Vanguard's Average Fee Is Now Just 0.07% After Biggest-Ever Cut
100 comments
·February 4, 2025ilamont
wing-_-nuts
TBH, I trust vanguard more, even if their website is absolutely worse. There's a saying, 'if you're not the customer, you're the product'. I expect trades on those index funds are getting 'front run' much like robinhood is getting front run. You might have a lower ER but your nav might effectively be higher when buying and lower when selling.
Of course, I'm a 'buy and hold' investor so this doesn't really effect me much, but it's the principle of the matter.
bombcar
Fidelity uses those funds as marketing, and they make up for it with all the other services and funds they offer. It's intentional, and it's working.
Vanguard is more and more becoming a group that just wants to run ETFs and if you want to use them, they're making it harder and harder. They recently dumped all their 401(k) and similar plans from being in-house to some other provider.
Saves costs, makes support annoying.
Of course, you can use a Fidelity account to own Vanguard ETFs if you wanted.
kasey_junk
Front running is illegal.
NickC25
In finance, nothing is illegal if the profits outweigh the fines.
Citaldel paid handsomely for order-flow information from Robinhood. They made a lot of money off retail traders. They paid a fine IIRC equivalent to a few day's profits.
SteveNuts
Isn't it just PFOF? Is that actually illegal?
Edit: No, it's not in the US at least. It mostly just allows the broker to internalize orders if they prefer.
op00to
Only if you get caught. And the fine needs to be higher than the profit.
NegativeLatency
The riskier the road, the greater the profit.
2OEH8eoCRo0
How do you front run a mutual fund? The price is the price.
manojlds
You mean an index fund?
short_sells_poo
If you know the index rules, it's fairly simple to calculate the turnover it is going to generate when it rebalances and subsequently the impact the rebalance is going to have on prices. This is a fairly well known behavior and a lot of players have been doing this for a long time. Basically every index of any significance is already being monitored and rebalancing effects are "front-run" this way.
I put the word in quotes, because this is a perfectly legitimate way of front running. The major indices are all public, and anyone can take a crack at this. In other words, if I announce to the world a month in advance that on a specific day and a very specific time of the day (at the closing auction) I'm going to buy X amount of specific stocks and sell Y amount in other stocks, I can't blame people for using that information against me.
toast0
Predict or react to index changes faster than the funds that are compelled to follow the index.
But you can't front run shares of mutual funds; they always trade at close of business at NAV.
You could potentially front run ETFs, but if you're worried about that, you can use limit orders and get the price you want or not transact. As long as you use a competent broker that offers limit orders.
Gshaheen
One other differentiation that Vanguard has is that it is owned by the fund holders
“Vanguard set out in 1975 under a radical ownership structure. Our company is owned by its funds, which in turn are owned by Vanguard’s fund shareholders. We focus on meeting the investment needs of our clients.”
So in short, vanguard is customer-owned, where fidelity is owned by mostly the founding family (the Johnson’s).
https://corporate.vanguard.com/content/corporatesite/us/en/c...
londons_explore
But does that structure confer any realistic chance of voting control by any real humans who aren't already employed by vanguard?
Funds aren't known for being voting activists.
ElevenLathe
Even so, I think the incentives are still for the Vanguard management to make as little profit as possible so that they can compete and have more funds under management. Controlling more billions of dollars of stock shares is kind of its own reward and brings many opportunities for enrichment, and if they don't have to worry about making money for shareholders, they can pretty much always engineer the lowest fees.
nfriedly
I have accounts at both, and my perception is that Vanguard is pretty much exclusively low cost, but Fidelity does have some very competitive options if you can find them. They just also have a lot of overpriced junk.
Fidelity’s technology and customer service does generally seem better. Although they were completely baffled when their app refused to run on a rooted phone with an error message along the lines of “your account is frozen” after I logged in. (It wasn’t, and worked fine after I realized that was the issue and put it on the deny list.)
Overall, I trust Vanguard more, but both have their strong points.
baking
It's really annoying that people here are talking about "Zero" fee funds as if they were zero-fee funds. As far as I can tell "Zero" means less than 0.05% fees.
ak217
No, zero means a 0% expense ratio and no minimums, as listed for the four funds at the top of https://www.fidelity.com/mutual-funds/investing-ideas/index-.... Unlike most other funds, these are captive to Fidelity so if you ever do an ACATS transfer they have to be liquidated.
bombcar
That's the key, though if it's a tax-advantaged account it's not a major issue (as you can just transfer to an appropriate ETF and then ACATS that).
In taxable it could cause you to have to stay with Fidelity or eat a tax bill.
yesimahuman
I don't think vanguard's core customer base cares about what hungry competitors are doing to entice them to move. Just look at Robinhood: they offered the biggest financial incentive for users to switch of any broker in the industry and I doubt many vanguard customers took them up on that. Stability, trust, and low fees are all buy and hold investors at Vanguard really care about.
tommiegannert
Isn't this about the funds, rather than using Vanguard as a broker? Can't you buy Vanguard funds while on Fidelity, or vice versa?
angry_moose
You can. There's usually a hefty transaction fee when purchasing a funds not managed by whichever service you're on ($49?).
Might be manageable if you're purchasing in enormous quantities; but a 5% fee on $1000 hurts if you're in normal consumer purchase ranges.
jhardy54
This is true for mutual funds, but Vanguard ETFs are available on Fidelity with no fees.
Enginerrrd
We tried using vanguard. The UX/UI was so bad we went through the work of transferring everything to fidelity. They've got a pretty decent app.
Vanguard has so much friction on what should be very simple and common tasks.
There's no excuse for that. I can say pretty confidently that cutting fees won't be enough. They need a total rewrite of all their customer facing software and web stuff, and they probably need to revamp their customers service as well. They screwed up my wife's name and she tried for months and months to fix it before giving up.
nineplay
The idea of making financial decisions based on UI/UX is extraordinary to me.
ryandrake
Vanguard recently made two horrible mistakes: 1. a typical "Grand UI Redesign" that made the site worse and removed a bunch of previously working features, and 2. They made all their users "migrate" their accounts from one type to another, a process that I found to be error prone and clunky.
For 1, all of us software people have seen companies do this over and over, and it always sucks. For 2, why they couldn't do whatever backend migration they needed to do without having it disrupting retail customers, I have no idea.
Both of those point to a software organization way below where it needs to be competence-wise.
toast0
> They need a total rewrite of all their customer facing software and web stuff,
They've done that. And now you can't sort by capital gain/loss per share when picking lots to sell.
They're also almost done forcing everyone into the brokerage side, which is less flexible with some things like reinvestment of dividends. On the nice side, it includes foreign dividend info on the 1099s so you don't have to find a separate document to get those percentages.
giantg2
That's because Vanguard is a buy and hold philosophy. They have previously stated that they designed their site for the bulk of the users. Those users log in just to check their balances in the 5 or fewer funds/ETFs that they hold. So instead of building something that would be reasonably easy for everyone, they built something that was easy for their primary (aging) user base. It's the same sort of mentality how they don't allow inverse ETFs, they aren't going to offer any crypto related stuff, etc.
whitepoplar
Fidelity's "Zero" funds are great, but only for specific scenarios IMO. They can't be held outside Fidelity accounts, so what happens if you get caught up in some KYC nonsense and Fidelity closes your account? Are you forced to liquidate and incur capital gains? There are also some embedded tax efficiencies inherent to ETFs, like 351 exchanges, which aren't popular now, but may become popular in the future. TBH, this mainly applies to taxable accounts. For nontaxable accounts, Zero funds don't have much downside.
icelancer
> They can't be held outside Fidelity accounts, so what happens if you get caught up in some KYC nonsense and Fidelity closes your account?
This literally happened to me. I'm banned from Fidelity for some unknown (AML presumably) reason but have no other issues with any brokerage, bank, or exchange.
Fortunately I just held a bunch of ETFs, so it was straightforward. But it does happen.
robszumski
The zero fund I am familiar with (FZILX) has a once-a-year dividend schedule which I'm sure nets them a lot of money, vs paying out more frequently. If you want to unload, you can only do it once a year without throwing away your earned dividend.
baking
That's not how dividends work.
cantaloupe
JKCalhoun
I always upvote the archive link unless it is already the top comment, ha ha.
syspec
Someone correct my math here, but if they have 10 trillion in assets under management and the management fee is 0.07% then that's still 7,000,000,000 7 billion in fees every year?
Not bad
giantg2
Interesting. That would put their budget higher than the bottom 10% of state budgets.
andsoitis
Straight from the source: https://corporate.vanguard.com/content/corporatesite/us/en/c...
omgJustTest
Unless you have some super special edge, Vanguard is really good IMO. Having a 0.01% or 0.05% fund is really as good as you can do and never pay attention.
Vanguard also has things like the VIGAX (0.05%) and the VITAX (0.09%) with excellent returns over the past 20 years.
You could also actively invest, where you can get lucky, but if you have a day job... it gets tougher.
edit: also you could do "better" with lower fee funds, but they typically dont match the performance over the time period, and fidelity is a recent entry for their funds.
sega_sai
That only applies to US funds, but not in the UK ones which continue to be significantly more expensive...
giantg2
How do those compare to average expense ratios and fees in that market?
cess11
My broker doesn't show fee on some of the Vanguard instruments, but e.g. the S&P 500 UCITS ETF (USD) has 0.08 % listed as fee. Which ones are you looking at?
nexle
VWRA (all world UCITS) probably the more famous one charging 0.22%, while the closest corresponding US ETF VT (total world) is just 0.06% (dropped from 0.07%)
JKCalhoun
Article mentions their bond funds getting the most dramatic cuts — they didn't list specific symbols though.
Anyone know off the top of their heads which funds specifically? Thinking I need to move away from being so stock-heavy.
fred256
The full list is at the bottom of their press release: https://corporate.vanguard.com/content/corporatesite/us/en/c...
francisofascii
[delayed]
dinkblam
> they didn't list specific symbols though.
rule of journalism: never quote the original news/article source
rule of financial journalism: never list the ticker/wkn/isin that would make the article actually useful
im3w1l
Bonds kind of fell of my radar for a while. What are yields like now?
latchkey
Let's not forget that Vanguard has taken a strong stance against crypto [0]. Claiming to significantly invest in technology while deliberately ignoring the latest advancements in financial technology, seems contradictory. If their business was doing so well, they wouldn't have to lower fees.
mdasen
Vanguard funds are owned by the investors in those funds. The fees that they charge are to cover the expenses, not make profit for a private company. If they're doing so well that the fees are brining in more money than they need, they lower the fees so that their owners (the investors in the funds) don't have to pay as much in fees.
Their business is doing so well that they can lower fees.
latchkey
> Their business is doing so well that they can lower fees.
The counter to that is that they are not doing so well, that they need to attract more investors.
cbg0
Your counter assumes that it's one or the other, but there could be more reasons, such as doing well but looking to steal even more market share.
At over $10 trillion AUM, it's hard to think that they're "not doing so well".
giantg2
I doubt at that size you could attract enough new money to offset the reduced revenue from reducing fees on the existing $10T.
thorncorona
cynically, crypto’s greatest achievement thus far has been speed running 200 years of financial mistakes and explaining why we need financial regulation.
bityard
There is a difference between investment and speculation and lots of people learn it the hard way, eventually.
latchkey
Typically: Investment is long term. Speculation is short. Investment is looking for a gradual return over time. Speculation is betting on price.
I've been long on crypto since 2013, I'm not a crypto day trader, and I'm well aware of DeFi. I consider that an investment, not speculation.
Let people treat things the way they want to. All of the people who want to stick with Vanguard and their position are free to do so.
recursive
And now I trust Vanguard just a little more.
latchkey
I'd rather not have to "trust" any financial institution.
https://www.cnbc.com/2025/01/17/vanguard-fined-more-than-100...
https://asic.gov.au/about-asic/news-centre/find-a-media-rele...
https://www.reuters.com/business/finance/vanguard-fined-prov...
turnsout
Agreed—this strengthens my feelings about the brand. And I write this as someone who also holds (a tiny amount of) crypto
greenavocado
Vanguard won't let you trade anything even tangentially related to crypto FYI
Not mentioned in any of the coverage I've seen (or the interview with Vanguard's new CEO in the WSJ) is Fidelity.
Fidelity used to be known for actively managed funds, but has been eating Vanguard's indexing lunch for the past 10 years or so. Part of this relates to its dominance in workplace accounts, but Vanguard hasn't helped itself with some bad customer-facing software updates and a perception that its service levels are poor compared to Fidelity.
Cutting fees helps, but Fidelity has shown its willing to do this, too, including no fee "Zero" index funds: https://www.fidelity.com/mutual-funds/investing-ideas/index-... (note Fidelity is very clear about who it's competing with)