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Charles Schwab to Cease Selling Load Mutual Funds

edited April 2016 in Fund Discussions
Gotta love it ... some progress.

Similarly, Morningstar should stop giving its annual awards to loaded funds.

c

http://www.wsj.com/articles/charles-schwab-to-cease-selling-load-mutual-funds-1461749403

Comments

  • But you still have until May 2nd, so if you hurry you can still buy load funds from them. Just a heads up for those who might be interested.
  • @ Charles & MFO Members: IBD Slant
    “There definitely has been, over the past 15 or so years, a big move away from load shares,” said Scott Cooley, director of policy research for Morningstar Inc. “Fifteen years ago, load funds were more than 40% of mutual fund assets. Now they’re down to 20%. The industry has been growing, but load funds have lost market share.”

    Schwab insisted that the move is a response to dwindling interest by shareholders in paying loads, not a response to a recent Department of Labor (DOL) rule that tightens restrictions on advisor conflicts of interest and requires advisors to disclose how they’re paid.
    Regards,
    Ted
    http://www.investors.com/etfs-and-funds/mutual-funds/charles-schwabs-cutback-on-load-mutual-funds-reinforces-trend/
  • I have 4 "A" shares, which I currently buy in my 4 Schwab accounts on a load waived basis. I am assuming I can still continue to purchase those shares after May 2nd since no load was paid. Correct?
  • I would think so. I have First Eagle Global (SGENX) on the same basis.
  • @rabockma: From the atricle I linked !
    "Shareholders with already existing A-class funds at Schwab can leave them there or even transfer such shares into a Schwab account, the brokerage told IBD. Account holders can also still sell and receive dividend reinvestments for those shares inside a Schwab account."
    Regards,
    Ted
  • @Ted- Thanks for the info.
  • @Ted Of course this does not say explicitly that certain A-class shares will still be available on a no-load basis at Schwab, but I believe that they will be.
  • Is Schwab going to stop selling load funds from Franklin Templeton (e.g. TPINX) or Oppenheimer (e.g. OIGAX)? Of course not, even though these are not only load funds, but load classes - if you go to E*Trade, they'll gladly sell you the Templeton fund or the Oppenheimer fund with a load.

    Schwab is only going to stop selling a share class if it can't negotiate a load waiver. This is hardly generosity on Schwab's part. It typically get 40 basis points per year for NTF shares sold, and (admittedly I haven't checked) less for load shares. If you're working with an adviser, the adviser gets the lion's share of the front load, so Schwab comes out on the short end of the stick by selling the funds with a load (as opposed to load-waived).

    Schwab (unlike Fidelity) used to include TF funds as well as NTF funds in its select lists. It stopped that years ago - now it tries to drive investors to its most profitable share classes. I don't see a difference between this and the supposed conflict of interest that advisors have in selling load funds. Except that soon (at least for retirement accounts) advisors will be held to a fiduciary standard that Schwab can avoid.

    Let's look at those load-waived classes. Why would I go to Schwab and buy a 12b-1 laden (dare I say loaded) share class when TGBAX can be purchased elsewhere, albeit with a TF? That higher ER is just skimming money from the fund to pay Schwab for shelf space.

    On general principle, I for one don't see anything positive about being offered less choice. But it makes for great PR, and evokes the predictable hurrahs.
  • @msf.

    Hmmm...

    Maybe it's one step forward and half a step back?

    In mean time, I'll keep telling myself that the best deals are those where all parties feel they have benefited.

    c
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