Charles Schwab continued the ETF industry's downward pressure on fees by announcing last week that it is drastically reducing the expense ratios charged by several of its exchange-traded products. Schwab, which pioneered the concept of commission-free trading for ETFs within the last few years, joins a long list of issuers who have reduced fees in an effort to woo cost conscious investors. Though Schwab ETFs generally maintain low expense ratios to begin with, some of the cuts were substantial. For example, expenses on the Schwab Equity Income ETF (SCHD) declined by more than 50%, dropping from 0.17% to 0.07%. That makes SCHD the cheapest dividend ETF, surpassing Vanguard's VIG and VYM.Schwab is now home to the cheapest ETFs on the market as well; both the Multi Cap Core ETF (SCHB) and Large Cap Core ETF (SCHX)will have expense ratios of just four basis points. Previously, those ETFs charges 0.06% in annual fees. In total, Schwab cut fees on all 15 of its ETFs, including products offering exposure to domestic and international stock markets, fixed income securities and REITs. The changes to expense ratios were effective September 20. The new expense structures for Schwab ETFs are as follows:

ETF New ER Old ER
US Broad Market ETF (SCHB) 0.04% 0.06%
US Large-Cap ETF (SCHX) 0.04% 0.06%
US Large-Cap Growth ETF (SCHG) 0.07% 0.13%
US Large-Cap Value ETF (SCHV) 0.07% 0.13%
US Dividend Equity ETF (SCHD) 0.07% 0.17%
US Mid-Cap ETF (SCHM) 0.07% 0.13%
US Small-Cap ETF (SCHA) 0.10% 0.13%
US REIT ETF (SCHH) 0.07% 0.13%
International Equity (SCHF) 0.09% 0.13%
Emerging Markets Equity ETF (SCHE) 0.15% 0.25%
International Small-Cap Equity ETF (SCHC) 0.20% 0.35%
Short-Term US Treasury ETF (SCHO) 0.08% 0.12%
Intermediate-Term US Treasury ETF (SCHR) 0.10% 0.12%
US Aggregate Bond ETF (SCHZ) 0.05% 0.10%
US TIPS ETF (SCHP) 0.07% 0.14%

"In this period of uncertainty in the markets, the expenses investors pay are the only sure thing, said CEO Walt Bettinger.As a long-time advocate for investors, we want to offer our clients a truly low-cost way to build a diversified portfolio.

Among the other highlights from the recent price cuts:

  • SCHE is now the cheapest emerging markets ETF at just 15 basis points, surpassing VWO
  • SCHZ is now the cheapest ETF in the Total Bond Market ETFdb Category at 0.05%; previously, it was tied with BND at 0.10%.
  • SCHH is now the cheapest ETF in the Real Estate ETFdb Category, passing up VNQ.

In aggregate, Schwab is home to some $140 billion in client ETF assets. Schwab ETFs now have more than $7 billion in aggregate AUM.

Disclosure: No positions at time of writing.

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