Schwab Sinks Fees

[dixonge]

Just got an email - Schwab 1000 Index ETF now charging 0.05%! Less than half the Vanguard rate.

 

[meierlde]

Just got an email - Schwab 1000 Index ETF now charging 0.05%! Less than half the Vanguard rate.

Note that if you have 10k in the vanguard fund you can upgrade to admiral class funds
which have a .04% expense ratio. for most vanguard funds there is an admiral fund option with lower fees.

 

[bingybear]

schwab has a number of funds with lower ERs. Not a big deal... but ... I use schwab and fido. It is no longer all that unique for vanguard not to be the lowest ER.

 

[OldShooter]

This, too, shall pass.

These guys are slitting each other's throats in a race to the bottom, fees that ultimately will not be economically tenable. So, enjoy it while it lasts. I am.

 

[calmloki]

So a large loan is being paid back today, funds wired tomorrow to a Discover account that pays 1.15%. Plan is to plug some of it, maybe 100k, into stocks; probably something boring like VTI. I've read in the past about various companies offering a bonus for new accounts. We currently have most of the stock holdings with Vanguard and credit cards with Fidelity. While I like to get cash in play fast the Gal wants to wait and see if the market doesn't take a nice dip this fall/winter, so... We've adequate funds to keep doing loans, we have a big slug in VCADX tax free bond, a bit bigger slug in Ally 1.5% no-penalty certs, another 100+ in 3% Penfed CD.. We have a stupid amount in highly secure cash-like accounts earning pretty much diddly while we make hard money loans that earn a pretty penny. No one has contacted us lately looking for a loan and I like our money to do SOMETHING - so while we have the cash sitting I'd love to get a signup bonus from a good Vanguard-like company like Fidelity. Anyone aware of some offers?

 

[dixonge]

Note that if you have 10k in the vanguard fund you can upgrade to admiral class funds
which have a .04% expense ratio. for most vanguard funds there is an admiral fund option with lower fees.

Wait - so you're saying -- that Schwab didn't tell me everything LOL

It really is crazy how desperate everyone is. Vanguard is sucking all the air out of the room!

 

[target2019]

Vanguard Russell 1000 ETF (VONE)
e/r 0.12% as of 12/22/2016

Schwab 1000 Index ETF (SCHK)
e/r 0.05%

Russell 1000 Index Fund Institutional Shares (VRNIX)
e/r 0.08% - $5.0 Million

Schwab 1000 Index® Fund (SNXFX)
e/r 0.05%

Did not find a fund ticker for Vanguard 1000, other than the Institutional VRNIX.

 

[pb4uski]

There is no Vanguard 1000 but VTSAX (Vanguard Total Stock Admiral) and has 3,600 stocks. The ER for Total Stock Admiral and VFIAX (Vanguard 500 Index Admiral) is 0.04%.

 

[GalaxyBoy]

The Schwab 1000 index is a proprietary index and isn't the same as the Russell 1000 which is what the Vanguard ETF referenced on the Schwab web page tracks.

Schwab and VG both have total stock market funds. Schwab dropped the ER on theirs to 0.03%, below VG's nearest equivalent Admiral fund, some time ago.

 

[LOL!]

At these low expense ratios, tax-efficiency is more important to me. If the Schwab ETF causes me to pay 0.1% more of my investment in it every year over a Vanguard ETF, then why would I want to use it?

 

[bada bing]

This, too, shall pass.

These guys are slitting each other's throats in a race to the bottom, fees that ultimately will not be economically tenable. So, enjoy it while it lasts. I am.

It's going to be interesting watching the fee competition.

There is a widespread assumption that Vanguard has a cost
advantage because of their nonprofit shareholder ownership structure.
I would bet that that assumption is false. Nonprofit customer owned
sounds nice on paper, but there are lots of examples where it doesn't
win in the real world. One example is the difference between a for-profit
private utility and a co-op utility. In every case I've ever experienced,
the private utility is better run with cheaper service. What tends to
happen is that in a non-profit, the employees have much greater
influence and much less oversight. Performance is much more
incentivized in a for-profit.

Schwab and Fidelity need market share. It is going to be a bit of a trick
for them to manage the lower fee limba dance, but they do have what I
think is a slight structural advantage. The real question is whether the
difference in fees at the current level is much of a draw for market share.
They have to be careful to not cannibalize their reputation for superior
customer service or they will end up loosing.

 

[kevdude]

No one has contacted us lately looking for a loan and I like our money to do SOMETHING - so while we have the cash sitting I'd love to get a signup bonus from a good Vanguard-like company like Fidelity. Anyone aware of some offers?

We opened a Merrill Edge account recently. You can get up to $650 for transferring up to $200,000, which has to stay there for 90 days. You can put the money in their "Preferred Deposit", which is earning .86% currently. If you keep money there, you can also qualify for various BofA Preferred Rewards programs which are pretty decent as well. This includes their Premium Rewards Visa which will give you up to .75% bonus on their 1.5% cash back on regular purchases and up to a .75% bonus on the travel charges, giving you up to 2.625% and 3.50% respectively. If you spend $3k on the card within 90 days you will also get 50k bonus points.

 

[calmloki]

We opened a Merrill Edge account recently. You can get up to $650 for transferring up to $200,000, which has to stay there for 90 days. You can put the money in their "Preferred Deposit", which is earning .86% currently. If you keep money there, you can also qualify for various BofA Preferred Rewards programs which are pretty decent as well. This includes their Premium Rewards Visa which will give you up to .75% bonus on their 1.5% cash back on regular purchases and up to a .75% bonus on the travel charges, giving you up to 2.625% and 3.50% respectively. If you spend $3k on the card within 90 days you will also get 50k bonus points.

Thanks! We do both have the Merrill + card and have just a bit left to qualify for the second 50,000 bonus. $600 (the current offer for an Edge account I saw) is worth about 1.2% on a $200k transfer - add it to the .86% you mention and you are up to 2% for three months - not really stirring me. Can get the same $600 bonus by transferring in securities, which is how we got Chase Bank's Private Client status while avoiding Chase management fees, but this is cash.

May end up plugging it into VCADX, which is kinda cash-like, earns about 2.5%, and is double tax free. Although it's dividends are counted in MAGI for figuring Medicare premium costs. Still looking - funds hit Discover today and I want to get them into a higher return location soon.

 

[mathjak107]

don't go by just expense ratio . there are other internal costs involved and they vary from fund to fund .

even an s&p 500 fund can vary based on the internal trading that goes on loaning securities ,writing calls or puts ,etc .

you can see when this was done schwab #6 on the list , had one of the highest tax ratio costs .

 

[mathjak107]

We opened a Merrill Edge account recently. You can get up to $650 for transferring up to $200,000, which has to stay there for 90 days. You can put the money in their "Preferred Deposit", which is earning .86% currently. If you keep money there, you can also qualify for various BofA Preferred Rewards programs which are pretty decent as well. This includes their Premium Rewards Visa which will give you up to .75% bonus on their 1.5% cash back on regular purchases and up to a .75% bonus on the travel charges, giving you up to 2.625% and 3.50% respectively. If you spend $3k on the card within 90 days you will also get 50k bonus points.

we did the same with chase. transferred my vanguard account to a chase private client account and also got the chase sapphire reserve card for thousands in perks .

 

[mathjak107]

Note that if you have 10k in the vanguard fund you can upgrade to admiral class funds
which have a .04% expense ratio. for most vanguard funds there is an admiral fund option with lower fees.

you can convert non admiral shares of many index funds to their etf equal and get lower fees and no tax implications . i converted vfiax to voo

 

[pb4uski]

we did the same with chase. transferred my vanguard account to a chase private client account and also got the chase sapphire reserve card for thousands in perks .

What sort of perks?

 

[GalaxyBoy]

don't go by just expense ratio . there are other internal costs involved and they vary from fund to fund .

even an s&p 500 fund can vary based on the internal trading that goes on loaning securities ,writing calls or puts ,etc .

you can see when this was done schwab #6 on the list , had one of the highest tax ratio costs .

I’d like to dig deeper into this. Can you give the citation for this, please?

 

[mathjak107]

What sort of perks?

with private client status we got 10,000 more points added on to the 50,000 already given with the sapphire reserve . we no longer have to maintain minimum checking account balances to avoid fees . no wire transfer fees . a cultural card for membership at many museums and attractions . discounts on mortgages which we may take and a bunch more things .

with the sapphire we got more benefits and dollars in points than i can even list . we already covered the fee plus a whole lot more in the first 30 days . the benefits were worth a few thousand dollars when the chase private client and the sapphire reserve were combined .

best of all i pay nothing in any fees to have them baby sit my shares . i just had vanguard convert my admiral shares to the equal in an etf and transferred it to chase via acat

 

[mathjak107]

I’d like to dig deeper into this. Can you give the citation for this, please?

it has been quite a while , i am not sure who did the math on it anymore . i had it in my "interesting file "

 

[Hermit]

The Schwab 1000 index is a proprietary index and isn't the same as the Russell 1000 which is what the Vanguard ETF referenced on the Schwab web page tracks.

Schwab and VG both have total stock market funds. Schwab dropped the ER on theirs to 0.03%, below VG's nearest equivalent Admiral fund, some time ago.

I got sucked into one of the Schwab "1000" funds many years ago. It was a perenail under performer. That is when I left Schwab.

Just got an email - Schwab 1000 Index ETF now charging 0.05%! Less than half the Vanguard rate.

At these low expense ratios, tax-efficiency is more important to me. If the Schwab ETF causes me to pay 0.1% more of my investment in it every year over a Vanguard ETF, then why would I want to use it?

 

[OldShooter]

I'm not taking a position but have some thoughts:

First, for "small" indexes like the S&P 500 all the funds are basically making the same trades so in the end shouldn't their tax efficiency be about the same?

Second, for large indexes like the ACWI All Cap, all funds are sampling as they cannot possible hold every issue. So there maybe it is worth more concern?

Finally, these tax numbers will vary with what's going on in the market, so are today's numbers a reliable predictor of tomorrows?

 

[MRG]

This, too, shall pass.

These guys are slitting each other's throats in a race to the bottom, fees that ultimately will not be economically tenable. So, enjoy it while it lasts. I am.

Maybe.

On the other hand expenses have been dropping for years. ICI has some data that shows the drop in fund fees over time. There's a lot of information there.

https://www.ici.org/research/industry_research/fees

In the early 1980s funds were awash with paper in the back office. It was very expensive to handle it all. In the later 80s imaging technology started helping.

The percentage of paper interactions has been dropping steadily since the late 1980s. Internet access has further removed the number humans in the back office. Basically we do our own data entry today.

Other technology improvements have further reduced costs. Twenty years ago ICR/OCR was pretty iffy on accuracy, today it makes sense. Many of the remaining paper share owner interactions are done by robotic systems; humans only deal with exceptions. Whole complex customer interactions involving correspondence going back and forth, completed and never seen or touched by humans.

There's other technology improvements to further reduce the cost of the back office and improve security. I left the industry mid way through the product development.

 

[mathjak107]

I'm not taking a position but have some thoughts:

First, for "small" indexes like the S&P 500 all the funds are basically making the same trades so in the end shouldn't their tax efficiency be about the same?

tax efficiency is different . for one thing not all own all 500 stocks . some own less and mimic the index by trading in and out of the minor ones as needed .

they all tend to have different policy's about loaning securities , writing calls and puts , etc . some like spy as an example do not reinvest dividends as the fund gets them they hold it in cash until paid out .others reinvest and sell when dividends are paid quarterly. there are other difference's as well .

some have 12b-1 fees and higher expenses as well

 

[meierlde]

I’d like to dig deeper into this. Can you give the citation for this, please?

Here is a link to Morningsides tax cost ratio:Tax Cost Ratio

The ratio reflects "The Morningstar Tax Cost Ratio measures how much a fund's annualized return is reduced by the taxes investors pay on distributions. Mutual funds regularly distribute stock dividends, bond dividends and capital gains to their shareholders. Investors then must pay taxes on those distributions during the year they were received."

So it really only matters on taxable accounts not retirement accounts.