Wall Street Can’t Hold Back Vanguard’s Low-Fee Ocean

The Vanguard Group is bringing down the cost of investing and there’s nothing Wall Street can do about it despite its best efforts.

The Wall Street Journal reported on Sunday that some financial firms are making it more expensive — and in some cases impossible — for their clients to buy Vanguard mutual funds and ETFs.

Fidelity Investments, for example, will charge “some new corporate customers that hire the firm to run their 401(k) plans a fee of 0.05 percent on assets invested in Vanguard funds.” TD Ameritrade dropped 32 Vanguard funds from its commission-free lineup of ETFs, and Morgan Stanley banned “its financial advisers from selling clients new positions in Vanguard mutual funds.” (Disclosure: My asset-management firm uses TD for custody and Vanguard funds in some accounts, including my own.)

It’s a naked ploy to prop up their fees and it won’t work. This isn’t the first time that Wall Street is on the wrong side of history. When Vanguard founder Jack Bogle introduced the first index fund in 1976 — the iconic Vanguard 500 Index Fund — Wall Street famously dubbed it “Bogle’s Folly.”

Four decades later, Bogle has the last laugh. Vanguard took in a record $236 billion in net assets in 2015 and an additional $305 billion in 2016. In November, outgoing CEO Bill McNabb said that the firm was on pace to collect an additional $350 billion in 2017. Vanguard is now the second-largest money manager in the world with roughly $5 trillion in assets — multiples bigger than Wall Street firms such as Goldman Sachs and Morgan Stanley.

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TIAA’s Devotion to Investors Can Start With Fees

No other mutual fund company enjoys the Vanguard Group’s well-deserved reputation for looking after investors’ interests. But if anyone comes close, it’s the Teachers Insurance and Annuity Association, or TIAA.

The New York Times recently questioned TIAA’s “reputation as a selfless steward of its clients’ assets.” The Times cites a lawsuit and a whistle-blower complaint that accuses TIAA of pushing “customers into products that do not add value and may not be suitable but that generate higher fees.”

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