BlackRock is indulging in a bit of “Do as I say, not as I do” with a round of cuts to the fees on some of its ETFs and the introduction of new ETFs with lower fees even as it criticizes other firms for doing the same thing.
The Wall Street Journal on Oct. 15 reported that BlackRock rolled out the new strategy, which includes a revamp of its sales force and the premiere of its first-ever TV commercials to spread the word. The move is seen as a response to Vanguard Group’s ETFs with low fees, as well as the firm’s latest move, announced just this month and reported by AdvisorOne—changing indexes on 22 different mutual funds and ETFs to save its customers money.
Fees have been dropping throughout the industry, as BlackRock and Vanguard are just the latest to take action. In September Charles Schwab cut ETF fees, some as much as 59%, and Fidelity Investments had waived trading commissions in 2010 and 2011 on a group of ETFs.
BlackRock may be joining the trend, but Chairman and CEO Laurence Fink (left) doesn’t have to like it. In fact, after conceding that it’s “fee pressure,” he’s termed such a move “stupidity.” His criticism came Oct. 17, just two days after the firm bowed to the pressure and announced that six ETFs would have their fees cut while four new low-cost ones would be introduced.
According to the WSJ report, Fink admitted that BlackRock has lost some $70 billion in business from a single institutional client to a competing firm with lower fees. But he said the firm would not surrender to pressure on pricing, and was quoted saying, “If you provide the right solutions, fees become less dominant.”