Charles Schwab announced on Monday that it is reducing fees on four of its exchange-traded funds (ETFs). The company is cutting costs on its $4 billion 1000 Index ETF from 5 basis points to 3, the $48 billion International Equity ETF from 6 basis points to 3, the $4.4 billion International Small-Cap Equity ETF from 11 basis points to 8, and the $10 billion Emerging Markets Equity ETF from 11 basis points to 7. John Sturiale, head of product management and innovation at Schwab Asset Management, said in a statement, “We continually review our cost-effective product suite to find new opportunities to lower costs for investors.”
With these changes, all Schwab market-cap weighted index ETFs are now available for less than 10 basis points.
This reinforces the firm’s commitment to affordable investing. Schwab’s recent fee cuts follow previous reductions. In February, the company lowered the fee on its International Dividend Equity ETF from 14 basis points to 8.
Schwab cuts fees on key ETFs
In 2022, Schwab reduced fees on seven of its passive fixed income ETFs, with all but one dropping to 3 basis points. Zach Evens, a manager research analyst at Morningstar Research Services, said, “The fresh round of fee cuts shows a continued desire on Schwab’s part to be a low-cost leader in ETFs.” He emphasized that Schwab faces stiff competition from other major players like Vanguard and State Street, which also offer low-cost investment products.
Along with the ETF fee reductions, Schwab announced share splits for several mutual funds. The Schwab 1000 Index, US Large-Cap Growth Index, and Total Stock Market Index funds will undergo splits of 10-1, 8-1, and 7-1, respectively. The Schwab S&P 500 Index, US Mid-Cap Index, and US Large-Cap Value Index funds will see splits of 6-1, 5-1, and 4-1, respectively.
As costs decrease significantly, particularly on an asset-weighted basis, investors continue to favor passive ETFs largely for their affordability. Zach Evens noted, “Investors overwhelmingly favor cheap products and cheap ETFs, and that brings down the average fee that investors pay.”
