Fund giant Vanguard is the latest brokerage to slash trading fees to zero
- Investment management firm Vanguard is the latest to cut its trading fees to zero, according to a Thursday announcement.
- The move brings Vanguard in line with industry peers Fidelity, Charles Schwab, TD Ameritrade, and E*Trade, which all slashed their commission fees in fall 2019.
- Vanguard's new policy will still levy a $1 fee per contract for options transactions.
- The announcement comes just months after CEO Tim Buckley told Barron's he feared fee-free trading would lead clients to "churn and burn" their accounts.
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Fund giant Vanguard is the latest brokerage service to cut its fees to zero, announcing Thursday it would extend commission-free trading for stocks and options to all clients.
The move brings Vanguard in line with most other major brokerage firms. Interactive Brokers kicked off the fee cuts in late September, with Fidelity, Charles Schwab, TD Ameritrade, and E*Trade similarly slashing commissions in the following weeks.
Online trading platform Robinhood was among the first services to offer commission-free trading in March 2015. The startup has since added new features like fractional share trading to compete with legacy firms and their zero-fee trading services.
Vanguard already offered zero-commission exchange-traded funds through its platform. The company's new policy will still levy a $1 fee per contract for options transactions.
"Lowering the cost of investing is business as usual for Vanguard," Karin Risi, managing director of Vanguard's Retail Investor Group, said in a statement. "The expansion of our commission-free platform marks the latest demonstration of this unwavering commitment to our clients."
The change-up arrives only a few months after Vanguard CEO Tim Buckley told Barron's in November that he wasn't convinced commission-free trading would benefit the firm's customers. The investment management company didn't want to encourage users to "churn and burn" their accounts through rapid-fire day trades, Buckley said.
Though some analysts feared the slashing of fees would cut out a major revenue source for brokerage firms, some companies have already reported the move to be successful in attracting new clients. Schwab saw trading accounts jump 31% in one month after dropping trading fees, according to a November 14 press release. The 142,000 new accounts also helped bring Schwab's total client assets to a record $3.85 trillion.
Vanguard's clients may be of a more bullish nature and not use the fee-free trading as often. Only 4% of the firm's customers exited their equity positions during the financial crisis, Buckley told Barron's.
"We're proud of that," he said. "Most of them sat tight. When people come here, they believe in a buy-and-hold strategy."
Vanguard managed $6 trillion in global assets as of November 30, according to the company's announcement. The firm serves more than 30 million accounts.
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