So long, A shares. Charles Schwab
] is breaking up with you.
| Walt Bettinger|
President, Chief Executive Officer
Sarah Krouse and Jason Zweig of the Wall Street Journal report
that the brokerage giant "will no longer sell share classes with loads to clients." The change will be effective this coming Monday, May 2.
Yet Schwab has not yet clarified which part (or parts) of its business are affected by the change. Is Schwab no longer selling A shares of its own proprietary mutual funds? Are A shares of outside mutual funds no longer available for sale to Schwab's direct online and branch brokerage customers? What about Schwab's RIA allies' clients or its retirement plan participants? The WSJ
article does not offer clarification, and as yet a spokeswoman for Schwab has not yet answered those questions for MFWire
What Schwab has insisted on so far is that the change has nothing to do with the DoL's fiduciary regulation that was revealed earlier this month and has everyone in financial services abuzz. That Schwab spokeswoman emailed MFWire
the following statement:
As of 5/2, Schwab clients will no longer be able to purchase Class A Load mutual funds – although they can still transfer in, custody, sell and elect dividend reinvestment for these shares. The move away from load funds has been a secular trend over the last decade or more and Schwab has never been a significant player in this space. Our decision wasn’t triggered by DOL; it’s a housekeeping move for a low-volume business that no longer makes sense for us to administer given the breadth of our core mutual fund offer and the reality that many firms now make their funds available directly to retail clients on a load-waived basis. Load funds have never been part of our core offer - over the past two years we’ve accommodated about ~750 of these purchase trades, a tiny fraction of our mutual fund business overall.
Given the shift to fee-based business over the past few years (Merrill One
, anyone?), the SEC's efforts to eventually create a uniform fiduciary standard, the DoL reg, and more, it seems likely that the shift away from commissioned A shares will only continue across the industry. The U.S. is not yet at the point where the UK was three years ago with the RDR
banning commissions, but we're getting closer.
Neil Anderson, Managing Editor
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