Schwab Cuts Trading Fees

While Schwab conceded that its commission cuts could reduce consolidated revenues by 2% to 3% in the coming 12 months, McWhinney insisted that the move is “a really positive event” for the broker’s advisor channel. “Our [advisor] clients count the cost of a trade in the results they provide to their end clients,” she said. With Schwab Institutional assets now over $300 billion, “we’re ahead of plan,” she said. So even with Schwab’s overall revenues set to decline, “the direction we’re getting is to invest in the [institutional] business.”

Schwab also announced a sliding scale of commissions of $14.95 to $19.95 per trade for several classes of retail clients. In addition, it lowered from $500,000 to $250,000 the minimum amount of household assets necessary to qualify for no-fee access to its Schwab Independent Investing Signature service. The service includes research and priority handling of client calls. Schwab did not reduce commissions on options ands bond trades. It also left unchanged its charges to buy mutual funds sold with transaction fees.

Despite the equity commission cuts, Schwab’s new fees are still well above those of a number of online discount brokers. For example, Brown & Company, a unit of J.P. Morgan Chase, charges $5 for online market orders and $10 for limit orders up to 5,000 shares. Ameritrade, which has been offering both cash rebates and free trades as an incentive to open new accounts, charges $10.99 for market and limit orders for all of its clients. TD Waterhouse, which spokesperson Jennifer Olegario says is “committed to remaining competitive,” charges large customers $9.95 for market orders online, while Fidelity Investments charges its largest and most active retail customers $8 for any online equity trade. Asked about the impact of Schwab’s move on its advisor channel, Sarah Friedell, the Boston firm’s director of media relations, acknowledged that “the market continues to push pricing for equity transactions down and that we need to be responsive to our clients.” She added that “many of our clients have already negotiated reduced equity pricing on behalf of their customers.”