This week Charles Schwab is using its annual Impact advisors conference in Seattle to launch a number of high-profile initiatives, including a new branding campaign featuring "Chuck" and business management tools for advisors. What it is putting in a press release, though, may be of more interest to those in Seattle. It turns out that you can now find Schwab funds in the aisles of other supermarkets.
That's right; advisors taking a walk down the aisle at Fidelity FundsNet, TD Waterhouse and Ameritrade will find Schwab products for the first time.
The decision by Schwab to offer its funds through supermarkets should be an interesting one for other fund firms. When Schwab first entered the fund business it was careful to reassure fund firms that it was not becoming a competitor with the funds on its shelves, rather it was offering them commodity products that did not compete with active managers.
Thus, Schwab's money market fund was the default for its clients and its only equity funds were index products.
That began to change when Schwab purchased Axa Rosenburg's actively managed fund group two years ago and began to market them under the Laudus brand.
All of those funds are now available on rival fund supermarket platforms. Essentially, that means that Schwab has become a full fledge fund manufacturer competing for shelf space directly with those funds that it also distributes through its own supermarket.
Logically, by expanding its market beyond its existing client base to those of other brokerages, Schwab will also have to develop a more widespread retail brand for those funds.
Indeed, Evelyn S. Dilsaver, president of Schwab Investment Management, told the Associated Press
that the decision to sell the funds through third parties "is all about growth."
Dilsaver also said that Schwab is considering selling the funds through third-party 401(k) platforms, perhaps in 2006.
"At the end of the day, the client buys performance, and I have to compete on performance within Schwab for the reps to recommend us," Dilsaver explained. "If I have to compete on performance inside Schwab, I may as well do it on the outside as well."
Sean Hanna, Editor in Chief
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