Zero Confusion: Setting the Record Straight

Zero Confusion: Setting the Record Straight

On October 1, we took an historic step in eliminating online trading commissions. We were thrilled to see others follow our lead to help millions of investing Americans save more money, and commend those who share our belief that investors deserve tangible value.

The last broker to follow suit did so while making a number of claims about how their overall value bests others. Their approach clouded the facts on a number of fronts; investors deserve better.

As our clients know, we have a long history of being transparent, and because of this tradition of transparency, we feel it is important to make the facts clear -- for the benefit of our employees, shareholders, and most importantly, the investing public:


CLAIM:

  • Fidelity provides “industry leading trade execution that does not sacrifice customer interests.”

FACTS:

  • Third parties recognize Schwab’s leadership when it comes to trading. In 2019, Schwab was ranked #1 overall among online brokers by Investor’s Business Daily and #1 in trade reliability.
     
  • Fidelity claims it does not receive payment for order flow on equities and ETFs, but Fidelity routes trades through its affiliate National Financial Services (NFS). NFS operates a registered ATS that generates revenue by matching trades. Fidelity also receives rebates from markets to which it routes substantial percentages of its equity and ETF orders.
     
  • Additionally, Fidelity does receive payment for its order flow on options.
     
  • Here’s how Schwab improved executions for market orders of 500-1,999 shares in S&P 500® stocks during the second quarter:
     
    • 95.9% of orders were filled at prices better than the National Best Bid and Offer (NBBO)
       
    • Average savings per order was $12.29 as a result of better execution prices
       
    • Average execution speed was 0.05 seconds
       
  • Schwab clients actually received better price improvement on order sizes of 500-4,999 shares than did Fidelity clients as demonstrated by the facts clearly displayed on our web sites:
     
  • In 2018, Schwab’s clients received total price improvement of $694 million vs $635 million at Fidelity.
     
  • Fidelity’s comparison of trade order savings to industry averages is like comparing apples to oranges due to differences in order mix among large and small, institutional and retail.


CLAIM:

  • Fidelity is “providing customers unmatched value while challenging industry practices that appear to give value in one place while they are actually having customers pay in other ways.”

FACTS:

  • We believe, from experience with clients, that they want two things with their cash meant for liquidity – FDIC insurance and higher yielding money funds, so we deliver both.
     
  • Fidelity’s default sweep money fund, the Government Money Fund (SPAXX) yields 1.57%. At Schwab, you can get a higher yield with one click, the Schwab Value Advantage (SWVXX) at 1.77% (with waivers). Schwab also offers a Government Money fund which currently yields 1.59%.
    (All yields as of 10/17/2019)

    For current yields, see: www.schwab.com/public/schwab/investing/accounts_products/investment/money_markets_funds/purchased_money_funds
     
  • Fidelity sweep money market funds by definition do not enjoy FDIC insurance; by contrast, Schwab’s bank sweep provides FDIC insurance up to $250k.
     
  • Fidelity does not offer full-featured checking accounts, or other banking services; Schwab’s clients enjoy a full array of cash options for everyday needs and long-term investing.
     
  • Fidelity is suggesting that their clients do not pay for services in other areas, which is untrue. Just one example – for the increasing number of investors who seek advice and portfolio management, Schwab delivers lower costs and superior value compared to Fidelity: Schwab Wealth Advisory™ costs 0.80% versus fees as high as 1.05% to 1.50% for dedicated advice through Fidelity Wealth Services.


CLAIM:

  • Fidelity is the only leading brokerage firm to offer “zero minimums for account openings.”

FACT:

  • Schwab has no account minimums for US retail investors.

Fidelity says it is taking “a different path from the industry” but their path looks a lot like the one we’ve forged over the past 45 years. Along the way, we’ve welcomed questions, provided transparency and set new standards in lowering commissions, fees and minimums – our focus has removed countless barriers on behalf of investors. Our Satisfaction Guarantee is the one path that is truly unique in our industry, and yet none of our competitors dare to follow there.

Investors have different needs, and that’s why we encourage them to ask questions about their money – and their firm – and separate fact from fiction. We are confident investors will like the answers they get from Schwab.

1019-9YZ0

Money fund investors should carefully consider information contained in the money fund prospectus, or, if available, the summary prospectus, including investment objectives, risks, charges, and expenses. You can request a mutual fund prospectus by calling Schwab at 1-800-435-4000. Please read the prospectus carefully before investing.

You could lose money by investing in the Schwab Money Funds. All Schwab Money Funds with the exception of Schwab Variable Share Price Money Fund seek to preserve the value of your investment at $1.00 per share, but cannot guarantee they will do so. Because the share price of Schwab Variable Share Price Money Fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. All Schwab Money Funds with the exception of Schwab Government Money Fund, Schwab Retirement Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab Treasury Obligations Money Fund and Schwab Government Money Market Portfolio may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Schwab Money Funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Schwab Money Funds’ sponsor has no legal obligation to provide financial support to the Funds, and you should not expect that the sponsor will provide financial support to the Funds at any time.

Data presented reflects past performance which is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. For the most recent 7-day yields, see schwab.com. Yields subject to change without notice.

The 7-Day Yield is the average income paid out over the previous seven days assuming interest income is not reinvested and it reflects the effect of all applicable waivers. Absent such waivers, the fund’s yield would have been lower.

Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab Funds, and Schwab, Member SIPC, the distributor for Schwab Funds, are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation.

The standard online $0 commission does not apply to large block transactions requiring special handling, restricted stock transactions, trades placed directly on a foreign exchange, transaction-fee mutual funds, futures, or fixed income investments. Options trades will be subject to the standard $0.65 per-contract fee. Exchange process, ADR, foreign transaction fees for trades placed on the US OTC market, and Stock Borrow fees still apply. See the Charles Schwab Pricing Guide for Individual Investors for full fee and commission schedules.

Schwab Wealth Advisory™ ("SWA") is a non‐discretionary investment advisory program sponsored by Charles Schwab & Co., Inc. ("Schwab"). Schwab Wealth Advisory, Inc. ("SWAI") is a Registered Investment Adviser and provides portfolio management for the SWA program. Schwab and SWAI are affiliates and are subsidiaries of The Charles Schwab Corporation.

If you are not completely satisfied for any reason, at your request Charles Schwab & Co., Inc. (“Schwab”), Charles Schwab Bank, SSB (“Schwab Bank”), or another Schwab affiliate, as applicable, will refund any eligible fee related to your concern. Refund requests must be received within 90 days of the date the fee was charged. Two kinds of “Fees” are eligible for this guarantee: (1) “Program Fees” for the Schwab Wealth Advisory (“SWA”), Schwab Managed Portfolios™ (“SMP”), Schwab Intelligent Portfolios Premium® (“SIP Premium”), and Managed Account Connection® (“Connection”) investment advisory services sponsored by Schwab (together, the “Participating Services”); and (2) commissions and fees listed in the Charles Schwab Pricing Guide for Individual Investors or the Charles Schwab Bank Pricing Guide.

For more information about Program Fees, please see the disclosure brochure for the Participating Service, made available at enrollment or any time at your request. The Connection service includes only accounts managed by Charles Schwab Investment Management, Inc., an affiliate of Schwab. The guarantee does not cover Program Fees for accounts managed by investment advisors who are not affiliated with Schwab or managed by Schwab‐affiliated advisors outside of the SWA, SMP, SIP Premium, and Connection services. Go to schwab.com/satisfaction to learn what’s included and how it works.

The guarantee is only available to current clients. Refunds will only be applied to the account charged and will be credited within approximately four weeks of a valid request. No other charges or expenses, and no market losses will be refunded. Other restrictions may apply. Schwab reserves the right to change or terminate the guarantee at any time.

Execution speed is measured from the time Schwab sends an order to a market center until the time an execution is completed by the receiving market center. This is typically less than one second and excludes pre-trade review and the time that it takes for the order execution to be reported back to Schwab and posted to the order’s status.

Bank Sweep deposits are held at one or more FDIC-insured banks that are affiliated with Charles Schwab & Co., Inc. (“Affiliated Banks”). Funds deposited at Affiliated Banks are insured, in aggregate, up to $250,000 per Affiliated Bank, per depositor, for each account ownership category, by the Federal Deposit Insurance Corporation (FDIC). Securities products and services (including unswept or intra-day cash, net credit or debit balances, and money market funds) offered by Charles Schwab & Co., Inc. (Member SIPC) are not deposits or obligations of the Affiliated Banks, are subject to investment risk, are not FDIC insured, may lose value, and are not Affiliated Bank-guaranteed. Charles Schwab & Co., Inc. and the Affiliated Banks are separate entities and are all affiliates of The Charles Schwab Corporation.

From Investor’s Business Daily, January 28, 2019, ©2019 Investor’s Business Daily, Inc. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. 

Brokerage Products: Not FDIC Insured • No Bank Guarantee • May Lose Value

© 2019 Charles Schwab & Co., Inc, All rights reserved. Member SIPC.

1019-9YZ0

Money fund investors should carefully consider information contained in the money fund prospectus, or, if available, the summary prospectus, including investment objectives, risks, charges, and expenses. You can request a mutual fund prospectus by calling Schwab at 1-800-435-4000. Please read the prospectus carefully before investing.

You could lose money by investing in the Schwab Money Funds. All Schwab Money Funds with the exception of Schwab Variable Share Price Money Fund seek to preserve the value of your investment at $1.00 per share, but cannot guarantee they will do so. Because the share price of Schwab Variable Share Price Money Fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. All Schwab Money Funds with the exception of Schwab Government Money Fund, Schwab Retirement Government Money Fund, Schwab U.S. Treasury Money Fund, Schwab Treasury Obligations Money Fund and Schwab Government Money Market Portfolio may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Schwab Money Funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Schwab Money Funds’ sponsor has no legal obligation to provide financial support to the Funds, and you should not expect that the sponsor will provide financial support to the Funds at any time.

Data presented reflects past performance which is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. For the most recent 7-day yields, see schwab.com. Yields subject to change without notice.

The 7-Day Yield is the average income paid out over the previous seven days assuming interest income is not reinvested and it reflects the effect of all applicable waivers. Absent such waivers, the fund’s yield would have been lower.

Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab Funds, and Schwab, Member SIPC, the distributor for Schwab Funds, are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation.

The standard online $0 commission does not apply to large block transactions requiring special handling, restricted stock transactions, trades placed directly on a foreign exchange, transaction-fee mutual funds, futures, or fixed income investments. Options trades will be subject to the standard $0.65 per-contract fee. Exchange process, ADR, foreign transaction fees for trades placed on the US OTC market, and Stock Borrow fees still apply. See the Charles Schwab Pricing Guide for Individual Investors for full fee and commission schedules.

Schwab Wealth Advisory™ ("SWA") is a non‐discretionary investment advisory program sponsored by Charles Schwab & Co., Inc. ("Schwab"). Schwab Wealth Advisory, Inc. ("SWAI") is a Registered Investment Adviser and provides portfolio management for the SWA program. Schwab and SWAI are affiliates and are subsidiaries of The Charles Schwab Corporation.

If you are not completely satisfied for any reason, at your request Charles Schwab & Co., Inc. (“Schwab”), Charles Schwab Bank, SSB (“Schwab Bank”), or another Schwab affiliate, as applicable, will refund any eligible fee related to your concern. Refund requests must be received within 90 days of the date the fee was charged. Two kinds of “Fees” are eligible for this guarantee: (1) “Program Fees” for the Schwab Wealth Advisory (“SWA”), Schwab Managed Portfolios™ (“SMP”), Schwab Intelligent Portfolios Premium® (“SIP Premium”), and Managed Account Connection® (“Connection”) investment advisory services sponsored by Schwab (together, the “Participating Services”); and (2) commissions and fees listed in the Charles Schwab Pricing Guide for Individual Investors or the Charles Schwab Bank Pricing Guide.

For more information about Program Fees, please see the disclosure brochure for the Participating Service, made available at enrollment or any time at your request. The Connection service includes only accounts managed by Charles Schwab Investment Management, Inc., an affiliate of Schwab. The guarantee does not cover Program Fees for accounts managed by investment advisors who are not affiliated with Schwab or managed by Schwab‐affiliated advisors outside of the SWA, SMP, SIP Premium, and Connection services. Go to schwab.com/satisfaction to learn what’s included and how it works.

The guarantee is only available to current clients. Refunds will only be applied to the account charged and will be credited within approximately four weeks of a valid request. No other charges or expenses, and no market losses will be refunded. Other restrictions may apply. Schwab reserves the right to change or terminate the guarantee at any time.

Execution speed is measured from the time Schwab sends an order to a market center until the time an execution is completed by the receiving market center. This is typically less than one second and excludes pre-trade review and the time that it takes for the order execution to be reported back to Schwab and posted to the order’s status.

Bank Sweep deposits are held at one or more FDIC-insured banks that are affiliated with Charles Schwab & Co., Inc. (“Affiliated Banks”). Funds deposited at Affiliated Banks are insured, in aggregate, up to $250,000 per Affiliated Bank, per depositor, for each account ownership category, by the Federal Deposit Insurance Corporation (FDIC). Securities products and services (including unswept or intra-day cash, net credit or debit balances, and money market funds) offered by Charles Schwab & Co., Inc. (Member SIPC) are not deposits or obligations of the Affiliated Banks, are subject to investment risk, are not FDIC insured, may lose value, and are not Affiliated Bank-guaranteed. Charles Schwab & Co., Inc. and the Affiliated Banks are separate entities and are all affiliates of The Charles Schwab Corporation.

From Investor’s Business Daily, January 28, 2019, ©2019 Investor’s Business Daily, Inc. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. 

Brokerage Products: Not FDIC Insured • No Bank Guarantee • May Lose Value

© 2019 Charles Schwab & Co., Inc, All rights reserved. Member SIPC.