BlackRock has cut prices across its iShares Core exchange traded fund suite ahead of the new Department of Labor fiduciary rule changes, positioning its broad investment options as quality and cost-efficient alternatives in the fund space. The fee reductions beat or match the low expense ratios first established by Vanguard ETFs.
Long-term investors will now enjoy the tax efficiency, liquidity and quality of these core ETF options at a greater value. Following the changes, the iShares Core S&P 500 ETF is now among the least expensive ETF options available, outpricing options from many of its competitors, namely Vanguard, which has recently been gaining traction as a low-cost provider. However, the reigning cheapest ETF on the market is still the Schwab U.S. Broad Market ETF (NYSEArca: SCHB), which has a 0.03% expense ratio.
“As advisors and investors further consider index funds we think the Blackrock ETF and mutual fund changes will spur further adoption and likely contribute to expense cuts at other providers,” Todd Rosenbluth, Director of ETF & Mutual Fund Research, said in a note.
The lower fees have attracted a lot of attention in the investment community as more investors and advisors look to cheap, index-based options in response to costly, underperforming active funds. The SPIVA mid 2016 scorecard revealed only 19% of active large cap core funds outperformed the S&P 500 for the year ended June 2016, and only 12% and 8% of active funds outperformed in the three- and five-year periods, respectively.
A recent ETF Trends and BNY Mellon research study on the impact of the new DOL rules on the ETF industry also found that the majority of surveyed financial advisors expect to raise ETF allocations in response to the new DOL rules, citing low fees as a main factor.