CEO Bill McNabb
is going head-to-head with Schwab and Fidelity on commission-free ETFs. McNabb is dangling commission-free transactions for Vanguard's proprietary ETF lineup.
The move comes six months after Schwab announced it was making proprietary ETFs available on Schwab.com free of commission, and three months after Fidelity announced a similar move involving its own ETF and 25 iShares ETFs.
Vanguard has 46 ETFs with a total of about $100 billion in AUM.
"This has been in the works for quite some time," Vanguard spokeswoman Rebecca Katz told The MFWire
. "This is no different from what we've done over the past 35 years, during which we've pushed mutual fund expense ratios lower. This extends our low-cost initiatives to ETFs."
Sought for comment, Schwab spokesman David Weiskopf
wrote in in an e-mail: "As they say, imitation is the greatest form of flattery and we welcome Vanguard (and Fidelity before them) following our lead in the ETF space. We will continue to innovate and lead the field."
According to Vanguard's Katz, the Valley Forge, Pennsylvania-based firm timed the move to its 35th anniversary
over the weekend.
"This is the broadest lineup of commission-free ETFs," Katz added.
Also on Tuesday, Vanguard said it is lowering costs for trading stocks and non-Vanguard ETFs. Most Vanguard brokerage clients will pay $7 or $2 to trade stocks and non-Vanguard ETFs.
Company Press Release
VALLEY FORGE, PA, May 4, 2010—Vanguard, long recognized as a leading provider of low-cost index and actively managed funds, today announced substantial reductions in the cost of investing in ETFs and stocks*. Vanguard is lowering the costs of investing with:
· Commission-free ETF transactions. Vanguard brokerage clients may make commission-free transactions in Vanguard’s entire line-up of 46 low-cost ETFs, which is the largest suite of ETFs available without commissions.
· Ultra-low equity commissions. Most Vanguard brokerage clients will pay $7 or $2 to trade stocks and non-Vanguard ETFs®.
"For 35 years, Vanguard has been committed to reducing the cost of investing in mutual funds for our clients. Now, Vanguard is expanding our low-cost commitment to ETFs," said Vanguard CEO Bill McNabb. "Importantly, Vanguard offers a greater choice of ETFs with expense ratios that are among the lowest in the industry."
Unlike competitors' commission schedules, the same commissions apply to both transactions conducted on Vanguard.com and those executed with the assistance of a Vanguard brokerage representative.
Vanguard: An ETF Leader
Vanguard offers 46 ETFs that seek to track an array of domestic and international stock benchmarks, as well as broad and discrete segments of the domestic bond market. The average expense ratio of Vanguard ETFs is 0.18%, compared with the industry average of 0.52%(source: Lipper, Inc. as of December 31, 2009).
Vanguard is the industry leader in ETF net cash flow this year, with an estimated $11.7 billion through April 29, 2010, according to Bloomberg data. The firm’s ETF assets have more than doubled over the past year and now total more than $100 billion. Vanguard offers some of the industry’s largest and best selling ETFs, including the $15 billion Vanguard Total Stock Market ETF (VTI), the $24 billion Vanguard Emerging Markets ETF (VWO), and the $7 billion Vanguard Total Bond Market ETF (BND), according to Bloomberg data. Vanguard ETFs also enjoy high awareness and loyalty scores from ETF investors, according to Cogent Research.
Building a Diversified ETF Portfolio
Vanguard brokerage clients are now able to tailor a portfolio of Vanguard ETFs to meet their long-term goals, contribute to it monthly, and rebalance it annually (or whenever they determine)—all without paying a single commission.
To be clear, our commission-free offer is not intended to encourage the active trading of ETFs, which we believe is counterproductive and rarely successful. Rather, it enables investors to construct a balanced, long-term portfolio of low-cost Vanguard ETFs and add to the portfolio regularly," said Mr. McNabb.
Educating Investors on ETFs
While ETFs offer a low-cost means of obtaining broad exposure to the stock and bond markets, these products feature risks and costs not associated with traditional index funds. To help investors better understand ETFs, Vanguard has developed educational content and interactive tools on its website. A "Compare ETFs" tool that enables investors to conduct a side-by-side review of the expense ratios, portfolio characteristics, and other data of nearly 100 exchange-traded products will be available later this month.
Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages more than $1.4 trillion in U.S. mutual fund assets. Vanguard offers more than 160 funds to U.S. investors and more than 50 additional funds in non-U.S. markets.
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