A Core principle of the Park + Elm’s Investment Strategy is investing efficiently, and adding value by analyzing and reducing portfolio expenses. We focus on partnering with firms that value those same principles, in order to deliver a cost efficient, research based portfolio for our clients.
It’s been a great 2017, and we are thankful to be partners with two respected organizations that announced fee reductions in January. As a fiduciary, we continuously analyze the cost of building a portfolio, and work with these partners to add value through reducing expenses. Charles Schwab and Dimensional Fund Advisors have both announced cost cutting adjustments for 2017.
Charles Schwab, Inc.
Charles Schwab, the brokerage firm that custodies our firm’s assets, has significantly cut expenses on several of its open-ended index funds, announcing a reduction to the same level as their equivalent ETF’s. We currently use both Schwab open-ended index funds, as well as the equivalent ETF’s, so this directly affects the value of our portfolios.
Additionally and most importantly, the lowest expense ratio would apply to all investors, whether they invested $1 or $1 million. In normal industry practice, institutions with $1 million or more to spend get significantly lower expense ratios than individuals with $500 to invest. Schwab’s lower expenses will start March 1.
Schwab will also reduce standard online equity and ETF trade commissions from $8.95 to $6.95, which, Schwab says, is lower than those charged by Fidelity, TD Ameritrade, E*Trade and Vanguard. The lower commission rates start Friday, Feb. 3.
Dimensional Fund Advisors
Dimensional Funds also announced a reduction in expense caps and investment management fees for 2017 relating to 10 of their mutual funds. Dimensional Funds are the building blocks of our portfolios, and have been a preferred partner of Park + Elm for 16 years. Dimensional’s foundation is based upon investing practically and EFFICIENTLY, and they continuously evaluate investment management fees and overall expenses. Dimensional Funds have had a long history of low-expenses and turnover in their funds, which is a core reason for our long-term partnership. As of January 1, 2017, expense cap reductions were already effective, and management fee reductions will be effective February 28, 2017.
This is a BIG deal. This will positively affect our portfolio values, and, long-term, can make an impactful difference in retirement. Investing in equity markets can be risky and volatile, but expenses are one controllable aspect of an investment strategy. These efforts also confirm that Park + Elm, Charles Schwab and DFA are working to give clients the best products, in the most efficient way.