensation in order to offset the expense we incur in providing shareholder servicing.’ But is it a coincidence that Schwab is raising prices on two fund families with brokerage divisions that are its biggest competitors and the source of the fee wars?”

Excellent article. Delves into the history of the fee price wars, some of the causes and motivational factors and makes some inferences about where things may be heading.

From: Barron’s - September 20, 2021
LINK (May require subscription to access complete article)


  • Not mentioned is that TD Ameritrade is reducing its fees on all other TF OEF funds
    (by less than a nickel:-()

    I view this more as duopoly pricing (Fidelity, Schwab) than a generic pushback on "low" prices. AFAIK, no other major brokerages charge fees one-way (pay to buy, free to sell).

    As I recall (not positive of precise details/chronology), Fidelity went to one way pricing: $75 to buy, $0 to sell. Schwab followed with one way, $76 dollar pricing. Then Fidelity dropped fees to $49.95 except for a few families, and Schwab responded by dropping fees on all TF families to $49.95. Or the other way around, i.e. Schwab with Fidelity following.

    Now Schwab is again closing the gap between it and Fidelity, though this time by raising the fee on a few families to $74.95.

    A few pricing details to add to Lewis' chart:

    Fidelity charges $75 to buy Schwab funds; Vanguard charges its usual $20; obviously Schwab charges nothing.

    Vanguard charges $0 for the first 100 trades for Flagship Select (over $5M) customers. Both the Flagship ($1M) and Flagship Select ($5M) thresholds include all household assets, not just assets in the account. But only Vanguard fund assets count, not all assets held at Vanguard. That's except for Vanguard-managed accounts, where all assets in the accounts are included.

    The number of free trades at Vanguard is reduced by the number of free option trades that were executed in the current calendar year.
  • Just switch to ETF’s
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