It’s never been cheaper to buy mutual funds and ETFs, but the already-low fees that issuers charge will only fall further in coming years.
That’s according to analysts Morgan Stanley (NYSE:MS), who see another 10-15% drop in fees over the next few years. MarketWatch got a hold of a recent note that Morgan Stanley sent to clients expressing the sentiment:
Fees for mutual funds and exchange-traded funds have been dropping regularly for years, but despite many being offered at what would have seemed rock-bottom prices not too long ago, there may be more cuts ahead. That’s good news for investors, though it could also result in further consolidation in the fund industry as providers and sponsors struggle against the lower revenue that comes with lower fees.
“Intensifying secular changes could reshape the industry and compress fees by 10-15% over the next three to five years, offsetting asset-driven growth and limiting earnings power,” Morgan Stanley wrote in a note to clients on Thursday.
As competition heats up in the fund space, issuers are battling for client assets by offering significant fee cuts. Schwab, for example, has several of the lowest-fee ETFs in the world, recently substantially lowering the existing fees for a handful of funds. The Schwab US Broad Market (NYSE:SCHB) has an expense ratio of only 0.03%.
That fund closed at $59.00 on Friday, up $0.24 (+0.41%). Year-to-date, SCHB has gained 8.90%, versus a 9.23% rise in the benchmark S&P 500 index during the same period.
SCHB currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #10 of 109 ETFs in the Large Cap Blend ETFs category.