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Portfolio > Mutual Funds

Schwab Fees Steer Some Funds to the Exits

By Staff Writer

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Pay up or shove off, Charles Schwab Corp. has been telling mutual fund companies lately — most of them, anyway.

The discount brokerage firm is seeking new fees from funds in its Schwab “supermarket” and is showing the door to a few funds that so far say they won’t pay. Fund supermarkets, of which Schwab’s is one of the two biggest, have proved highly popular in providing one stop shopping for investors to buy and sell shares in thousands of funds operated by hundreds of fund companies.

But not all fund firms have gotten an ultimatum from Schwab. Industry behemoths Vanguard Group and Fidelity Investments say Schwab hasn’t approached them seeking new fee payments to keep their products in the Schwab supermarket — an apparent reflection of the importance of those fund giants to Schwab.

“We’ve had no contact with Schwab regarding any fee matters in the past several months, nothing from them at all,” says Vanguard principal and spokesman Brian Mattes.

Of course, any conversation on that matter would probably be a brief one, involving a “no” from Vanguard, which has built its reputation on low expenses. “We don’t pay for distribution,” Mattes says flatly.

At Fidelity, spokeswoman Sarah Friedell says “Schwab has not contacted us” seeking new fee payments. She says Fidelity, which operates another giant fund supermarket, doesn’t currently pay Schwab for distribution of Fidelity funds.

Schwab spokesman Mike Durand says officials of the San Francisco firm “have had conversations with all the fund companies about pricing” and the proposed new fees. But fellow spokesman Lance Berg says Vanguard and Fidelity are among “a few cases where fee schedules do differ from the norm” because of a high volume of business or other “special considerations.”

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