Emile Hallez
2 min read
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It’s not just a “cheap trick” — Charles Schwab this week cut fees this week on four ETFs. It wants you to want them.
The company on Monday cleaved costs, in some cases by as much as half, on its $4 billion 1000 Index ETF (3 basis points, down from 5); $48 billion International Equity ETF (3, down from 6); $4.4 billion International Small-Cap Equity ETF (8, down from 11); and $10 billion Emerging Markets Equity ETF (7, down from 11). “We continually review our cost-effective product suite to find new opportunities to lower costs for investors,” John Sturiale, head of product management and innovation at Schwab Asset Management, said in a statement to ETF Upside. “With these fee reductions, all Schwab market-cap weighted index ETFs are now available for less than 10 basis points.”
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It’s not the first time in recent history that Schwab has pared expenses on its exchange-traded funds. In February, it reduced the fee on its International Dividend Equity ETF from 14 basis points to 8. It also dropped fees on seven of its passive fixed income ETFs in 2022, with all but one dropping to 3 basis points. The company further trimmed its remaining ETFs in that category to 3 basis points a year later. The fresh round of fee cuts shows “a continued desire on Schwab’s part to be a low-cost leader in ETFs,” said Zach Evens, a manager research analyst at Morningstar Research Services. Of course, the company also has to compete with the likes of Vanguard, State Street, and others that provide bargain-basement pricing, he noted. And Vanguard earlier this year made the biggest set of fee cuts in its history — it reduced expenses by an average of 20% across 87 funds.
Along with the new ETF fee reductions, Schwab announced share splits for half a dozen of its mutual funds:
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The Schwab 1000 Index, US Large-Cap Growth Index and Total Stock Market Index funds will see splits of 10-1, 8-1 and 7-1, respectively.
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The Schwab S&P 500 Index, US Mid-Cap Index and US Large-Cap Value Index funds will get split by 6-1, 5-1 and 4-1, respectively.
But Don’t Give Yourself Away: Costs have come down considerably in ETFs, particularly on an asset-weighted basis. Investors choose passive ETFs largely because of the low costs, so shopping around for the best deals makes sense. “Investors overwhelmingly favor cheap products and cheap ETFs,” Evens said. “And that brings down the average fee that investors pay.”
This post first appeared on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter.
