Fee war rages on as Schwab slashes commissions to match Fidelity

Charles Schwab cuts its online retail trade commission to $4.95 from $6.95, matching a cut Fidelity made about 10 hours earlier.

Feb 28, 2017 @ 5:36 pm

By Bloomberg News

It didn't take long for Charles Schwab to answer Fidelity.

Less than 12 hours after Fidelity announced a raft of fee cuts for retail investors at midnight Monday, Charles Schwab Corp. fired back. It lowered its standard online retail trade commission from $6.95 to $4.95, matching Fidelity. Schwab also matched Fidelity's cut in fees on options contracts to 65 cents per contract for individual investors.

Fidelity's cut to online commissions for trading in U.S. stock and exchange-traded funds was a nearly 40% drop, to $4.95 from $7.95 a trade. The nation's largest online retail brokerage firm, with 17.9 million accounts and $1.7 trillion in client assets as of Dec. 31, had lowered its options fee from 75 cents a contract, and lowered margin rates for investors.

On Monday, Ram Subramaniam, president of Fidelity's retail brokerage business, noted that the new commission pricing was 50% lower than standard commission trades at E*Trade Securities and Ameritrade Holding Corp. For about 10 hours, it was 28% lower than at Charles Schwab Corp.

"For us, this is a real commitment to being the undisputed value leader," he said.

Tuesday, Schwab Chief Executive Officer Walt Bettinger said in a press release that, "We never want commission costs to be a barrier for investors deciding which firm can best serve their needs. In addition to low commissions, our industry-leading low-cost S&P index mutual fund is nearly five times less than Vanguard and three times less than Fidelity."

So take that.

Investors who trade on margin, with money borrowed from the broker, got some decent rate cuts on their balances from Fidelity's cuts. The new rates span five tiers of assets, instead of six, and start at 8.325% for a balance of up to $24,999. Under the eliminated tier, you were charged 8.825% for balances up to $9,999. The rate on balances from $50,000 to $99,999 fell, from 7.235% to 6.875 %, and on balances from $100,000 to $499,999, from 6.825% to 6.575%.

Schwab's margin rates remain higher than those of Fidelity. They are 8.5% for margin debit balances up to $24,999, 8% on balances from $25,000 to $49,999, 7% on balances from $50,000 to $99,999 and 6.875% on balances ranging from $100,000 to $249,999.

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