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Industry Spotlight > Clearing and Custodial Firms

Schwab to Raise Fees for Retail Investors Buying Vanguard, Fidelity, Dodge & Cox Funds

By Bernice Napach

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What You Need to Know

  • The 50% fee hike applies to funds for which Schwab isn't compensated for shareholder servicing expenses.
  • It's effective Nov. 1 for Schwab retail investors; Oct. 1 for TD Ameritrade retail investors
  • The increase does not apply to RIAs who custody at Schwab or TD Ameritrade.

Schwab is hiking fees for retail investors to buy Vanguard, Fidelity at Dodge Cox funds from $49.95 to $74.95, effective Nov. 1. Retail clients at TD Ameritrade, which Schwab acquired last October, will be subject to the new fees as of Oct. 1.

Registered investment advisors who custody at Schwab and TD Ameritrade, however, will not be subject to the higher fees.

Schwab spokeswoman Alison Wertheim said the 50% fee hikes apply only to those funds for which Schwab does not receive compensation for the expenses Schwab incurs from servicing shareholders. Those funds are Vanguard funds, Dodge & Cox  and investor-class funds from Fidelity, Wertheim said.

She noted that the majority of mutual fund families pay Schwab/TD Ameritrade for “necessary and important shareholder servicing expenses.”

As of Oct. 1, Schwab is also eliminating the $49.99 sell-side mutual fund transaction fee for TD Ameritrade retail clients and reducing TD Ameritrade’s buy-side fee from $49.99 to $49.95 as part of its efforts “to harmonize the Schwab and TD Ameritrade platforms and experiences for retail clients,” said the spokeswoman.

The upcoming limited Schwab fund fee hikes will widen the gap between what RIAs who use Schwab’s Advisor Services — for custody, trading and other support services — and what retail investors pay to buy Vanguard, Fidelity and Dodge & Cox funds. Currently, advisors that custody at Schwab pay a maximum $45 for those funds ($49.95 at TD Ameritrade) but only $25 for trades in all other funds. Schwab had lower buy and sell trading fees for most mutual funds in October 2018.

Bernice Napach

@Think_Napach

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