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Rating:Schwab Alters Pricing on its Transaction Fee Fund Supermarket Not Rated 1.0 Email Routing List Email & Route  Print Print
Friday, February 18, 2011

Schwab Alters Pricing on its Transaction Fee Fund Supermarket

News summary by MFWire's editors

Schwab is changing the way it charges mutual fund companies on its transaction-fee platform. A spokeswoman for the brokerage giant confirmed to The MFWire.com that come April, it is switching the pricing system for the platform from a flat fee to an asset-based one.

Doug Hanson
Vice President
Doug Hanson, vice president at Schwab, confirmed to The MFWire that the current price is $20 per account and the new price will instead be 10 basis points. That pricing would be good news for funds with lots of small accounts with the platform but bad news for those with bigger ones.

"We need to have it look like our other platform," Hanson explained, pointing to Schwab's popular, no transaction fee platform, OneSource, which charges 40 bps. (A Schwab spokeswoman confirmed that the transaction fee platform now accounts for 58 percent of the outside mutual fund assets Schwab works with.)

Hanson also clarified that the $49.95 flat transaction charged to the mutual fund shareholders themselves will not change.

InvestmentNews' Jessica Toonkel broke the news today. The change apparently isn't new for all fund firms. An American Funds spokesman told INews that the giant mutual fund firm has paid 10 bps since day one on the platform, while a Vanguard spokeswoman confirmed that the low-cost fund firm doesn't pay to be on the platform. And Hanson confirmed to The MFWire that, while the new pricing will be effective on April 1 for all new and existing mutual funds on the transaction fee platform, some of them are already paying asset-based fees.

"There have been a fair number of firms that have been on asset-based pricing for years," Hanson said.

This is second major pricing shift for the transaction fee platform. Hanson confided that, prior to 2003, "the old pricing system was zero."

"It was really more of an accommodation platform in the background," Hanson said. 

Edited by: Neil Anderson, Managing Editor

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