Schwab's Financial and Other Relationships with Mutual Funds

No Transaction Fee Funds
Transaction Fee Funds
Load Funds
Schwab-Affiliated Funds
Share Classes, Investment Minimums, Fees and Expenses
Fund Marketing and Sponsorships
Fund Education
Additional Information

No Transaction Fee Funds

Schwab receives various fees for the recordkeeping, shareholder services and other administrative services Schwab provides to Schwab's Mutual Fund OneSource platform (‘oneSource") and other No Transaction Fee (NTF) funds, including asset-based fees and one-time set up fees.

A. Asset-Based Fees.  When you purchase and redeem shares of OneSource and NTF funds, you generally don't pay a transaction fee ( see the Charles Schwab Pricing Guide for more information on fees that may apply). You can purchase and redeem shares of a OneSource or NTF fund without paying a transaction fee because the fund (or its advisor or other service provider) pays Schwab a fee based on a percentage of the fund assets held by shareholders (an "asset-based fee") to cover the costs of providing the Shareholder Services to you and other Schwab customers.  

The amount of the asset-based fee may differ based on when the fund first became available through Schwab's Mutual Fund OneSource service or other factors. The annual fee can range up to 0.45% of the average fund assets held at Schwab. However, most OneSource and NTF funds pay Schwab's standard OneSource/NTF fee of 0.40%. The OneSource/NTF fee may be paid entirely out of fund assets, but often some portion of the fee is paid by the fund's investment advisor, distributor, or other service provider. In cases where the OneSource/NTF fee is paid in full or in part by the fund, the portion paid by the fund is included in the fund's operating expense ratio (OER) which can be found in the fund's prospectus. A fund's operating expenses are paid out of fund assets, and therefore, any portion of the OneSource/NTF fee paid by the fund may be borne indirectly by fund shareholders. The amount of a fund's OER also affects overall fund performance. You should carefully consider fund OERs relative to other important investment considerations when making an investment decision.

In some cases, Schwab applies a minimum monthly fee per OneSource or NTF fund that generally does not exceed $2000 per month. This minimum monthly fee is applied starting with the seventh full month after the fund is made available for purchase at Schwab and only if the asset-based fee calculated for the month is less than the minimum monthly fee.

OneSource and NTF funds may pay a different asset-based fee on shares made available to retirement and other benefit plan ("Plan") participants through Schwab's retirement plan services business. The annual fees paid on Plan shares generally range from 0.10% to 0.50%—but in rare cases can range up to 1.10%—of the average fund assets held at Schwab.  Schwab typically passes through all or a portion of those fees to Plan trustees and Plan recordkeepers, some of which may be affiliated with Schwab, for the shareholder and administrative services they provide to Plan participants. These shareholder and administrative services vary depending on the type of retirement or other benefit plan, but typically include processing of plan purchases, redemptions and exchanges, processing of dividends and distributions, delivery of plan account statements, delivery of fund documents, administration of plan benefits and maintenance of plan records.

B. One-Time Fund Set-Up Fees.  In addition to the asset-based OneSource/NTF fee, OneSource and NTF funds may pay one-time "establishment fees" for the addition of the funds to Schwab's Mutual Fund Marketplace. These establishment fees help cover the start-up costs associated with setting up the mutual fund on Schwab's brokerage systems. The establishment fees vary, and may in some cases be waived, but generally do not exceed $10,000 for the first fund and $1,000 per additional fund within a fund family.

C. An Example.
Assume that on January 1 you invest $10,000 in a fund and hold your position through December 31. Based on Schwab's standard OneSource/NTF fee rate of 0.40% per year, and assuming no change in the fund's value over the course of the year, the Fund would pay Schwab $40 for the shareholder services Schwab provides to you.  

Remember, this $40 does not come out of your $10,000 investment, but is instead paid out of fund expenses (or by a fund affiliate or fund service provider).  Keep in mind, if the fee is paid in full or in part by the fund, the portion paid by the fund is included in the fund's OER and borne indirectly by fund shareholders. The OER of any fund generally reduces the fund's performance .