Tags: vanguard | index fund | fidelity | tdameritrade

WSJ: Wall Street Fights Back Against Vanguard

WSJ: Wall Street Fights Back Against Vanguard
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By    |   Monday, 29 January 2018 01:54 PM

Vanguard Group, the fund manager that pioneered passive investing with low-cost index funds, is facing pressure from large financial firms over its fee structure.

Fidelity Investments, TD Ameritrade and Morgan Stanley are among the financial services companies that are making changes to fees or product lineups to make Vanguard’s funds more expensive forsome customers. Some firms have even made investing in Vanguard mutual funds impossible, The Wall Street Journal reported.

Vanguard oversees about $5 trillion in investor money, up from $1.4 trillion 10 years ago, as its lower-cost index-tracking funds pulled in record levels of cash. Wall Street’s wealth managers and brokerage firms helped the growth by selling Vanguard’s products to customers.

But many of those firms are trying to compete more directly with Vanguard by cutting fees.

Fidelity, the largest 401(k) plan administrator in the country with $1.4 trillion in assets, now charges some new corporate customers that hire the firm to run their 401(k) plans a fee of 0.05% on assets invested in Vanguard funds.

“A small number of fund families have not compensated Fidelity for certain services, and this pricing change is designed to address that disparity with the intention of providing fairness across all of our business relationships,” a Fidelity spokeswoman told the WSJ. “This is about leveling the playing field.”

Fidelity’s move is considered unconventional because it appears to only affect Vanguard and because of the scale of the fee. The 0.05% charge on assets in Vanguard funds amounts to more than 40% of the average expense ratio across Vanguard’s mutual funds.

TD Ameritrade last year revamped its commission-free ETF trading lineup, dropping all 32 Vanguard products it had previously offered. Morgan Stanley last year decided to ban its financial advisers from selling clients new positions in Vanguard mutual funds. Merrill Lynch has long had such a policy for its advisers.

“While some moves have made rival funds relatively less expensive, they have so far done little to halt the tidal wave of new cash flowing into Vanguard’s products and in some cases risk driving investors loyal to Vanguard to the firm’s own retirement administration and brokerage businesses,” the WSJ reported.

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Vanguard Group, the fund manager that pioneered passive investing with low-cost index funds, is facing pressure from large financial firms over its fee structure.
vanguard, index fund, fidelity, tdameritrade
356
2018-54-29
Monday, 29 January 2018 01:54 PM
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