"Next Stop for Mutual-Fund Fees: Zero
That could mean tens of thousands in extra savings for investors in retirement."
https://www.wsj.com/articles/next-stop- ... 652532[url][/url]
How much is a mutual-fund adviser’s advice really worth?
How about nothing?
Since 2000 the average annual mutual-fund fee has fallen by more than a third. For funds that track a stock index, the average fee is now less than 0.1%, but even that is too high. That fraction of a percentage point means real money over time. If you invest $10,000 in a mutual fund today, and the stock market rises 6% a year, a 0.09% expense ratio will cost you more than $1,500 over three decades.
The industry has begun to realize this isn’t sustainable. In April Fidelity Investments launched its first-ever free index funds—that is, funds with a stated expense ratio of zero. The new funds, part of the firm’s Flex suite, will be available only to select Fidelity clients, but other mutual-fund advisers will likely emulate the model.
Four factors should facilitate the wider distribution of zero-cost mutual funds in the near future.
Third, mutual funds are increasingly finding that they can generate income from nonfee sources. In fiscal 2017, the Vanguard Total Stock Market Index Fund earned more than 63% of its expenses by lending securities. The demand for securities loans has limits, but growth in that market will allow an increasing number of funds to offset some or all of their expenses through loan income. Wise financial institutions will realize that offering a free mutual fund can attract customers to whom they can cross-sell other products, like life insurance and annuities.
If the notion of a free mutual fund seems exotic, consider that for centuries banks have paid investors to manage their money. That is what we call “interest.” While interest rates on bank accounts have fallen dramatically in recent decades, perhaps mutual funds of the future, like banks of the past, will pay us to hold our savings. Meanwhile, eliminating fees seems like a worthwhile goal—and one that now appears within reach.