Beginning in August, registered investment advisor The Vanguard Group will be eliminating all its trading fees for ETFs, including those offered by its market competitors like iShares, Schwab and State Street Global Advisors.
It’s the first domino to fall in what could be other giants in the financial sector, such as BlackRock and Charles Schwab offering commission-free trading for all ETF products through their respective online platforms. The Vanguard Group’s move could also signal a shift towards the elimination of management fees for ETF products.
Related: Vanguard Eyes Two ESG ETFs
The move by Vanguard Group would give their users access to more than 100 ETF providers–1,800 ETF products in total relative to the 2,000 available in the marketplace. As ETFs continue to gain even more popularity as an investment vehicle, product differentiation will be a driving factor to capture market share and The Vanguard Group’s elimination of fees is a game-changer in the ETF space.
“This is a significant move by Vanguard,” said Todd Rosenbluth, director of ETF and mutual fund research at CFRA. “Other brokerage firms, such as Schwab or TD Ameritrade, provide commission-free trades on a subset of ETFs, with the asset managers supplementing the cost savings.”
Increased Access to ETFs
The timing is auspicious for the growth of ETFs with the recent announcement by The Vanguard Group coupled with the more lax regulations to enter the ETF space with the SEC’s recent announcement of Rule 6c-11–a rule that would “exempt exchange-traded funds (‘ETFs’) from certain provisions of [the Investment Company Act of 1940]and our rules” and “permit certain ETFs to begin operating without the expense and delay of obtaining an exemptive order from the Commission.”
Related: Vanguard to Move Big Bond ETF to Nasdaq from NYSE
With more ETFs entering into the marketplace and possibly more firms following suit with The Vanguard Group’s elimination of fees, the investment environment could see increased inflows of capital into ETF products. Of course, firms will have to offer investors more in terms of differentiating their products in order to be standouts in what could be a flooded ETF landscape.
For more trends in the ETF marketplace, click here.