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Rating:Morgan Stanley Cuts Off Vanguard, Except ... Not Rated 5.0 Email Routing List Email & Route  Print Print
Thursday, May 4, 2017

Morgan Stanley Cuts Off Vanguard, Except ...

News summary by MFWire's editors

A giant wirehouse is about to cut off access, at least partially, to the largest mutual fund company in the world.

Effective on Monday, May 8, Morgan Stanley advisors will no longer be allowed to sell Vanguard [profile] open-end mutual funds to clients who don't already own shares in the funds, Mason Braswell of AdvisorHub reports. Yet investors who already hold Vanguard mutual funds will be able to keep adding to their positions through Q1 2018. And Morgan Stanley advisors and customers will continue to be able to invest in Vanguard's ETFs.

Reuters also reported on the news. Morgan Stanley's echoes a move Merrill Lynch made a year ago.

The move comes as Morgan Stanley, like other broker-dealers, is rationalizing its mutual fund shelves by cutting about 25 percent of the funds offered. Underperformance, lack of scale, lack of popularity, and potential conflicts of interest are key factors driving certain funds to be rationalized off of platforms like Morgan Stanley. Yet in this case at least one other factor probably plays in, AdvisorHub notes: Vanguard's "longstanding refusal to pay for brokerage firm 'shelf space' as part of its crusade to keep expenses for investors low."

"Vanguard does not pay for distribution," a Vanguard spokeswoman tells the publication. "We do not pay platforms or advisors to sell our mutual funds or ETFs." 

Edited by: Neil Anderson, Managing Editor

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