Regarding ETF flows, it sure looks like Schwab’s fee cuts are making a difference.
Charles Schwab, the discount brokerage that first entered the ETF space in November 2009, posted a 29 percent rise in fourth-quarter net income thanks to what it described as its focus on the end-client.
Schwab earned $211 million, or 15 cents a diluted share, compared with $163 million, or 13 cents a share, in the same year-earlier quarter. The San Francisco-based company also said that its fourth-quarter net revenues rose 9 percent on the year to $1.215 billion.
On the ETF front, Schwab’s assets tied to its 15 proprietary ETF ballooned to $8.6 billion in the fourth quarter of 2012, up 72 percent from a year earlier in what speaks to the company’s success with its low-cost approach.
All of the 15 Schwab ETFs are the cheapest in their respective categories, a distinction it earned following a September fee cut of as much as 60 percent on some of the fund’s fees. The Schwab U.S. Broad Market ETF (NYSEArca: SCHB), for instance, now costs only 0.04 percent a year, or $4 for each $10,000 invested.
“By continuing to challenge the status quo in investing services, we believe that both our clients and the company win,” Schwab’s Chief Executive Officer and President Walt Bettinger said in a press release.
“With environmental pressures continuing to slow our revenue progress in 2012, our enduring commitment to expense discipline enabled Schwab to allocate over $160 million to projects across our businesses and still deliver a 30 percent pre-tax profit margin for the year,” he added.
The company, which reported net income growth of 29 percent year-on-year in the fourth quarter, also pegged its total assets in Schwab Managed Portfolio ETFs at $2.4 billion, unchanged year-on-year.
All in all, it ended 2012 with $1.95 trillion in total client assets, a growth of 16 percent from December 2011 levels.
Schwab also said Windhaven, its Boston-based financial advisory that runs ETF-only portfolios, added 58 percent in client assets compared with last year’s fourth quarter, ending the year with $13.6 billion under management.