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Rating:Walt's Fee Cut Puts Schwab's Rivals in a Pickle Not Rated 5.0 Email Routing List Email & Route  Print Print
Wednesday, September 26, 2012

Walt's Fee Cut Puts Schwab's Rivals in a Pickle

News summary by MFWire's editors

How shrewd is Walt Bettinger? The Financial Times weighs in on the matter by noticing that it will cost many pretty pennies for Larry Fink, Bill McNabb and Jay Hooley to match Walt's price cutting move on Schwab ETFs [profile].

Fink, of course, already has said that he wants BlackRock [profile] to drop fees to levels below or near those of rivals. Vanguard [profile] and SSgA's [profile] leadership has yet to match the public moves.

If they do, it will cost:

BlackRock would "face a hefty bill of around $358m if it reduced charges on directly competing products, and $745m, if it reduced charges on all overlapping products to match the new prices announced by Schwab," reports the FT.com.

Vanguard would forego either $63 million "if it reduced charges on only directly competing products." If it matched all of Schwab's fee cuts it would forego $102 million.

SSgA currently has the prices nearest to those announced by Schwab so it would lose only $96 million in fee revenue if it match Schwab's fee cuts, according to the FT's calculations.

Of course, Walt can put his rivals in this position because he has the least to lose. Sitting far down the league table at number 12 with just $7.2 billion in ETF AUM, Schwab will give up just $3.7 million in fee revenue. All of the headlines and the goodwill among advisors may more than make up for the costs already. 

Edited by: Sean Hanna, Editor in Chief


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