Schwab Takes the Lead in ETF Price War
September 24th 2012 at 7:58am by Tom Lydon
Discount exchange traded fund provider Charles Schwab has cut fees on various products to help gain market share. The fee cuts further solidify Schwab’s leading position in terms of least expensive broad equity ETFs.
“These reductions aren’t a temporary marketing strategy. They’re not in response to something else that someone has said,” Walt Bettinger, Schwab CEO, said in a report. “This is a period of great uncertainty in the markets. We all know that. The price you pay for an investment product is important. We’ll continue to be a challenger company helping the end-investor get what they want. We’ll respond in any way to help end-investors in a Schwab-like way.”
Vanguard started the recent movement of lowering fees on ETFs earlier this year. [ETF Fee Cuts: Almost a 'Free Lunch']
Schwab’s Multi-Cap Core ETF (NYSErca: SCHB) and Large Cap-Core (NYSEArca: SCHX) are now just 4 basis points, down from 6 basis points. These funds are the least expensive broad equity ETFs trading. The move helps put Schwab in the lead for providing the cheapest ETFs. Bettinger also expects other providers to start lowering their prices in response, reports Lisa Shidler for RIA Biz. [ETF Spotlight: Schwab U.S. Large Cap]
Bettinger also explicitly stated that the reason for lowering fees is not a reaction to the competition. In the bigger picture, the move was more about growing client loyalty and improving the overall experience.
San Francisco-based Schwab said it managed $7.2 billion in ETFs at the end of August. [Charles Schwab Plans to Expand ETF Lineup]
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.