I like the CEO - Going international will help continue to lower prices"As we continue to get scale, as we continue to grow and we get more efficient, we pass a large part of that back to our clients in the form of lower expenses. That’s not going to stop,” Buckley said Thursday on a company webcast. "If other people want to offer index funds, great. But you better be ready to keep lowering price, and we’re going to do it across every product."
Vanguard Puts Rival Firms On Notice: Fee Wars Will Only Heat Up"As we continue to get scale, as we continue to grow and we get more efficient, we pass a large part of that back to our clients in the form of lower expenses. That’s not going to stop,” Buckley said Thursday on a company webcast. "If other people want to offer index funds, great. But you better be ready to keep lowering price, and we’re going to do it across every product."
Expenses are already at zero for some funds - some firms engage in securities lending that offsets some or all of their entire ER.tooluser wrote:When might expenses go to zero as a matter of standard practice in the industry?
What will the average investor give up to get that cost?
https://www.bloomberg.com/news/articles ... since-2013
...The Schwab 1000 Index ETF would be the issuer’s first to use an index created in-house, reducing Schwab’s costs and potentially allowing it to charge as little as zero to two basis points in management fees, said Balchunas. The fund’s expense ratio wasn’t disclosed in the filings...
I think this is quite consistent with Vanguard's philosophy. It gives you products "at-cost." If it costs $5 per month to maintain such accounts, then I think it is reasonable. (I do not know the cost.) Fidelity and Schwab can subsidize it as they have other high fee products.dbltrbl wrote:While it is good, Vanguard charging $5.00 per month for 403b participants is a big step in wrong direction. Most 403b participants do not get a match either. While I have no idea about Schwab's charges , FIDO charges $ 4.00 per year . I think MR. Buckley should reverse that decision. P.S. It does not affect me personally as I retired and will convert all of it to an IRA avoiding the fees but it still irks me coming from Vanguard.
I believe that Schwab (or is it Fidelity??) has a cap on how much they'll charge. Somewhere around $3,000.DippityDoo wrote:I wonder if "every product" includes PAS.
Not to 'jack the thread, but was there ever a definitive answer on whether that was $5 per account, or $5 per fund in the account?dbltrbl wrote:While it is good, Vanguard charging $5.00 per month for 403b participants is a big step in wrong direction. Most 403b participants do not get a match either. While I have no idea about Schwab's charges , FIDO charges $ 4.00 per year . I think MR. Buckley should reverse that decision. P.S. It does not affect me personally as I retired and will convert all of it to an IRA avoiding the fees but it still irks me coming from Vanguard.
+1GolfGal wrote:It seems to me that if it wasn't for Vanguard, these other firms would not be lowering their fees (or offering index funds at all).
Good point. There’s definitely been a “Vanguard effect,” as other fund companies are under pressure to lower their fees in an attempt to compete. But industry-wide average fees are still quite high in comparison (chart below) — by a factor of about 6x!GolfGal wrote:It seems to me that if it wasn't for Vanguard, these other firms would not be lowering their fees (or offering index funds at all).
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.tooluser wrote:When might expenses go to zero as a matter of standard practice in the industry?
What will the average investor give up to get that cost?
The Vanguard ex-US Small Cap fund last year cost negative 1bp and the year before than negative 13bp. This was due to securities lending revenue which is lucrative in this asset class. Yes you take some small amount of risk.Dottie57 wrote:tooluser wrote:When might expenses go to zero as a matter of standard practice in the industry?
What will the average investor give up to get that cost?
I always expect to pay for a service. If not monetary, you are paying in some other way.
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.triceratop wrote:The Vanguard ex-US Small Cap fund last year cost negative 1bp and the year before than negative 13bp. This was due to securities lending revenue which is lucrative in this asset class. Yes you take some small amount of risk.Dottie57 wrote:tooluser wrote:When might expenses go to zero as a matter of standard practice in the industry?
What will the average investor give up to get that cost?
I always expect to pay for a service. If not monetary, you are paying in some other way.
There's no reason expenses have to be larger than some given amount.
I'm not aware of any large Vanguard stock fund which does not engage in securities lending. Vanguard only lends to large institutions which they deem to have lowest risk. I don't think they have ever had a failure of an institution to return the shares. In return, Vanguard (you) is paid a fee as compensation.Dottie57 wrote:triceratop wrote:The Vanguard ex-US Small Cap fund last year cost negative 1bp and the year before than negative 13bp. This was due to securities lending revenue which is lucrative in this asset class. Yes you take some small amount of risk.Dottie57 wrote:tooluser wrote:When might expenses go to zero as a matter of standard practice in the industry?
What will the average investor give up to get that cost?
I always expect to pay for a service. If not monetary, you are paying in some other way.
There's no reason expenses have to be larger than some given amount.
I am not knowledgable about lending securities, but doesn't sound good. So since my securities are being lent out, I am paying in this way. Doesn't this add risk?
Having $4.2 Trillion AUM helps...Avo wrote:...They are already heavily reliant on indexed products. Their rivals makes tons of money on active management...
Vanguard keeps bugging me via ads and letters to sign up for their advisory service. They do not have my best interest at heart. Never think that any of these financial companies are not trying to increase their revenue and profit margin. Pick the company you deal with based on quality of service, expenses, and funds. I choose Vanguard AND Fidelity but not because of their ownership structure or who started low expense ratios first.92irish wrote:Fidelity and Schwab can offer all the loss leader index funds they want at .05% less than Vanguard - I'm not biting. I'm sticking with Vanguard.
A client of mine had a multi-million dollar portfolio of index funds at Fidelity and he died leaving it to his widow. She was not financially adept and Fidelity within a month of his death was pestering her to move the account to a "managed" account for 1.15% wrap fee not including actively managed mutual funds with expense ratios of .6% to 1.0% on top of that. They kept schmoozing her until she did it. The husband would be rolling in his grave.
Fidelity works for the best interests of the Johnson family. Vanguard works for your best interest. If you like Fidelity's website better - that's great, or if you want to shave .05% on your index fund - knock yourself out, just watch your wallet as they are not doing it to be nice and their goal is to make as much money off you as possible at the end of the day.
Correct, the reported expense ratio is still positive (in VSS' case it was 17bp and 13bp respectively). To actually compute the figure you can do one of two things: look at tracking error relative to the index, or net securities lending revenue reported in the annual report (divided by asset base) against the expenses reported by the fund. The second metric is more representative of costs, because index funds don't track perfectly, but obviously what you really care about is tracking error. So: consider both.LadyGeek wrote:^^^ Please explain the "negative" costs, as an expense ratio cannot be negative. How is it actually reported?
Vanguard has been running a fee war with itself for 40 years, since inception. They haven't beaten themselves, yet. My guess is they'll emerge from the fee war just fine.Avo wrote:Fee wars are bad for Vanguard. They are already heavily reliant on indexed products. Their rivals makes tons of money on active management. Already we hear many complaints about Vanguard customer service compared to rivals. Fee wars won't help this situation.
If you mean online ads, everyone does that. I looked up a flatware pattern a month or two ago and now I see ads everywhere for it. At some point I will get around to finding a plug or whatever that stops tracking.bengal22 wrote:
Vanguard keeps bugging me via ads and letters to sign up for their advisory service. They do not have my best interest at heart. Never think that any of these financial companies are not trying to increase their revenue and profit margin. Pick the company you deal with based on quality of service, expenses, and funds. I choose Vanguard AND Fidelity but not because of their ownership structure or who started low expense ratios first.
I think bengal22's point is that every financial company (Vanguard included) works to increase their revenue and profit margin and do not have his best interest at heart. I think he just used the ads and letters as examples.mouses wrote:If you mean online ads, everyone does that. I looked up a flatware pattern a month or two ago and now I see ads everywhere for it. At some point I will get around to finding a plug or whatever that stops tracking.bengal22 wrote:
Vanguard keeps bugging me via ads and letters to sign up for their advisory service. They do not have my best interest at heart. Never think that any of these financial companies are not trying to increase their revenue and profit margin. Pick the company you deal with based on quality of service, expenses, and funds. I choose Vanguard AND Fidelity but not because of their ownership structure or who started low expense ratios first.
As to letters, just tell them not to. It amazes me that people don't know that if they call a company and say don't send me any more ads the company almost always stops doing it. The only exception I have found is when a company blankets an area with mail and the post office is unable to cope with no address card for a home and just delivers to everyone. RedPlum, I'm talking to you.
Exactly. Vanguard is part of the financial services industry not a charitable enterprise. Below is one of their job postings which clearly states the goal is "winning new business" and upselling PAS. Vanguard employs sales staff every bit as much as other firms do. I'm not in the habit of trusting sales reps to always have my best interest at heart.student wrote: every financial company (Vanguard included) works to increase their revenue and profit margin and do not have his best interest at heart.
When I buy Vanguard ETFs at non-Vanguard brokerages that doesn't seem to be an issue. And if the fees to PAS cover the expenses of those employees, well, I am only concerned about the expenses of the funds, so it is puzzling.DippityDoo wrote:Exactly. Vanguard is part of the financial services industry not a charitable enterprise. Below is one of their job postings which clearly states the goal is "winning new business" and upselling PAS. Vanguard employs sales staff every bit as much as other firms do. I'm not in the habit of trusting sales reps to always have my best interest at heart.student wrote: every financial company (Vanguard included) works to increase their revenue and profit margin and do not have his best interest at heart.
Vanguard Careers
Investment Sales Consultant
https://vanguard.wd5.myworkdayjobs.com/ ... ant_108840
Like you, I buy Vanguard funds at other brokerages. My point was that all firms--including Vanguard--in the financial services industry exist to expand business and profits. What's in the company's best interest may or may not be in mine. Perhaps I am mistaken, but I get the impression on this board that many people trust Vanguard staff simply because they work for Vanguard. I think it's naive to assume sales reps at ANY company will necessarily prioritize a customer's best interest over their own job security, need to meet performance standards, etc. As to whether or not this is a matter you should care about, to each his owntriceratop wrote:When I buy Vanguard ETFs at non-Vanguard brokerages that doesn't seem to be an issue. And if the fees to PAS cover the expenses of those employees, well, I am only concerned about the expenses of the funds, so it is puzzling.
I'm not sure why I should care.
There's good news and bad news. I'll start with the bad news.student wrote:I am interested to see how long does it take for mutual fund companies in Canada to make substantial changes in response to Vanguard. I believe the average expense ratio is over 2%. Here are a couple of examples of their index funds. MER (Their way to call expense ration is about 0.8%.)
https://www.tdassetmanagement.com/fundD ... &site=TDCT
https://www.tdassetmanagement.com/fundD ... &site=TDCT
Code: Select all
Fund name Fund ID MER
TD Canadian Bond Index – e TDB909 0.50
TD Canadian Index – e TDB900 0.33
TD US Index – e TDB902 0.35
TD International Index – e TDB911 0.50
Who do you think are the shareholders of vanguard who receive the profits from the company? As you say, if the company's best interest are not aligned with yours, I would like to know who they are aligned with; that is, who the owners are.DippityDoo wrote:Like you, I buy Vanguard funds at other brokerages. My point was that all firms--including Vanguard--in the financial services industry exist to expand business and profits. What's in the company's best interest may or may not be in mine. Perhaps I am mistaken, but I get the impression on this board that many people trust Vanguard staff simply because they work for Vanguard. I think it's naive to assume sales reps at ANY company will necessarily prioritize a customer's best interest over their own job security, need to meet performance standards, etc. As to whether or not this is a matter you should care about, to each his owntriceratop wrote:When I buy Vanguard ETFs at non-Vanguard brokerages that doesn't seem to be an issue. And if the fees to PAS cover the expenses of those employees, well, I am only concerned about the expenses of the funds, so it is puzzling.
I'm not sure why I should care.
Links to many of the funds mentioned by longinvest can be found at our sister Canadian forum's wiki: Simple index portfolios - finiki, the Canadian financial wikilonginvest wrote:Currently, iShares/BlackRock has a new, lower fee total international ETF (XAW, 0.20%) than Vanguard Canada (VXC, 0.25%). But, as one could expect from BlackRock, they kept the fees pretty high on their older total-world ETF (XWD, 0.44%). It took them years, too, to lower the fees on their aggregate Canadian bond ETF; they just lowered the fees of XBB, from 0.30% to 0.09% a few months ago, in May 2017, to compete with Vanguard's VAB, (0.12%) and BMO's ZAG (0.09%).
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.The Management Expense Ratio (MER) is backward-looking. It includes the management fees and the taxes imposed on these management fees as shown in the last verified financial statements of the ETF. The Management Fee is forward-looking; it tells us how much the provider will be charging from now on, before taxes. Based on the announced 0.09%, we can expect the next financial statement to show an MER of 0.10%.LadyGeek wrote: Checking ZAG, I see a MER of 0.14%, but a Maximum Annual Management Fee of 0.09%. Did I misinterpret the fact sheet?
More people on this board may trust Vanguard because the reps won't try to steer us into high expense funds, or high fee managed accounts. Fidelity may do that. Fidelity has also never made it easy to find their low cost index funds or low cost Target funds. It's not blind loyalty that engenders trust in Vanguard. It's experience from doing business with Vanguard for decades that makes me trust them.DippityDoo wrote:Like you, I buy Vanguard funds at other brokerages. My point was that all firms--including Vanguard--in the financial services industry exist to expand business and profits. What's in the company's best interest may or may not be in mine. Perhaps I am mistaken, but I get the impression on this board that many people trust Vanguard staff simply because they work for Vanguard. I think it's naive to assume sales reps at ANY company will necessarily prioritize a customer's best interest over their own job security, need to meet performance standards, etc. As to whether or not this is a matter you should care about, to each his owntriceratop wrote:When I buy Vanguard ETFs at non-Vanguard brokerages that doesn't seem to be an issue. And if the fees to PAS cover the expenses of those employees, well, I am only concerned about the expenses of the funds, so it is puzzling.
I'm not sure why I should care.
The Greying Duke:TheGreyingDuke wrote:Interesting discussion...
In my experience, having been with Vanguard for about 40 years and seen by portfolio rise beyond all expectations (not Vanguard's doing, just thrifty and a rising market), I have never received any solicitation from them for anything.
Chopped liver or what??
Exactly. Referencing other replies as well, I'm intrigued by why funds cannot or do not offset the profits from lending their securities against the reported expense ratio. Is it prohibited by law, or so variable that they cannot predict the effect, or some sort of shell game? In which case what extra expenses are not reported? I have read on this forum that fund turnover rates affect the fund performance, but the effect is also not reported as an expense. Somehow it's book-kept at a different level.Dottie57 wrote:I always expect to pay for a service. If not monetary, you are paying in some other way.tooluser wrote:When might expenses go to zero as a matter of standard practice in the industry?
What will the average investor give up to get that cost?
I don't think your statement about Fidelity never made it easy to find their low cost index funds is 100% accurate. For example, last week its headline on its website is a link to a page with 28 mutual funds and ETFs. Under its mutual fund overview page https://www.fidelity.com/mutual-funds/f ... s/overview index funds have their own tab. However, I do agree that their target retirement index funds are difficult to find.goingup wrote: More people on this board may trust Vanguard because the reps won't try to steer us into high expense funds, or high fee managed accounts. Fidelity may do that. Fidelity has also never made it easy to find their low cost index funds or low cost Target funds. It's not blind loyalty that engenders trust in Vanguard. It's experience from doing business with Vanguard for decades that makes me trust them.
I just received a letter in the mail from Vanguard soliciting for their advisory service. First such letter since my start with them in mid eighties. My point is that want to sell me a service at additional costs that I don't need. Like all companies they seek to expand their revenue for the good of Vanguard. No different than Fidelity.Taylor Larimore wrote:The Greying Duke:TheGreyingDuke wrote:Interesting discussion...
In my experience, having been with Vanguard for about 40 years and seen by portfolio rise beyond all expectations (not Vanguard's doing, just thrifty and a rising market), I have never received any solicitation from them for anything.
Chopped liver or what??
I have been with Vanguard since 1986. I also have never received any solicitation from them for anything.
Best wishes.
Taylor
Nothing is free when it has a cost. Schwab gets its money (and then some) through the fact that their robo-adviser enforces a 9% or 10% cash position. Here is a very cogent explanation of the whole thing (scroll down a bit).Nate79 wrote:Yeah, when will Vanguard robo service be free like Schwab?
+192irish wrote:Fidelity and Schwab can offer all the loss leader index funds they want at .05% less than Vanguard - I'm not biting. I'm sticking with Vanguard.
Fidelity works for the best interests of the Johnson family. Vanguard works for your best interest.
