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Portfolio > Mutual Funds

Schwab to Give RIAs Access to T. Rowe Price Active Mutual Funds Without Fees

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What You Need to Know

  • Starting in early February, about 120 institutional no-transaction-fee funds from T. Rowe Price will be available to Schwab advisors.
  • The funds included in the deal will include about 65 Morningstar categories.
  • Schwab entered into the strategic pact with T. Rowe Price due to strong advisor demand for NTF funds.

Charles Schwab and T. Rowe Price entered into a strategic relationship that will enable advisors who custody on the Schwab platform to buy T. Rowe Price’s lowest-cost institutional share class funds without transaction fees, according to Heather Fischer, head of third-party platforms at Schwab.

Starting in early February, about 120 institutional no-transaction-fee funds from T. Rowe Price, spanning about 65 Morningstar categories, will be made available to Schwab’s RIA clients, she said Wednesday in a Main Street Stories post on Schwab’s website.

Advisor Demand

The goal of the deal with T. Rowe Price is threefold, according to Bernie Clark, head of Schwab Advisor Services.

First, this will help Schwab respond to demand from advisors for access to NTF funds, according to Clark.

Second, it will lower costs for advisors when constructing portfolios, allowing them to put more of their clients’ initial investment to work.

And, third, this will help advisors navigate the wide variety of product choices for their clients via a unique partnership with a qualified leader in active management, according to Clark.

Agreeing, Jalina Kerr, who heads up client experience for Schwab Advisor Services, said, “It helps advisors deliver value to their clients, and most of all, it responds directly to something clients are telling us they want.”

Schwab recently conducted research with a small group of RIAs, and all advisors surveyed considered NTF funds somewhat or very important, according to Fischer.

As part of the study, conducted the week of Dec. 6, nine advisors who custody at Schwab were asked, when considering mutual funds for their clients’ portfolios, how important was it that there were no transaction fees. When asked to rank different buying factors for mutual funds, having NTF choices came in third, behind only price and performance, Fischer said.

In 2022, Schwab will “continue to evaluate the potential benefits of expanding availability of institutional share classes with no transaction fees,” she noted.

A Simple Choice

T. Rowe Price stood out from other active managers because their portfolio managers average 22 years of experience; about 70 of their 159 institutional share class funds earned a four- or five-star overall Morningstar rating as of Oct. 31; and more than 90% of their institutional share classes have expense ratios at or below the average Morningstar category expense ratio for institutional share classes, Fischer said.

“One of the most appealing elements of this strategic relationship is that we believe it can help advisors and their clients make decisions,” she added.

Charles Schwab sign (Photo: Christopher Dilts/Bloomberg)


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