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Vanguard Launches Largest Commission-Free ETF Platform

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The competition among low-cost asset managers reached a new level on Tuesday when Vanguard launched a major expansion in its no-transaction-fee ETF platform.

Nearly 1,800 ETFs, accounting for almost 90% of ETFs trading on major exchanges — including ETFs from BlackRock, Schwab and State Street Global Advisors — can now be traded on the Vanguard platform for no fee so long as the transactions are conducted online. Inverse and leveraged ETFs are excluded “due to their highly speculative nature,” according to the press release from Vanguard, which had initially announced the expanded platform in July.

(Related: Vanguard to Offer 1,800 Commission-Free ETFs on its Platform)

The number of no-fee ETFs on the Vanguard platform is many times greater than the number on Schwab, Fidelity and TD Ameritrade platforms, which range between roughly 250 and 300-plus commission-free ETFs each. Schwab and Ameritrade offer no-fee ETFs from a range of firms; Fidelity offers no-fee ETFs from BlackRock’s iShares and its own Fidelity ETF lineup.

Vanguard’s move “will enable investors that work with a mix of providers to make tactical trades and rebalance asset allocation portfolios with reduced costs,” says Todd Rosenbluth, director of ETF & mutual fund research at the research firm CFRA.

(Related: Fidelity Unleashes No-Fee Index Funds)

He says the move “will help Vanguard gather retail investor assets as they offer the same ETFs commission-free that other platforms have available plus many others, including Vanguard’s own that are not as widely listed with no trading costs.” But Rosenbluth doesn’t expect it will necessarily cause investors and advisors focused on long-term goals to move their ETF investments to the Vanguard platform because the firm doesn’t have a clearing component. Fidelity, Schwab and TD Ameritrade do.

Karin Risi, managing director of Vanguard’s Retail Investor Group, said in a statement that the newly expanded Vanguard commission-free ETF platform will serve the “increasing number of investors turning to ETFs as their preferred investment vehicle … [providing] additional access and flexibility.”

(Related: Vanguard Faces Pushback From Other Firms)

She noted that “ownership of Vanguard ETFs has quadrupled in the last five years and ETFs are being held by a broad range of investors — from millennials to retirees.”

Whether other ETF platform providers choose to respond to Vanguard’s expansion of its no-transaction-fee ETF platform with an expansion of their own, as they have often responded to fee cuts by competing fund providers, remains to be seen. It should be noted, however, that Schwab President and CEO Walt Bettinger said that Schwab, which “originated the idea of ETF trading without transaction fees” is “likely to expand ETF OneSource to a measurable extent.”

In July when Vanguard’s move was first announced, TD Ameritrade said it was “well positioned to compete and win in a low-cost environment” and “value goes beyond price. The richness of the overall client experience matters.”

TD Ameritrade had expanded its commission-free ETF platform earlier this year and Fidelity increased the number of iShares ETFs that its clients can trade commission-free as part of its sweeping announcement a few weeks ago, noted Ben Johnston, director of global ETF research at Morningstar. On August 1 Fidelity introduced two no-fee index mutual funds as well as lower fees and no minimums on multiple funds.


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