To keep up with competitors, Vanguard Group announced Tuesday
that it has reduced commissions associated with its exchange-traded
funds and stock trades.
Valley Forge, Pa.-based Vanguard said it would offer
commission-free trading to its brokerage clients that use its
lineups of 46 proprietary ETFs. The company will also offer its
customers $7 trades on stocks and $2 trades on non-proprietary
"For 35 years, Vanguard has been committed to reducing the cost
of investing in mutual funds for our clients," Bill McNabb, the
company's chief executive officer, said in a press release.
"Now, Vanguard is expanding our low-cost commitment to ETFs."
Vanguard's move comes just a few months after Charles Schwab
[SCHW] reduced commissions on online equity and non-Schwab ETF
trades to $8.95. Schwab offered commission-free trading when it
launched its proprietary ETF family last year.
However, John Woerth, a spokesman at Vanguard, said that the
company's decision to lower costs was not an effort to chase the
competition. He said that growth within its ETF fund families and
the ability to self-clear enabled the company to cut
In its press release, Vanguard said that unlike some
competitors, the same commissions apply to both online transactions
and those executed with a Vanguard brokerage representative. "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," McNabb said in the statement. "Rather, it
enables investors to construct a balanced, long-term portfolio of
low-cost Vanguard ETFs and add to the portfolio regularly."
Vanguard is one of the three largest ETF managers. BlackRock
[BLK], which bought the iShares family of funds from Barclays
[BCS], managed 47.8% of assets. State Street Corp. [STT] had 23.3%
share, while Vanguard came in third at 12.9%.
Vanguard's ETF assets have more than doubled to over $100
billion in the past year. The company offers ETFs that track an
array of domestic and international benchmarks, including fixed
But competition is increasing. In March, JPMorgan Chase &
Co. [JPM] announced in a pair of filings with the Securities and
Exchange Commission that it plans to introduce a pair of
exchange-traded funds. The New York-based company wants to
introduce both actively managed and index-based ETFs.
Vanguard said it thinks that education becomes more critical as
competition increases. As a result, it has developed educational
content and interactive tools on its website. Later this month, the
company plans to launch a "Compare ETFs" tool to conduct a
side-by-side review of the expense ratios, portfolio
characteristics, and other data of nearly 100 ETFs.
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