Vanguard to expand commission-free trading to 1,800 ETFs

Jul 3rd, 2018 | By | Category: ETF and Index News

Vanguard has announced plans to expand commission-free online trading to the vast majority of ETFs available in the US.

Karin Risi, managing director of Vanguard’s retail investor group.

Karin Risi, managing director of Vanguard’s retail investor group.

The move, expected to be completed in August, will see investors enjoy commission-free trading on almost 1,800 ETFs, including ETFs from rival issuers such as BlackRock, Charles Schwab, and SSGA.

Vanguard has provided commission-free trading of its own ETF suite since 2010.

Karin Risi, managing director of Vanguard’s retail investor group, commented, “Vanguard has led the industry in reducing the cost and complexity of investing for all investors for more than four decades. We’ve driven down the costs of funds. We’ve driven down the cost of advice. Now, we’re driving down the cost of investing in ETFs. We believe giving investors access to a broad choice of low-cost, broadly diversified, commission-free investments is good for investors and good for the asset management industry.”

ETFs have grown tremendously over the past ten years, as a broader range of investors have increasingly gravitated to low-cost index strategies. Financial advisors have increasingly deployed ETFs as low-cost, diversified building blocks on behalf of their clients and, more recently, retail investors are beginning to adopt ETFs as their preferred investment over actively managed mutual funds and individual securities.

The new scheme will be by far the largest commission-free ETF trading program available and will place pressure on the likes of Charles Schwab to respond. Charles Schwab currently offers the Schwab ETF OneSource program which provides commission-free trading on over 200 ETFs from 15 issuers.

So which ETFs will be left out of the new offering? Vanguard has noted the offer will not apply to “highly speculative and complex” ETFs which primarily points to those with inverse or leveraged investment strategies. This reflects the SEC’s stance that such products are generally unsuitable for retail investors.

Vanguard also noted that it has made considerable enhancements to its brokerage platform over the past several years and plans to invest additional resources to enhance the online experience and trading capabilities.

“Vanguard wants to be the premier provider for long-term investors who want the flexibility to hold a wide array of low-cost funds and ETFs, coupled with the convenience of interacting with a single firm,” said Risi. “Investors will be able to assemble balanced, diversified portfolios from virtually the full universe of ETFs to meet their financial goals, add additional assets regularly, and periodically rebalance—all without paying a commission.”

While Vanguard made a name for itself in the ETF space by specialising in plain vanilla, core portfolio strategies at highly competitive costs, the firm has made several steps this year to broaden its ETF family.

In February, Vanguard introduced its first actively managed ETFs in the US. Five funds in the suite target single factor exposures – minimum volatility, value, momentum, liquidity, and quality – while the sixth ETF follows a multi-factor approach.

This week, Vanguard also announced plans to introduce two new ESG ETFs, expected to launch in September of this year.

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