Fee Schedule is a table used to define the formulas used to calculate sales commissions. The table is quite general and therefore can be confusing. The table will be explained in detail, but first for the good news.
If your portfolio holds only stocks and ETFs it is likely that your sales fees are a fixed amount (in the range of $7 to $10) regardless of the number of shares traded. There really isn't a complicated formula. This usually holds true for mutual funds, although sometimes an early redemption fee applies. One added twist is that some custodians offer free trades for selected ETFs or mutual funds.
The example Schwab fee schedule will be used to illustrate how it all works. The particulars are different with other custodians, but the ideas are identical.
Schwab charges $9 to trade a stock or ETF as indicated in the Per Trade column. The rest of the entries on the stock and ETF rows are blank (i.e., zero). It's really (almost) that simple. (Actually, Schwab charges $8.95 but its not sensible to deal with those few pennies. Other custodians do something similar.)
Here is an added twist. Schwab offers free trades for some ETFs, which are designated as being of type ETF-s. The corresponding row is all blanks, hence zeros. You would need to use this feature if your portfolio has a mix of ETFs with different custodians.
Mutual funds (in this example) have added complexity. The fee to buy the type "Mutual Fund" is $76 but there is no charge to sell it. A disclosure triangle is the hint that the buy and sell fees are different. The Divide Buy/Sell button provides the way to designate that an asset type has different buy and sell fees. The button changes to Unite Buy/Sell which will make buy and sell fees the same.
Now look at the type "Mutual Fund-s" which is used here to indicate a fund with preferential Schwab fees. Here there is no fee to buy the fund but there is a $50 fee if it is sold within 90 days of purchase. This is an early redemption fee.
You really have to read the fine print to discover all of these details and its prudent to do so if these asset types apply to your portfolio. The general pattern that emerges is that custodians charge fees that guide you towards their proprietary or otherwise anointed products. Somehow there is a financial incentive for them to do so. Beware!
The final two asset types, bond and CD, have a similar fee structure. The fee is $1 Per Share (i.e., per bond or CD) or at least $10 but not more than $250.
None of the asset types in this example charge a Per Dollar fee. Suppose a fee of $0.05 Per Dollar were charged. This would amount to a 5 percent fee which might be encountered is some mutual funds that charge a sales load.
Enter a name in the custodian drop down list to define a new custodian. The table will be populated with default asset types. Add or remove types as needed. Then enter the fee factors.
Tips & Tricks
Fee schedule entries (Per Trade, Per Share, Per Dollar, etc.) are factors in an equation used to calculate fees. It can be reassuring see the calculation in action if you have to edit the factors, especially when several are involved. These are the basic steps to confirm that the fee calculation works as expected:
- Edit the fee schedule factors
- Select an account in the asset table (portfolio window) with the same custodian as in the fee schedule
- Select a ticker (row in the asset table) with the asset class of interest
- Manually enter a trade value (either shares or dollars)
- Confirm that the calculated fee matches your expectation