Daily ETF Watch: Schwab Lowers Fees

Schwab ratchets up ETF fee war with expense ratio cuts on two ETFs.

Charles Schwab, the discount broker known for its low-cost ETFs, is once again making waves in the ETF fee war. The firm is reducing the fees on two equity ETFs by 6.6 percent, rendering its emerging market ETF now cheaper than Vanguard’s competing offering.

The expense ratio on the Schwab Emerging Markets Equity (SCHE | C-88) was cut from 0.15 percent, or $15 for every $10,000 invested, to 0.14 percent. In comparison, the Vanguard FTSE Emerging Markets fund’s (VWO |C-89) annual expense ratio is 0.15 percent.

Also, the expense ratio for the Schwab International Small Cap Equity ETF (SCHC | B-81) was reduced from 0.20 percent, or $20 for every $10,000 invested, to 0.19 percent, according to a regulatory filing. The changes were effective March 5.

SCHE and SCHC were part of a larger group of Schwab ETFs on which expense ratios were cut last September. At the time, Walt Bettinger, chief executive officer of the San Francisco-based firm, said in a monthly telephone conference with journalists: “We're not going to stop here,” stressing the price cuts weren’t a temporary measure.

Where it all stops, no one knows, but ETF.com analysts suspect Schwab’s bigger plan is to attract more clients and financial advisors to its overall platform in the hopes that they make use of Schwab products and services that are more expensive than its low-cost ETFs. The exchange-traded funds can also be traded commission free by Schwab clients.

For instance, Schwab’s ETF 401(k) platform made its much-awaited debut in February, prompting Dave Nadig, ETF.com’s chief investment officer, to say, “I’m betting this is the program we look back on as the one that ‘cracked’ the ETFs-in-401(k) problem.”

Total U.S.-listed assets now stand at more than $1.713 trillion, and Schwab currently manages $18.54 billion of those assets and is the No. 11 ETF provider, according to data compiled by ETF.com Analytics.

Factoids

• ETF volumes have reportedly dipped this year to about 16.5 percent of total equity volumes, down from 16.7 percent in 2013, according to analysts at Credit Suisse Trading Strategy. The data suggest investors are currently favoring trades in individual stocks over ETFs.

No further filings or launches have yet been made or scheduled today.