A simplified shopping experience for retail investors

Article

January 27, 2022  |  2 min read

By Heather Fischer, Head of Third Party Platforms 

Today’s retail investors are inundated with choices. That can lead to confusion about how to make fund buying decisions. Our research bears that out – in a recent study, nearly half of investors told us they feel overwhelmed or frustrated by the process of selecting funds, and just over half say they feel like they have too many options when shopping.1 To help navigate the clutter, we have developed a redesigned retail mutual fund shopping experience aimed at helping our clients meet their financial goals.  

We’re excited to deliver on this now because of our new strategic relationship with T. Rowe Price, a leading provider of actively managed mutual funds. In December, we announced that independent advisors who custody with Schwab will have access to T. Rowe Price’s lowest cost institutional share class funds without transaction fees. Today, we’re announcing that T. Rowe Price’s actively managed funds will get enhanced visibility – alongside Schwab’s own proprietary funds – as part of our new mutual fund shopping experience for retail investors.  

How It Will Work  

The Fund Finder tool on Schwab.com sorts and filters prioritizing the criteria we know based on our research investors typically value most – factors such as low expense ratios, no transaction fees, and high Morningstar Overall Ratings. Starting January 27th, we’ll also add a “Featured Funds” module that highlights funds from Schwab and T. Rowe Price that meet clients’ search criteria, have no transaction fees, and have Morningstar Overall Rating of four or five stars.  

Here’s what it will look like:

For illustrative purposes only. Please see important disclosures below. 

In addition, when a client conducts research on a particular fund, they will get a rich snapshot of data and information about that fund. They will also see a “Similar Funds” module featuring no transaction fee fund choices from Schwab and T. Rowe Price, marked as sponsored, that are in the same category.  

Here’s what it will look like: 

For illustrative purposes only. Please see important disclosures below. 

Demand and Benefits  

We developed this new mutual fund shopping experience in response to what we see as a clear need in the market. Going back to the research cited above, the good news is that more than half of investors feel well equipped to navigate the fund selection process. Still a significant number of investors feel overwhelmed, frustrated, and confused.1 

Having a world of choices is undoubtedly a great thing for investors, and many new products and asset classes are now more accessible and bring new opportunities to individual investors. We’re proud of the depth and scale we offer and remain deeply committed to an open architecture model. But some of our clients are telling us they want help navigating all those choices. With the launch of our new retail mutual fund shopping experience, help is on the way. 

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1 During a research study conducted from December 1-6, 2021, 452 clients and prospects responded to the question “Which if any of the following describes how the process of selecting mutual funds or ETFs makes you feel? (n=452) 

Featured Funds Selection Criteria: Featured Funds promotes mutual funds managed by Charles Schwab Investment Management, Inc. (“Affiliate Funds”) and funds from T. Rowe Price, which compensates Schwab to market and promote their funds. Schwab will show at least one Affiliate Fund and one fund from T. Rowe Price if they meet the screening criteria described below. Other funds are not eligible to be shown in the Featured Funds section, even if they are available for purchase at Schwab. Funds become eligible for Featured Funds because of Schwab’s financial relationships with Affiliate Funds and T. Rowe Price, which creates a conflict of interest. Schwab receives compensation from T. Rowe Price to market and promote their funds, in addition to shareholder servicing fees the fund company pays to Schwab.  Schwab’s affiliate, CSIM, receives investment advisory and/or administration fees in connection with the Affiliate Funds, and Schwab receives shareholder servicing fees in connection with certain of the Affiliate Funds. To read more about our relationships with fund companies, please visit: www.schwab.com/legal/financial-and-other-relationships

Eligible funds must meet additional screening criteria to appear in Featured Funds, including a Morningstar Overall RatingTM of four or five, be available for purchase at Schwab with no transaction fee (a service fee may apply), and be open for purchase to all investors. Transaction fee funds are not eligible to be included in Featured Funds. This creates a conflict as Schwab receives more compensation for shareholder servicing from funds made available at Schwab with no transaction fee than funds with transaction fees.     

Featured Funds will only display results when three or more eligible funds meet the selection criteria. If eligible, at least one fund from T. Rowe Price and one Affiliate Fund will be displayed. If they meet the above eligibility requirements, Featured Funds will include two active funds and two passive funds in the results. Funds on the Schwab Mutual Fund OneSource Select List® (the “Select List®”) will be listed first. Schwab’s Select List is developed and overseen by Charles Schwab Investment Advisory, Inc., following specific criteria and methodology described here. Other funds will be sorted next in ascending order by prospectus net expense ratio, in descending order by Morningstar Overall RatingTM, and then in ascending order alphabetically by ticker. Investors can input their own criteria, which will adjust the view to show different results. 

Featured Funds are not a recommendation, is not directed to any specific investor, and is not based on any investor's particular investment needs. Other funds that are not eligible for Featured Funds but that are available through Schwab may better meet your investing needs, including funds for which Schwab charges a transaction fee.    

Similar Fund Selection Criteria: Similar Funds are selected from mutual funds managed by Charles Schwab Investment Management, Inc. (CSIM) (“Affiliate Funds”) or funds from T. Rowe Price, which compensates Schwab to market and promote their funds.  Similar Funds receive more prominent placement on Schwab.com because of Schwab’s financial relationships with Affiliate Funds and T. Rowe Price, which creates a conflict of interest.  Schwab receives compensation from T. Rowe Price to market and promote their funds, in addition to shareholder servicing fees the fund company pays to Schwab.  Schwab’s affiliate, CSIM, receives investment advisory and/or administration fees in connection with the Affiliate Funds, and Schwab receives shareholder servicing fees in connection with certain of the Affiliate Funds. To read more about our relationships with funds, please visit this site

Eligible mutual funds must meet additional screening criteria to appear in Similar Funds, including having the same Morningstar CategoryTM and management style (active or passive) as the fund you are researching. In addition, eligible funds must also have a minimum of $20 million in assets under management, be open to all investors, and be available for purchase at Schwab with no transaction fee (a service fee may apply). Transaction fee funds are not included in Similar Funds. The screening criteria creates a conflict since Schwab receives more compensation for shareholder servicing from funds made available at Schwab with no transaction fee than funds with transaction fees.  

Similar Funds will only be displayed when three or more eligible funds meet your selection criteria. Where applicable, funds that are on the Schwab Mutual Fund OneSource Select List® (the “Select List”) will be listed first. Schwab’s Select List is developed and overseen by Charles Schwab Investment Advisory, Inc., following specific criteria and methodology described here. Then, funds are sorted in ascending order by prospectus net expense ratio, in descending order by Morningstar Rating, and alphabetically by ticker. Only mutual funds are displayed in Similar Funds. 

Similar Funds is not a recommendation, is not directed to any specific investor, and is not based on any investor's particular investment needs.  Other funds that are not eligible for Similar Funds but that are available through Schwab may better meet your investing needs, including funds for which Schwab charges a transaction fee.   

Investors should consider carefully information contained in the prospectus, or if available, the summary prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by calling 800-435-4000. Please read the prospectus carefully before investing. 

Investment value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. 

Schwab receives compensation from T. Rowe Price to market and promote their funds, in addition to any shareholder servicing fees the fund company pays to Schwab which creates conflicts of interest.  Learn more here about the compensation Schwab receives.    

Trades in no-load mutual funds available through the Mutual Fund OneSource® service (including Schwab Funds®) as well as certain other funds, are available without transaction fees. For each of these trade orders placed through a broker, a $25 service charge applies. Schwab reserves the right to change the funds we make available without transaction fees and to reinstate fees on any funds. Funds are also subject to management fees and expenses. 

The Morningstar Rating™, or "star rating," is calculated for funds with at least a three-year history.  It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars and the next 22.5% receive 4 stars. The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. Ratings do not take into account the effects of sales charges and loads. © 2022 Morningstar, Inc. All rights reserved. 

Charles Schwab & Co., Inc. (the distributor of Schwab Funds) and Charles Schwab Investment Management, Inc. (the investment adviser) are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation.