Sep 292012
 

Charles Schwab has extended its international investing services, following Fidelity’s decision to do the same earlier this year. The new Schwab Global Account offers online access to 12 non-US markets: Australia, Belgium, Canada, Finland, France, Germany, Hong Kong, Italy, Japan, Netherlands, Norway and the UK.

Schwab is initially is offering zero commission online trades until the end of 2013 – thereafter, international commissions will be in the range of US$15-35 online and US$50-75 by telephone (at current exchange rates). Currency conversion fees will be up to 1% and there is also a 0.1-0.25% fee from the local brokers that Schwab uses to execute trades abroad (something that isn’t clearly displayed on the Schwab website, but can be found in the latest fees guide [PDF]).

The Global Account seems to be distinct from the existing international trading service available through the Schwab One Account, which offered 20-30 countries for telephone trading, albeit at very high costs. While the Global Account mentions access to 30 countries in addition to the 12 online markets, this appears to mean the ability to trade ADRs and OTC stocks from other countries in US dollars, which is not at all the same thing as having direct access to a foreign market (selection will be more limited, liquidity will usually be poorer, spreads may be wider and prices may be stale).

Not cheap, not global

So how does the new service stack up? On first glance, it doesn’t seem especially compelling. On the positive side, there are no minimum balance or account fees, although clients will need an existing Schwab One account with a US$1,000 minimum deposit. However, unlike the Schwab One service, only US citizens and residents are currently eligible.

Relative to US peers, the commissions are on a par with Fidelity, but the range of countries available is smaller. In places, the choice seems a little odd – it’s hard to understand why Finland and Norway are available, but not Spain and Sweden.

The currency commissions – the big hidden cost of international investing – are the same as for Fidelity and remain much too high. With virtually no currency mark-up and lower minimum trading fees, Interactive Brokers is far cheaper for almost all international investors, albeit requiring a US$10,000 initial deposit which may put off investors looking at international markets for the first time.

Overall, the impression is that Schwab has realised investors want more international options, but is reacting to this rather than innovating. The fact that commissions on the old Schwab One international service are going up from an already steep 0.5% to 0.75% at the same time reinforces this. Given Schwab’s enormous client base, the new platform will still probably generate plenty of business, but US investors looking for the best international dealing account can do better elsewhere.

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