Schwab Institutional, a division of Charles Schwab, announced the changes in fees in an email this morning to the 5,600 investment advisers that do business with the division.
The move comes as online trading services are nervously watching brick-and-mortar brokerages such as Merrill Lynch and PaineWebber come online, attracting investors with sizable assets. As commission rates get increasingly discounted to compete in the online market, Internet trading houses are now vying to build their assets base by offering a broader range of financial services--including estate planning, mutual funds, and retirement. These services allow firms to earn fees by managing the funds.
Schwab said that it has about 750,000 account holders who work with independent investment advisers, representing about $180 billion of the nearly $590 billion in customer assets at Schwab. Investment adviser assets at Schwab grew at an annual compounded rate of 45 percent between 1993 and 1998, from $23 billion to $146 billion.
"From the onset, we have encouraged investors who prefer to delegate their financial decisions to seek the assistance of an independent investment adviser," said Schwab vice chairman John Philip Coghlan in a statement. "We are empowering investment advisers to provide their clients with an enriched, full-service offering," he said.
The new commission rate of $29.95 per trade takes effect November 1. Currently, clients of advisers pay Schwab Institutional's standard commission rates, which starts at a minimum of $39 unless a discounted rate has been negotiated.
Schwab will also introduce a program for clients in October called Signature Service Alliance, which will offer direct, round-the-clock access to third-party research, information, and news. The service is based on the program already available to independent investors with at least $100,000 in their accounts.