Vanguard, already the exchange traded fund (ETF) industry’s low-price leader, is now waging a pricing war on another front now: its brokerage platform.
Vanguard has slashed costs for its brokerage clients by offering them commission-free transactions on its already dirt-cheap line of ETFs and lowered commissions on trades of non-Vanguard ETFs. From now on:
- There are no trading commissions on Vanguard’s lineup of 46 ETFs
- Commissions to trade all other ETFs and stocks on Vanguard’s platform will range between $2 and $7
Vanguard has always been a competitive player in the ETF space, with competitive pricing, an excellent brokerage platform and solid indexing that has long set it apart. With an average expense ratio of 0.18%, those low prices have been paying off handsomely for the provider in recent months. Since March 2009, Vanguard’s assets under management have swelled from $43.3 billion to $103.7 billion, making it the third-largest ETF provider in the world. The average ETF expense ratio is 0.52%. [How Low Can ETF Fees Go?]
This move follows quickly on the heels of other price-slashing moves made by other ETF providers and brokerages in recent months. When Charles Schwab unveiled its new ETFs, the brokerage also announced that the funds would trade commission-free on the Schwab platform while all other ETFs trade for $8.95. Fidelity followed up by announcing $7.95 commissions and free trading of 25 iShares ETFs on its platform. [Schwab Hits An Asset Milestone.]
Other brokerages also offer appealing pricing to their customers: TD Ameritrade charges $9.99 a trade; E*Trade charges $12.99 for customers with less than $5,000 in assets under management; Scottrade charges $7 a trade.
Now that ETFs account for 50% of all trading on exchanges, the game is on. Vanguard’s lowered brokerage commissions represent an all-out fight for self-directed ETF investor assets – not just people who use Vanguard ETFs. [The ETF Price Wars.]
This battle is going to do nothing but intensify, and the winner could very well be you.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.