+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

Fund giant Vanguard is the latest brokerage to slash trading fees to zero

Jan 2, 2020, 21:51 IST

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.

Advertisement

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."

Advertisement

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.

Advertisement

Now read more markets coverage from Markets Insider and Business Insider:

'This is the shareholders' money': Billionaire Warren Buffett argues that companies should stop making decisions based on their social beliefs

A Tencent-led consortium buys 10% of Universal Music, valuing the world's biggest music firm at $34 billion

SoftBank-backed Improbable lost its CFO, chief people officer, and chief creative officer in 2019

You are subscribed to notifications!
Looks like you've blocked notifications!
Next Article