Is it time to join the Schwab platform?

by Dan Sondhelm

One of the key questions asked by new and smaller funds is “should I get on the Schwab platform?

For this issue, we continued our conversation with Schwab Investment Management Services Doug Hanson. He is in charge of the Schwab’s Mutual Fund MarketPlace™ and Mutual Fund OneSource® platforms. In this Q&A, Doug talks a bit about how getting on the Schwab platform works.

Click here to read part 1 on gaining marketshare on Schwab.


What kind of firms are on the Schwab platforms?
Any “40 Act” mutual fund can request to be a part of the Schwab’s platforms. Following our due diligence for fit and appropriateness, the firm can join thousands of funds and obtain access to millions of investors and thousands of advisors. There are no specific investment criteria.

What choices does a fund firm have when joining Schwab?
Schwab offers both a transaction fee and a no transaction fee (NTF) platform. The Schwab OneSource brand is the no transaction fee alternative. It’s important to note that our Select List® and managed portfolios feature products from the OneSource platform.

Schwab’s experience shows that investors prefer the simplicity and ease of doing business through OneSource. It is a simple platform that makes moving between funds easy. As a result, flows from individual investors have gravitated to OneSource products over the years. Schwab’s own financial consultants also use the Select List with their prospects and existing clients. The conclusion is not quite so simple in the advisor space. Advisors hire fund managers across both the transaction and non-transaction fee platforms. Their reasons may be as unique as they are and may include bias toward categories and fund types, managers or end-customer preferences.
It’s safe to say that the vast majority of flows come through Select List funds, particularly from individual investors.

What are the costs?
There is a one time fee of $10,000 to join either the OneSource or transaction fee platform, which covers your first fund. Each additional fund is $1,000 for OneSource or $2,000 for the transaction fee platform. This fee covers Schwab’s due diligence process. Ongoing participation fees are 40 basis points annually on assets held at Schwab for OneSource. We are just evolving the fees for the transaction fee business and see them settling in at 10 or 15 basis points annually. Previously those fees were based on customer positions.