Vanguard, one of the most popular investment management companies in the country, recently announced plans to substantially reduce the cost of investing for clients. The firm announced on July 2, 2018, that it will provide commission-free online transactions for the large majority of its exchange-traded fund (ETF) listings. This marks an important shift for the company, which has provided commission-free transactions on its own Vanguard ETFs since 2010.
The change in fee structure allows customers to access nearly 1,800 ETFs for investment without commission, as opposed to only 77 low-cost ETFs previously available through Vanguard directly. Among the ETFs affected by the shift in policy are those by BlackRock, Inc. (BLK), State Street Global Advisors (SSgA) and The Charles Schwab Corporation (SCHW).
The Next Step in Cost Reduction
According to a statement by the managing director of Vanguard's Retail Investor Group, Karin Risi, the company "has led the industry in reducing the cost and complexity of investing for all investors for more than four decades. [Vanguard has] driven down the costs of funds," as well as "the cost of advice." Now, the company is "driving down the cost of investing in ETFs." The statement, quoted in a press release on Vanguard's website, continues by suggesting that Vanguard believes that "giving investors access to a broad choice of low-cost, broadly diversified, commission-free investments is good for investors and good for the asset management industry." (See also: How Vanguard Index Funds Work.)
Commission-Free Online Transactions in August
The company expects that the commission-free online transactions across much of its ETF space will be available by August. The offering will include "the majority of ETFs traded on the major exchanges," although it will exclude both highly speculative and complex ETFs for the time being.
Risi notes that Vanguard has previously worked to enhance its brokerage platform during the past several years and indicates that the company will also dedicate further resources to continued development of the online experience for customers. "Vanguard wants to be the premier provider for long-term investors who want the flexibility to hold a wide array of low-cost funds and ETFs, coupled with the convenience of interacting with a single firm," she says. "Investors will be able to assemble balanced, diversified portfolios from virtually the full universe of ETFs to meet their financial goals, add additional assets regularly, and periodically rebalance – all without paying a commission."
The ETF space has ballooned in the past decade as investors have increasingly focused on low-cost index strategies. Vanguard ETFs stand at roughly $937 billion in global assets under management (AUM) as of this writing; the company broadened its ETF offerings in February of this year, introducing actively managed funds in this area for the first time. Vanguard will launch two new environmental, social and governance (ESG) ETFs in September of this year. (For additional reading, check out: Where to Find Over 700 ETFs Without Commissions.)