Low Fee Vanguard Joins The Competition With New Fees For Its Customers

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Vanguard has made its name for close to 50 years as a low-cost asset manager that revolutionized investing by cutting fees to the bone, so some of its customers may now be surprised to see new charges start adding up this summer.

"The people paying that fee are going to be retirees who have probably been lifelong Vanguard customers and aren't good with the internet," says Jeff DeMaso, editor and founder of The Independent Vanguard Adviser. "I understand there's an expense to have someone field those calls, but you're still dinging people who have been your longtime customers."

A Vanguard spokesperson said "the vast majority of mutual funds and ETFs trades placed today are done online," where transactions will remain commission-free, and added that it has invested in revamping the digital experience on its website and app in recent years. "Vanguard is committed to helping clients navigate toward secure, simpler, and more seamless digital pathways, and constantly evaluates our brokerage services and products, inclusive of the commissions and fee schedule," the spokesperson said in a statement. "Through these modernization efforts across web and mobile, client satisfaction has steadily improved year over year, now reaching all-time highs."

The new fees put Vanguard, which has long distinguished itself as the lowest cost provider across a host of financial services, right in step with its competition. The fine print on pricing for Charles Schwab and Morgan Stanley's ETrade also includes $25 broker service fees, and Fidelity doesn't share specifics but says "other concessions or commissions may apply if traded with a Fidelity representative." Vanguard's $100 fee to process account closures will be steeper than ETrade's $75 and Schwab's $50 for full transfers.

Vanguard, based in Malvern, Pennsylvania and founded by the late Jack Bogle in 1975, has always branded itself as different from those peers, owned by its 50 million clients who invest in its funds and share in the profits via lower costs. Its weighted average fees of 0.08% are still the industry standard collectively—BlackRock's iShares ETFs have an average fee of 0.25%—but individual index funds managed by companies like BlackRock or Fidelity are comparable or even lower cost now. The Fidelity 500 Index Fund (FXAIX) tracking the S⁘P 500 has $512 billion in assets and a 0.015% expense ratio, compared with 0.04% fees for Vanguard's $1.1 trillion 500 Index Admiral Shares (VFIAX)—more than 2.5 times more expensive.