Charles Schwab recently announced that it has entered into a strategic relationship with T. Rowe Price that will allow registered investment advisor firms on Schwab’s platform to purchase T. Rowe Price’s institutional share class funds without transaction fees.
About 120 institutional no-transaction-fee (NTF) funds from T. Rowe Price, spanning about 65 Morningstar categories, will be made available to Schwab’s RIA firm clients beginning in early February, Schwab said.
T. Rowe Price’s institutional share class has the lowest expense ratio of all of T. Rowe Price’s share classes, according to Heather Fischer, head of third-party platform at Charles Schwab. The share class will only be available without a transaction fee on the Schwab platform, according to Fischer.
The relationship with T. Rowe Price, a provider of actively managed mutual funds, will complement Schwab’s passively managed funds, Schwab said.
Earlier this month, Schwab conducted a study of nine advisors on its platform where it asked them how important, if at all, it was to not have transaction fees when considering mutual funds for clients’ portfolios, it said. The advisors could respond with “very important,” “somewhat important” or “not important at all,” and all of the advisors chose either “very” or “somewhat” important, Schwab said.
“RIAs are increasingly looking for more value when constructing portfolios to meet their clients’ needs and they want them at a lower cost. Recent research with a small group of RIAs found NTF funds are considered “somewhat” or “very important” and when asked to rank different buying factors for mutual funds, having NTF choices came in third behind price and performance,” Fischer said.
Fidelity Investments, meanwhile, launched its institutional no-transaction-fee platform in February 2017, and the platform has grown to provide access to more than 3,000 institutional mutual funds from more than 225 fund families, according to a company spokesperson. It is offered to all segments of Fidelity’s clearing and custody clients, the spokesperson said.
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