While competitors are roiled by the market turmoil and the market faces lower returns for some time to come, Charles Schwab is proactively cutting fees, lowering investment minimums and offerings popular exchange-traded funds to gain market share, Barron’s reports.
Chairman Charles Schwab said he expects low returns for some time, along with higher inflation and tight credit due to government borrowing. Given this highly competitive environment, the firm is doing whatever it can to appeal to cost-conscious, risk-averse investors.
Whereas Vanguard requires a $3,000 minimum to invest in the Vanguard 500 Index Fund and charges 15 basis points, Schwab cut the fee on its Schwab S&P 500 Index Fund to nine basis points and lowered the minimum to $100. Randy Merk, president of investment management services at Schwab, called the move “a call to action to get back into the market.”
“We’re seeing a nice little pop,” Merk said. “We’ve seen exactly what we’re hoping to see. We’ve seen transfers from Vanguard and Fidelity based on price and minimum investment.”
In addition, Schwab has filed to offer its own suite of ETFs, which Chairman Schwab calls “a major beginning for us.”
Certainly, the moves come on top of a solid 2008 at Schwab, thanks to its own money market funds, which took in $113 billion—more than Citigroup, Morgan Stanley, Merrill Lynch, E*Trade and TD Ameritrade combined. That inflow was critical, for with $242 billion in assets under management, Schwab is now the nation’s 13th largest fund complex.