Price Cuts the Flavour of the Season: Vanguard Europe Slashes Fees on ETFs and Index Funds

Vanguard adds fuel to the fee cut fire in financial services by slashing fees across its ETFs and index-tracking funds.

Vanguard, the passive investing giant, cut its fees down to an average of 0.2% across its index and ETFs product offerings.

This latest thrust by Vanguard could force other fund managers to follow-through with competing moves, thus taking industry price battles notches higher. Not the best of developments for an industry already facing competitive and regulatory pressures.

Vanguard cut: Ratcheting up the stakes

The latest Vanguard cut follows on its fees reduction in June. At the time, Vanguard cut fees on its Global Equity, Global Equity Income, and Global Balanced funds to 0.48% a year from 0.78%.  It slashed fees on its Global Emerging Markets fund from 0.8% to 0.78%.

In the current round, the Vanguard cut its fees on 22 of its 27 index funds and 13 of its 22 ETFs. The average fees on indexed funds will now be 0.15%; however, fees will be 0.1% on the ETF range.

Vanguard cut its fees on the active Sterling Short-Term Money Market fund from 0.15% to 0.12%.

How fees matter to investors

Sean Hagerty, head of Vanguard for Europe, said costs really impact the returns investor make. “Every pound paid in fees is a pound off investors’ returns,” he said. “Investors cannot control the markets, but they can control the fees they pay.”

Price wars in stock-trading

Investors have it good these days. Fidelity Investments announced earlier this month that it is eliminating commissions for stock trading. On Monday, Bank of America cut commissions to zero for Preferred Rewards customers. Previously, Charles Schwab, Ameritrade, and E*Trade went the commission-free route, taking a leaf out of disruptor Robinhood’s book.

[Related Story: VALT, the ETF for Liquid Fixed Income Returns ]


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