Vanguard to offer non-Vanguard ETFs commission-free

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walletless
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by walletless » Mon Jul 02, 2018 4:43 pm

This should also accelerate the rate of migration from mutual fund accounts to their new brokerage account. Many have resisted in the past due to so little benefits (and more pains), but this changes the requisition for some.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by JoMoney » Mon Jul 02, 2018 4:50 pm

walletless wrote:
Mon Jul 02, 2018 4:43 pm
This should also accelerate the rate of migration from mutual fund accounts to their new brokerage account. Many have resisted in the past due to so little benefits (and more pains), but this changes the requisition for some.
I doubt it. People that are strictly mutual fund owners don't have a need for a brokerage account or ETFs (or they would have already switched).
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by aristotelian » Mon Jul 02, 2018 5:11 pm

One more benefit, for ETF buyers who buy on small lots or don't like leaving cash on the table, we will be able to buy funds with cheaper shares. Schwab has some good ones in the $25-$35 range. Most VG funds are around $100. Lower share price means higher effective bid/ask spread, though.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by JoMoney » Mon Jul 02, 2018 5:27 pm

aristotelian wrote:
Mon Jul 02, 2018 5:11 pm
One more benefit, for ETF buyers who buy on small lots or don't like leaving cash on the table, we will be able to buy funds with cheaper shares. Schwab has some good ones in the $25-$35 range. Most VG funds are around $100. Lower share price means higher effective bid/ask spread, though.
Yes, Vanguard has done reverse-splits to raise the price on some of it's ETFs explicitly because it lowers the effective % impact the bid/ask spread does hurting investors using these ETFs.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by wije » Mon Jul 02, 2018 6:33 pm

grok87 wrote:
Mon Jul 02, 2018 9:52 am
Cool now I can buy LTPZ (hopefully)
I understand how LTPZ is a great diversifier, but aren't you concerned with increasing yields?

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by dotstar » Mon Jul 02, 2018 7:53 pm

Growth is good, but I hope the platform and systems are up to potential rush of new accounts and trading volume.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by grok87 » Mon Jul 02, 2018 7:54 pm

wije wrote:
Mon Jul 02, 2018 6:33 pm
grok87 wrote:
Mon Jul 02, 2018 9:52 am
Cool now I can buy LTPZ (hopefully)
I understand how LTPZ is a great diversifier, but aren't you concerned with increasing yields?
Well I would be buying LTPZ for short periods in advance of rolling the money into 30 year tips at auction. It’s part of my 3 legged stool approach as outlined here:
viewtopic.php?f=10&t=245377
By the way, not that this is relevant to me or my strategy, but LTPZ has outperformed the vanguard bond market fund year to date.
Keep calm and Boglehead on. KCBO.

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Vanguard expanding list of commission-free ETFs August 2018

Post by tooluser » Mon Jul 02, 2018 9:57 pm

Haven't seen any discussion on this:

Coming in August: The largest commission-free ETF lineup offered to investors
https://investornews.vanguard/coming-in ... investors/

“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.”

Sounds very competitive with TD Ameritrade, maybe others.
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Re: Vanguard expanding list of commission-free ETFs August 2018

Post by whodidntante » Mon Jul 02, 2018 10:20 pm

Look harder, because there is discussion on this.

I don't know why I would accept free when brokers are willing to pay me to use their platform.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by stlutz » Mon Jul 02, 2018 11:08 pm

I feel like on the board that the announcement we've really wanted is for Vanguard to say that they've deployed a new IT system that will fix all of the various gremlins they currently have, particularly when it comes to cost basis. Are they trolling us? :confused

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by ray.james » Mon Jul 02, 2018 11:35 pm

This is excellent news. IJS and FNDE are of interest to me.
Great job Mr. Buckley.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by motorcyclesarecool » Tue Jul 03, 2018 5:24 am

stlutz wrote:
Mon Jul 02, 2018 11:08 pm
I feel like on the board that the announcement we've really wanted is for Vanguard to say that they've deployed a new IT system that will fix all of the various gremlins they currently have, particularly when it comes to cost basis. Are they trolling us? :confused
My thought: is their creaking, patchwork, “we know your cost basis is wrong but it’s a Roth IRA account so we cannot be bothered to fix it” IT infrastructure ready for an onslaught of new accounts that they seem to be attracting?
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by jhfenton » Tue Jul 03, 2018 8:09 am

I don't know if it's completely accurate, but there is a statement in the Kiplinger article on the subject that there will be no frequent trading restrictions:
The latest move is a result of Vanguard’s desire to continue lowering costs for its clients, says Karin Risi, managing director of Vanguard’s Retail Investor Group.

“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,” Risi says.

There’s no catch, and the ETFs come with no hidden fees. You’ll be able to buy and trade ETFs as frequently as you like without incurring a charge, Risi says.
Even if that's true, that still leaves open the question whether there will be a restriction on the quantity of trades like there currently is on Vanguard ETFs (24 buys and 24 sells in the same account within 12 months triggers a 30-day restriction on buys). (Admittedly that is not much of a restriction for non-day traders, but it is a restriction.) And if there isn't a restriction on the quantity of trades, will they lift the restriction on Vanguard ETFs.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by am » Tue Jul 03, 2018 9:38 am

Are there any etfs that would be worthwhile to add or exchange for a vanguard 3 fund investor? Doesn’t seem like this will add much for the average boglehead?

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Re: Vanguard expanding list of commission-free ETFs August 2018

Post by am » Tue Jul 03, 2018 9:42 am

I don’t see how this benefits most of us on here since vanguard index etfs are some of the best run and lowest cost? I’m thinking of using 1-2% of my portfolio for speculative fun bets but then come to my senses as this will likely have no significant impact even in the best of cases.

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Re: Vanguard expanding list of commission-free ETFs August 2018

Post by Jags4186 » Tue Jul 03, 2018 9:48 am

am wrote:
Tue Jul 03, 2018 9:42 am
I don’t see how this benefits most of us on here since vanguard index etfs are some of the best run and lowest cost? I’m thinking of using 1-2% of my portfolio for speculative fun bets but then come to my senses as this will likely have no significant impact even in the best of cases.
Because Vanguard does not offer all asset classes or the best ETFs for certain asset classes.

For example, Vanguard does not offer an International Large Cap Value or Small Cap Value ETFs. Some people do not like Vanguards US Small Cap Value ETF, VBR, because it is not very small. Of course Vanguard offers VIOV SP600 Small Cap Value, but many people prefer SLYV and IJS.

I’m sure there are others.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by triceratop » Tue Jul 03, 2018 10:07 am

I merged tooluser's thread into this original one
am wrote:
Tue Jul 03, 2018 9:38 am
Are there any etfs that would be worthwhile to add or exchange for a vanguard 3 fund investor? Doesn’t seem like this will add much for the average boglehead?
IXUS has been consistently more tax efficient than VXUS, if you need to use a taxable account that is.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by am » Tue Jul 03, 2018 10:13 am

triceratop wrote:
Tue Jul 03, 2018 10:07 am
I merged tooluser's thread into this original one
am wrote:
Tue Jul 03, 2018 9:38 am
Are there any etfs that would be worthwhile to add or exchange for a vanguard 3 fund investor? Doesn’t seem like this will add much for the average boglehead?
IXUS has been consistently more tax efficient than VXUS, if you need to use a taxable account that is.
What kind of impact are we talking about in say 100k invested?

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by TIAX » Tue Jul 03, 2018 3:52 pm

Hopefully the influx of new clients will encourage Vanguard to fix their cost basis and other IT issues.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by Artsdoctor » Tue Jul 03, 2018 4:31 pm

UpperNwGuy wrote:
Mon Jul 02, 2018 9:14 am
Hmm... I wonder if the list of non-Vanguard ETFs will include the popular iShares ETFs that people now buy through Fidelity. If so, I can see Fidelity losing a lot more business to Vanguard.
Unless Fidelity will allow Vanguard ETFs to be traded free or charge . . . That would be interesting! Although I suspect that Vanguard would not be interested in that deal.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by retiringwhen » Tue Jul 03, 2018 4:34 pm

Artsdoctor wrote:
Tue Jul 03, 2018 4:31 pm
UpperNwGuy wrote:
Mon Jul 02, 2018 9:14 am
Hmm... I wonder if the list of non-Vanguard ETFs will include the popular iShares ETFs that people now buy through Fidelity. If so, I can see Fidelity losing a lot more business to Vanguard.
Unless Fidelity will allow Vanguard ETFs to be traded free or charge . . . That would be interesting! Although I suspect that Vanguard would not be interested in that deal.
There is no reason to believe the iShares ETF's will be not included. the Vanguard announcement said almost ALL ETF's except niche speculative ETFs that are not appropriate for long-term investors.... Vanguard is specifically going after the iShares crowd I believe. This is not about revenue or revenue sharing, it is about Market share and lower the costs of investing overall. They just threw a molotov cocktail into Fidelity's store front.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by Nthomas » Tue Jul 03, 2018 4:35 pm

Artsdoctor wrote:
Tue Jul 03, 2018 4:31 pm
UpperNwGuy wrote:
Mon Jul 02, 2018 9:14 am
Hmm... I wonder if the list of non-Vanguard ETFs will include the popular iShares ETFs that people now buy through Fidelity. If so, I can see Fidelity losing a lot more business to Vanguard.
Unless Fidelity will allow Vanguard ETFs to be traded free or charge . . . That would be interesting! Although I suspect that Vanguard would not be interested in that deal.
Fidelity would have to eat the cost and may end up doing that. Vanguard wouldn't have to make a deal or be involved for this to happen. Vanguard is clear they will never pay to be on a "preferred" commission free platform.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by walletless » Tue Jul 03, 2018 4:50 pm

TIAX wrote:
Tue Jul 03, 2018 3:52 pm
Hopefully the influx of new clients will encourage Vanguard to fix their cost basis and other IT issues.
If anything, I fear this will make things worse. They already have a lot of clients and AUM. The extra clients will put additional pressure on the same shared resources, and vanguard IT has been anything but competent to resolve these in the past.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by whodidntante » Tue Jul 03, 2018 5:17 pm

TIAX wrote:
Tue Jul 03, 2018 3:52 pm
Hopefully the influx of new clients will encourage Vanguard to fix their cost basis and other IT issues.
Yes, a lack of customers and lack of critical mass is the reason that Vanguard cannot get their house in order. :twisted:

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by whodidntante » Tue Jul 03, 2018 5:18 pm

Artsdoctor wrote:
Tue Jul 03, 2018 4:31 pm
UpperNwGuy wrote:
Mon Jul 02, 2018 9:14 am
Hmm... I wonder if the list of non-Vanguard ETFs will include the popular iShares ETFs that people now buy through Fidelity. If so, I can see Fidelity losing a lot more business to Vanguard.
Unless Fidelity will allow Vanguard ETFs to be traded free or charge . . . That would be interesting! Although I suspect that Vanguard would not be interested in that deal.
Vanguard will be interested. They just won't pay for it.

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Re: Vanguard expanding list of commission-free ETFs August 2018

Post by MnD » Tue Jul 03, 2018 7:03 pm

Jags4186 wrote:
Tue Jul 03, 2018 9:48 am
am wrote:
Tue Jul 03, 2018 9:42 am
I don’t see how this benefits most of us on here since vanguard index etfs are some of the best run and lowest cost? I’m thinking of using 1-2% of my portfolio for speculative fun bets but then come to my senses as this will likely have no significant impact even in the best of cases.
Because Vanguard does not offer all asset classes or the best ETFs for certain asset classes.

For example, Vanguard does not offer an International Large Cap Value or Small Cap Value ETFs. Some people do not like Vanguards US Small Cap Value ETF, VBR, because it is not very small. Of course Vanguard offers VIOV SP600 Small Cap Value, but many people prefer SLYV and IJS.

I’m sure there are others.
This is a nice change but not even remotely anything that might get me thinking about a move to Vanguard. What _would_ get my attention is a linked banking/checking feature set like Schwab has and what (I believe) Fidelity has under a cash management account. Likewise with my just starting out adult kids. Its the banking/checking/debit deal that sticks them to Schwab like glue. The free core low cost ETF's Schwab has, while not as comprehensive as Vanguard, are just fine for my needs and theirs. I'm done with seperate banks and the kids don't know of anything other than a one-shop bank/brokerage approach.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by G-Force » Tue Jul 03, 2018 7:30 pm

There is a followup interview and video from Vanguard on this change:

https://investornews.vanguard/why-were- ... g-in-etfs/

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by triceratop » Tue Jul 03, 2018 7:44 pm

am wrote:
Tue Jul 03, 2018 10:13 am
triceratop wrote:
Tue Jul 03, 2018 10:07 am
I merged tooluser's thread into this original one
am wrote:
Tue Jul 03, 2018 9:38 am
Are there any etfs that would be worthwhile to add or exchange for a vanguard 3 fund investor? Doesn’t seem like this will add much for the average boglehead?
IXUS has been consistently more tax efficient than VXUS, if you need to use a taxable account that is.
What kind of impact are we talking about in say 100k invested?
It depends on your personal situation: https://docs.google.com/spreadsheets/d/ ... edit#gid=0

For me, I expect it would save about $120/yr.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by triceratop » Tue Jul 03, 2018 7:50 pm

G-Force wrote:
Tue Jul 03, 2018 7:30 pm
There is a followup interview and video from Vanguard on this change:

https://investornews.vanguard/why-were- ... g-in-etfs/
"interview" :D :happy

I'm as excited about this change as the next, but an interview is not what that is. It's a clever PR video dressed up as a dispassionate analysis.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by retiringwhen » Tue Jul 03, 2018 8:19 pm

triceratop wrote:
Tue Jul 03, 2018 7:50 pm
G-Force wrote:
Tue Jul 03, 2018 7:30 pm
There is a followup interview and video from Vanguard on this change:

https://investornews.vanguard/why-were- ... g-in-etfs/
"interview" :D :happy

I'm as excited about this change as the next, but an interview is not what that is. It's a clever PR video dressed up as a dispassionate analysis.
Totally agree, but the messaging is clear, they are putting the heat on the other brokerages to lower trading costs. The more I think about it, this brings the potential for more AUM in the ETF for Vanguard via other brokerages as net buying of ETFs grow the asset base in addition to adding to their AUM number. This was a master-stroke strategically.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by bzargarcia » Tue Jul 03, 2018 8:30 pm

Interesting take on the subject from the advisor point of view from Michael Kitces on Periscope.

https://www.pscp.tv/MichaelKitces/1mnxeoDYaPrGX

Enjoy,

Bart
Bart Garcia

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by whodidntante » Tue Jul 03, 2018 8:59 pm

0% ER funds next, let's see if Vanguard can bring a date to that party.

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Re: Vanguard expanding list of commission-free ETFs August 2018

Post by tooluser » Tue Jul 03, 2018 11:06 pm

whodidntante wrote:
Mon Jul 02, 2018 10:20 pm
Look harder, because there is discussion on this.
Nope. There were no threads in the front page nor any hits on the Google search when I started my thread. Local server dysphoria I guess. Perils of the west coast or my ISP.

Now on with the show...
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by tooluser » Tue Jul 03, 2018 11:21 pm

retiringwhen wrote:
Tue Jul 03, 2018 8:19 pm
Totally agree, but the messaging is clear, they are putting the heat on the other brokerages to lower trading costs. The more I think about it, this brings the potential for more AUM in the ETF for Vanguard via other brokerages as net buying of ETFs grow the asset base in addition to adding to their AUM number. This was a master-stroke strategically.
It's got me thinking. I'm at three brokerages and would rather be at two. But there was no reason to move unless I can get more value at one of the other two.
whodidntante wrote:
Tue Jul 03, 2018 8:59 pm
0% ER funds next, let's see if Vanguard can bring a date to that party.
A desired endgame for the investor. But I wonder where they would make up the difference. I worry less with Vanguard but it’s still a concern.
"A calm and modest life brings more happiness than the pursuit of success combined with constant restlessness." -- Albert Einstein, just before he won the Nobel Prize.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by retiringwhen » Wed Jul 04, 2018 9:40 am

tooluser wrote:
Tue Jul 03, 2018 11:21 pm
whodidntante wrote:
Tue Jul 03, 2018 8:59 pm
0% ER funds next, let's see if Vanguard can bring a date to that party.
A desired endgame for the investor. But I wonder where they would make up the difference. I worry less with Vanguard but it’s still a concern.
In a recent thread, there was discussion of stock loans revenue and how it offsets ER as well as other execution strategies. I really wish there was a total tracking error calculation that could be apples to apples compared with other funds. If you have Admiral funds those two items often bring the tracking to well under %0.03 and for some Institutional share classes the tracking error is zero or negative.

Many of the other ETF providers are keeping half or more of the stock loan revenue and don't always execute any better then Vanguard.

I think this move by Vanguard against back-end marketing fees by fund providers (see the Michael Kitces video above) is part of a strategy to strip these hidden cost differences out of the industry so that Vanguard's cost advantages are seen more clearly while benefiting the entire universe of investors (this is a case of one company's competitive advantage can be used to improve the experience for all members of a marketplace through cost and service innovation [OT comment removed by moderator --triceratop]).

BTW, another thought came to me as I write this. Numerous commenters on this forum have made the legitimate case that Vanguard as an "at-cost provider" does not have all of the incentives to lower costs. I see this move as a direct counter-example against the proposition. Vanguard is not a non-profit in a traditional sense as it functions in a truly competitive marketplace (as compared to a church, the US Army and its supporting military industrial complex, the Red Cross, regulated utilities, etc.) The leadership of Vanguard is clearly showing that they consider themselves in the arena competing for customers and market-share. John Bogle may not like ETF's, but the industry has gone that way so Vanguard decided to play for keeps.

The wild-card / open question for me is whether or not the leadership of Vanguard is aware of the perception of lack of quality of the brokerage platform? If so, do they believe the issues are behind them? I would hope so, if not, it would seem to put them at real risk of ticking off new customers as issues arise when they move to the platform. Maybe Vanguard doesn't really think it will bring many new accounts, but instead force the other brokerages to lower costs and allow Vanguard ETFs (back) onto their no-fee ETF lists.

This is the latest salvo in what I think will be seen a decade from now as a major re-shaping of the industry by way of the ETF revolution.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by stlutz » Wed Jul 04, 2018 9:54 am

This move does show that Vanguard is in fact not a pure "at-cost" provider. It does cost something to execute trades, especially when you don't accept payment for order flow (as VG does not, to their credit). As such, these free ETF trades will be funded by something else. Perhaps it will be by keeping the cost of stock or bond trades artificially high. Or maybe it will come from maintaining slightly higher expenses on their own ETFs. But somebody will be paying for them.

I guess I see this as more of a defensive move than an offensive one. Monies that are housed at Vanguard tend to end up in Vanguard funds/ETFs. When money gets transferred to Fidelity it's more likely to end up in Blackrock ETFs; money that goes to Schwab ends up in Schwab ETFs, and money that goes to TD Ameritrade ends up in State Street ETFs. Point is, with the all of the bonuses and free trades being thrown around right now, they have probably seen a lot of customers leave through the back door to other brokerages who are paying bonuses and giving years of free trades. The move probably helps slow that down.

At the end of the day, for broader brokerage services, Fidelity, Schwab, TDAM, and E*Trade watch and respond to one another very closely. I don't think they view Vanguard Brokerage as a competitive threat, especially for the most profitable types of customers who trade options, take out margin loans etc. I don't think we'll see any response to this just as we didn't when Firsttrade rolled out a huge free ETF list a few months back.

For Bogleheads, this move is a good thing overall. I don't view it as a massive attack on the rest of the industry, however.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by grok87 » Wed Jul 04, 2018 9:57 am

stlutz wrote:
Wed Jul 04, 2018 9:54 am
This move does show that Vanguard is in fact not a pure "at-cost" provider. It does cost something to execute trades, especially when you don't accept payment for order flow (as VG does not, to their credit). As such, these free ETF trades will be funded by something else. Perhaps it will be by keeping the cost of stock or bond trades artificially high. Or maybe it will come from maintaining slightly higher expenses on their own ETFs. But somebody will be paying for them.

I guess I see this as more of a defensive move than an offensive one. Monies that are housed at Vanguard tend to end up in Vanguard funds/ETFs. When money gets transferred to Fidelity it's more likely to end up in Blackrock ETFs; money that goes to Schwab ends up in Schwab ETFs, and money that goes to TD Ameritrade ends up in State Street ETFs. Point is, with the all of the bonuses and free trades being thrown around right now, they have probably seen a lot of customers leave through the back door to other brokerages who are paying bonuses and giving years of free trades. The move probably helps slow that down.

At the end of the day, for broader brokerage services, Fidelity, Schwab, TDAM, and E*Trade watch and respond to one another very closely. I don't think they view Vanguard Brokerage as a competitive threat, especially for the most profitable types of customers who trade options, take out margin loans etc. I don't think we'll see any response to this just as we didn't when Firsttrade rolled out a huge free ETF list a few months back.

For Bogleheads, this move is a good thing overall. I don't view it as a massive attack on the rest of the industry, however.
Yeah it will be interesting To see the disclosure on this from vanguard on their expense/fee arrangements with the etf providers. Fido’s is interesting reading. Will post it when I can...
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by MBB_Boy » Wed Jul 04, 2018 11:02 am

livesoft wrote:
Mon Jul 02, 2018 9:37 am
Ah, it's nice when feedback to Vanguard leads to implementation.

The costs and expenses to implement commissions are probably higher than any income that they get from commissions anyways.

This is also why Robinhood and M1 Finance are not going to survive in my opinion.
Pretty sure the long term play for them is to sell their customer list and UI/platform tech. After all, they are popular with the young and affluent.....or at least the young and interested. Some financial firm or bank is going to eventually want to buy the customers

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by livesoft » Wed Jul 04, 2018 11:08 am

MBB_Boy wrote:
Wed Jul 04, 2018 11:02 am
livesoft wrote:
Mon Jul 02, 2018 9:37 am
Ah, it's nice when feedback to Vanguard leads to implementation.

The costs and expenses to implement commissions are probably higher than any income that they get from commissions anyways.

This is also why Robinhood and M1 Finance are not going to survive in my opinion.
Pretty sure the long term play for them is to sell their customer list and UI/platform tech. After all, they are popular with the young and affluent.....or at least the young and interested. Some financial firm or bank is going to eventually want to buy the customers
I totally agree and have stated as such a few times before.
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by triceratop » Wed Jul 04, 2018 11:09 am

MBB_Boy wrote:
Wed Jul 04, 2018 11:02 am
Pretty sure the long term play for them is to sell their customer list and UI/platform tech. After all, they are popular with the young and affluent.....or at least the young and interested. Some financial firm or bank is going to eventually want to buy the customers
An open question is how many of those young, interested customers are also unsavvy. Maybe none of them are willing to pay for commissions or extra fees of any kind? That would have to sting for the acquiring firm!
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by Angst » Wed Jul 04, 2018 11:11 am

retiringwhen wrote:
Wed Jul 04, 2018 9:40 am
[Snip...]

The wild-card / open question for me is whether or not the leadership of Vanguard is aware of the perception of lack of quality of the brokerage platform? If so, do they believe the issues are behind them? I would hope so, if not, it would seem to put them at real risk of ticking off new customers as issues arise when they move to the platform. Maybe Vanguard doesn't really think it will bring many new accounts, but instead force the other brokerages to lower costs and allow Vanguard ETFs (back) onto their no-fee ETF lists.

[Snip...]
I'd just tack on the overall lack of quality in Vanguard's IT. The margins left for cutting expenses vs. the competition have shrunk immensely, and there's not a lot of significant room left to move. But I believe strongly that over the last 5-10 yrs there has been a slowly opening window of opportunity for another low-cost index-focused competitor with a much higher quality user interface (think not just brokerage, but website reports & accounts information presentation in general), to take this thing Bogle started to a higher level. I've seen little to suggest that Vanguard is concerned about it though.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by MBB_Boy » Wed Jul 04, 2018 11:22 am

livesoft wrote:
Wed Jul 04, 2018 11:08 am
MBB_Boy wrote:
Wed Jul 04, 2018 11:02 am
livesoft wrote:
Mon Jul 02, 2018 9:37 am
Ah, it's nice when feedback to Vanguard leads to implementation.

The costs and expenses to implement commissions are probably higher than any income that they get from commissions anyways.

This is also why Robinhood and M1 Finance are not going to survive in my opinion.
Pretty sure the long term play for them is to sell their customer list and UI/platform tech. After all, they are popular with the young and affluent.....or at least the young and interested. Some financial firm or bank is going to eventually want to buy the customers
I totally agree and have stated as such a few times before.
Sorry, didn't see it earlier. I wrote the reply when I came across your comment, so would have missed you saying so later

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by MBB_Boy » Wed Jul 04, 2018 11:23 am

triceratop wrote:
Wed Jul 04, 2018 11:09 am
MBB_Boy wrote:
Wed Jul 04, 2018 11:02 am
Pretty sure the long term play for them is to sell their customer list and UI/platform tech. After all, they are popular with the young and affluent.....or at least the young and interested. Some financial firm or bank is going to eventually want to buy the customers
An open question is how many of those young, interested customers are also unsavvy. Maybe none of them are willing to pay for commissions or extra fees of any kind? That would have to sting for the acquiring firm!

Wouldn't avoiding the fees make them savvy? :mrgreen:

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by livesoft » Wed Jul 04, 2018 11:24 am

MBB_Boy wrote:
Wed Jul 04, 2018 11:22 am
Sorry, didn't see it earlier. I wrote the reply when I came across your comment, so would have missed you saying so later
No need to apologize at all. I have written this in years past and not in the thread. And I'll be saying it again in the future, too. :)
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by triceratop » Wed Jul 04, 2018 11:27 am

MBB_Boy wrote:
Wed Jul 04, 2018 11:23 am
triceratop wrote:
Wed Jul 04, 2018 11:09 am
MBB_Boy wrote:
Wed Jul 04, 2018 11:02 am
Pretty sure the long term play for them is to sell their customer list and UI/platform tech. After all, they are popular with the young and affluent.....or at least the young and interested. Some financial firm or bank is going to eventually want to buy the customers
An open question is how many of those young, interested customers are also unsavvy. Maybe none of them are willing to pay for commissions or extra fees of any kind? That would have to sting for the acquiring firm!

Wouldn't avoiding the fees make them savvy? :mrgreen:
If it's an open question how many are unsavvy, an exercise left to the diligent reader is to use the complement to see that it's also an open question of how many are savvy, avoiding fees. ;)
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by Austintatious » Wed Jul 04, 2018 11:48 am

Angst wrote:
Wed Jul 04, 2018 11:11 am
retiringwhen wrote:
Wed Jul 04, 2018 9:40 am
[Snip...]

The wild-card / open question for me is whether or not the leadership of Vanguard is aware of the perception of lack of quality of the brokerage platform? If so, do they believe the issues are behind them? I would hope so, if not, it would seem to put them at real risk of ticking off new customers as issues arise when they move to the platform. Maybe Vanguard doesn't really think it will bring many new accounts, but instead force the other brokerages to lower costs and allow Vanguard ETFs (back) onto their no-fee ETF lists.

[Snip...]
I'd just tack on the overall lack of quality in Vanguard's IT. The margins left for cutting expenses vs. the competition have shrunk immensely, and there's not a lot of significant room left to move. But I believe strongly that over the last 5-10 yrs there has been a slowly opening window of opportunity for another low-cost index-focused competitor with a much higher quality user interface (think not just brokerage, but website reports & accounts information presentation in general), to take this thing Bogle started to a higher level. I've seen little to suggest that Vanguard is concerned about it though.
I guess I'm wondering just who that other "low-cost index-focused competitor", the one that's going to take "this thing Bogle started to a higher level", would be. I doubt we'd have meaningful (if any) access to low cost, broadly diversified index fund offerings today absent the Bogle/Vanguard offerings. The other big names currently offering similar products are doing so because Bogle and Vanguard have forced their hands. Maybe Vanguard isn't too concerned about it happening because they appreciate that those other entities are primarily interested in generating profits for principals and corporate shareholders rather than offering products designed to put investors first. Just my thoughts, of course.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by Angst » Wed Jul 04, 2018 12:54 pm

Austintatious wrote:
Wed Jul 04, 2018 11:48 am
Angst wrote:
Wed Jul 04, 2018 11:11 am
retiringwhen wrote:
Wed Jul 04, 2018 9:40 am
[Snip...]

The wild-card / open question for me is whether or not the leadership of Vanguard is aware of the perception of lack of quality of the brokerage platform? If so, do they believe the issues are behind them? I would hope so, if not, it would seem to put them at real risk of ticking off new customers as issues arise when they move to the platform. Maybe Vanguard doesn't really think it will bring many new accounts, but instead force the other brokerages to lower costs and allow Vanguard ETFs (back) onto their no-fee ETF lists.

[Snip...]
I'd just tack on the overall lack of quality in Vanguard's IT. The margins left for cutting expenses vs. the competition have shrunk immensely, and there's not a lot of significant room left to move. But I believe strongly that over the last 5-10 yrs there has been a slowly opening window of opportunity for another low-cost index-focused competitor with a much higher quality user interface (think not just brokerage, but website reports & accounts information presentation in general), to take this thing Bogle started to a higher level. I've seen little to suggest that Vanguard is concerned about it though.
I guess I'm wondering just who that other "low-cost index-focused competitor", the one that's going to take "this thing Bogle started to a higher level", would be. I doubt we'd have meaningful (if any) access to low cost, broadly diversified index fund offerings today absent the Bogle/Vanguard offerings. The other big names currently offering similar products are doing so because Bogle and Vanguard have forced their hands. Maybe Vanguard isn't too concerned about it happening because they appreciate that those other entities are primarily interested in generating profits for principals and corporate shareholders rather than offering products designed to put investors first. Just my thoughts, of course.
I just don't share these concerns. I don't question your doubts one bit, but "standing on one's laurels" attends to nothing as far as the future is concerned, unless it's going to serve as one's epitaph. No one knows how the industry would have evolved without Vanguard, but the genie of low-cost index investing is totally out of the bottle now and I find the notion that only Vanguard can keep the powers that be from corking it up again to be just a fearful fantasy.

With ETF's and the likes of Schwab, Fidelity, and several other good index ETF providers out there besides Vanguard, I can do just as well at many places other than Vanguard. Expense ratios are no longer something that will necessarily make me stay there. I stay there though because I've been with Vanguard since it first came into existence and because they still have a pretty darn good product! But if the competition succeeds in providing the kind of high quality customizable user interface and IT that I can easily conceptualize, I believe it could be a game changer for the industry. I find none of these providers to be close yet to what I can imagine, but I do find Vanguard's apparent indifference to the broad, negative perception of their IT and account information presentation to be foolhardy. And nothing lasts forever.

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by MikeG62 » Thu Jul 05, 2018 4:05 pm

Interesting take by Kitces on the real implications of this move by Vanguard...

https://www.kitces.com/blog/vanguard-nt ... 9-57069329

Edited to add his summary conclusion:

"The significance is that they’re offering a no-transaction-fee platform without requiring the same back-end shelf space payments that all the other brokerage and custodial platforms require. In other words, the latest move by Vanguard isn’t a price war against ETF trading fees; instead, it’s declaring war on the entire model of asset managers being forced to pay back-end revenue-sharing and shelf-space agreements to get onto those platforms in the first place, by offering their own and not charging the asset managers what everyone else charges!

How will this potentially play out from here? ETFs that currently pay NTF platform fees are compelled to increase their expense ratios to cover the cost (because the money has to come from somewhere to pay)… except now ETF providers have a problem: their ETF expense ratios are boosted higher to compete on NTF platforms at companies like Schwab, Fidelity, and TD Ameritrade, but the higher expense ratios to cover the distribution costs on those platforms will reduce their competitiveness on the new mega Vanguard platform! As a result, ETF providers may be compelled to start creating a new series of their popular ETFs, with those additional distribution costs stripped out, creating a lower-cost “clean ETF” that can better compete in a true NTF environment. Yet once this happens, since the ETFs will be available elsewhere as well (just with a transaction cost instead) it will recreate the multiple-share-class effect we have now in mutual funds, where there’s a higher cost version of the mutual fund in the NTF platform – because it’s pushed up by the 12b-1 and sub-TA fees – and then there’s a lower cost version of the same mutual fund you can buy directly. Which ultimately will lead to consumers (and advisors) adopting whichever fund is cheaper in their situation, putting further pressure on custodians to offer less conflicted models where investors (or advisors) are simply charged a transparent basis point fee for the clearing and custodial services provided instead."
Last edited by MikeG62 on Fri Jul 06, 2018 8:25 am, edited 1 time in total.
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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by retiringwhen » Thu Jul 05, 2018 4:18 pm

stlutz wrote:
Wed Jul 04, 2018 9:54 am
This move does show that Vanguard is in fact not a pure "at-cost" provider. It does cost something to execute trades, especially when you don't accept payment for order flow (as VG does not, to their credit). As such, these free ETF trades will be funded by something else. Perhaps it will be by keeping the cost of stock or bond trades artificially high. Or maybe it will come from maintaining slightly higher expenses on their own ETFs. But somebody will be paying for them.
Are you sure that is a net cost to execute trades? I always thought there was some margin in the trades themselves for the broker. If you run a lean ship, that may cover the cost.

If you don't have to pay to put the fund on the "shelf" or demand payment from the ETF provider, just how much cost is there? (See Michael Kitces discussion of these hidden costs that Vanguard is attacking)

There is a bookkeeping cost for all brokerage accounts and that is somehow spread across the Vanguard universe, I assume that the delta cost of keeping those additional ETF's is very near zero as they already support the infrastructure for all of these ETFS.

BTW, how would Vanguard make the cost of trading stock and bonds high? Aren't there fees about normal for the industry (if you pay them, but many clients get a lot of free trades every year)? I guess you could argue that the fees of $2 to $7 for most of the non-high balance accounts is too high?

Here is the fee schedule https://investor.vanguard.com/investing ... ommissions

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Re: Vanguard to offer non-Vanguard ETFs commission-free

Post by stlutz » Thu Jul 05, 2018 7:46 pm

Are you sure that is a net cost to execute trades? I always thought there was some margin in the trades themselves for the broker. If you run a lean ship, that may cover the cost.
For the Robinhoods of the world who accept payment for order flow, there is. Vanguard doesn't accept such payments so they don't make any money executing the trade.

Other giving lots of free trades (like Merrill Edge) pay essentially nothing on cash, so they make up for it there. Vanguard's cash option a super-low-cost money market fund.

Other brokers also make money from margin interest and I'm sure Vanguard does too. But they don't exactly market margin borrowing like other brokers do.

Finally, Vanguard does not have a "pay to play" system for the free ETF trades like Schwab, TDAM, and Fido do.

In other words, Vanguard isn't making up the money lost from trades from the places where other brokers do. So it seems to me that they have to be subsidizing it from somewhere. I'm just not clear where.

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