Charles Schwab has reduced the fee on its Schwab International Dividend Equity ETF (SCHY), marking another move in the ongoing fee competition among asset managers seeking to attract investor capital.
SCHY’s expense ratio has dropped to 8 basis points from 14 basis points, reinforcing the trend of cost reductions in the ETF space. A basis point equals one one-hundredth of a percentage point.
The ETF invests in high-dividend-paying international stocks with a track record of at least 10 consecutive years of dividend payments. As of February 26, SCHY’s 30-day yield stands at 4.24%. Top holdings include Swiss biotech firm Roche Holding, French construction giant Vinci S.A., and London-based consumer goods company Unilever.
Launched in 2021, SCHY has grown to $822 million in net assets as of February 27. Year-to-date, the fund has gained 5.5%, according to Morningstar.
“This change underscores Schwab Asset Management’s commitment to reducing costs and delivering savings to investors,” says Nicohl Bogan, director of product strategy and development at Schwab Asset Management.
Schwab’s fee cut aligns with an industry-wide push toward lower-cost investment solutions. Asset managers continue to slash fees in response to investor demand for cost efficiency.
Vanguard’s recent move highlights this trend. In early February, the asset management giant reduced fees across dozens of mutual funds and ETFs. While fee cuts may seem minor at just a few basis points, the long-term cost savings can be substantial. A 2023 Morningstar study found that the asset-weighted average expense ratio declined to 0.36% from 0.87% in 2004.
Beyond cost reductions, asset managers are also expanding their ETF offerings, both passive and active. Schwab recently introduced its second actively managed fixed-income ETF, the Schwab Core Bond ETF (SCCR). The fund seeks income generation through corporate bonds, taxable municipal bonds, U.S. Treasuries, and other government-related debt securities. Vanguard has also been expanding its lineup of actively managed ETFs, particularly in fixed income.
Investors continue to favor ETFs over mutual funds due to their transparency and tax efficiency. As fee compression and ETF adoption accelerate, RIAs and wealth advisors should evaluate cost-effective investment solutions that align with client objectives.
