First of all, this isn't universal: there are sharp swords with a flared ricasso (schilt) and feders without.
"Feder" is very much a modern term, and broadly just means a longsword foil specifically modified for sparring. Characteristic features include:
- flared points
- wide edges
- additional flex
- blade shape that brings the weight closer to the hilt (thinner across)
- schilt / flared ricasso
Longsword "blunts" tend to lack multiple of these features, largely because it is impossible to have thick edges with a blade geometry matching a sharp without dangerously increasing the weight. But a sword with a schilt that lacked the other features would not be a feder either.
Now on to the schilt specifically.... There are basically two things it does.
As others have mentioned it can add a small amount of protection to the hands by preventing the opponents blade from reaching the crossguard, or changing where it strikes it (Which of these it does depends on the shape of the schilt). Personally, I think the benefits of this are over sold when using decent hema gloves. The draw back of this is that, in changing where the swords end up, it also changes the dynamics of certain techniques, most notably grappling.
The second is that it allows you to put weight in the blade without adding it to the parts that will strike the opponent, allowing for handling and weight similar to a real sword without increasing danger to your training partners. As a result,, it helps create realistic feel without also creating realistic damage. This is to my mind the stronger argument for them, although there are other techniques that can achieve the same goal.