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ETF News

Vanguard cuts trade,ETF costs to brokerage clients

* Says no commissions on 46 exchange-traded funds

* Move follows fee waivers by Fidelity, Schwab

BOSTON, May 4 (Reuters) - Vanguard Group Inc said it will slash equity commissions for its brokerage customers, including allowing free trades in its line of 46 exchange-traded funds.

Commissions for trading stocks, which ranged as high as $45 per transaction for customers with less than $50,000 at the firm, will decline to a range of $2 to $7. Trades in Vanguard’s popular line of ETFs, which had been subject to the same fees, will be free.

The rates apply to both online transactions and those done with a Vanguard representative, Vanguard said.

The move to slash equity commissions follows multiple fierce bouts of price cutting over several years by brokerage competitors like Fidelity Investments, Charles Schwab Corp SCHW.N and TD Ameritrade Holding AMTD.O.

By allowing free ETF trading, Vanguard follows more recent moves by its competitors to seize market share in the fast-growing segment. Free trades could help boost sales of popular Vanguard products, including shares in its $24 billion Vanguard Emerging Markets ETF and its $15 billion Total Stock Market ETF. Among their challengers are ETFs sold by the iShares unit of BlackRock Inc BLK.N.

In February, Fidelity of Boston said it would waive trading commissions on 25 of BlackRock’s most popular iShares ETFs. That followed Schwab’s announcement last fall allowing customers to trade its new line of in-house ETFs for free online.

The competition reflects growing investor interest in ETFs, which typically charge lower fees compared with traditional mutual funds. Many also offer tax advantages.

“This move means Vanguard has clearly embraced investors’ demands for low-cost and no-cost trading in ETFs,” said Daniel Wiener, who edits a newsletter for Vanguard clients.

However, Wiener noted the move could also put Vanguard in competition with the brokers who are among the biggest sellers of its ETFs. “It’s definitely a shot across all bows in the brokerage fleet,” he said.

A Vanguard spokesman, John Woerth, said clients who use brokers and those who trade online tend to be distinct groups and do not compete with each other.

“Vanguard now becomes more attractive to do-it-yourself investors,” he said, adding, “It really has no impact on those investors who maintain a relationship with a financial adviser, planner, or broker.”

Vanguard said its average ETF expense ratio is 0.18 percent, compared with an industry average of 0.52 percent, citing data from Lipper, a Thomson Reuters company. In all, it has more than $100 billion in ETF assets, Vanguard said, more than double the figure of a year ago.

Under Vanguard’s new commission schedule, customers with less than $50,000 at the company will pay $7 per trade for up to 25 trades per year, and $20 for each subsequent trade. That is down from $25 to $45 per trade under prior pricing.

Clients with $50,000 to $500,000, who paid $20 to $45 per trade previously, will have unlimited $7 trades.

Trades for those with $500,000 to $1 million will cost $2 each, and customers with over $1 million at Vanguard will get 25 free trades per year. (Reporting by Ross Kerber. Editing by Aaron Pressman and John Wallace)

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