Why we’re lowering the cost of investing in ETFs


Amy Chain: On Monday, July 2, we announced that the vast majority of ETFs will be available commission-free to Vanguard investors, starting in August. I’m joined by Karin Risi—managing director of Vanguard’s Retail Investor Group—to talk about this exciting change.

Karin, thanks for being with us.

Karin Risi: Thanks for having me. Happy to be here.

Amy Chain: Now tell us—why has Vanguard decided to offer nearly 1,800 ETFs totally commission-free?

Karin Risi: Well, the simple answer is, we think broadening access is good for investors—the millions of investors that we serve here at Vanguard and, we hope, investors all across the industry because we know that many investors share in our belief that low cost is important.

Probably not a surprising statement coming from Vanguard. It pretty much aligns with everything we do. But in this instance, the point is bolstered by research—both our own research and market research—which indicates that when investors are choosing a brokerage provider, they rank their ability to purchase ETFs at the lowest possible commission among their top priorities.

And we want to remove those barriers. We want to allow investors who choose ETFs to build that relationship with Vanguard.

Amy Chain: Karin, let’s switch gears a little bit. With Vanguard lowering the cost of investing in ETFs, we seem to be making a statement about their importance as an investment vehicle. Why should investors consider ETFs?

Karin Risi: Well, Amy, you’re right—ETFs are important and they have been for some time. Interest in ETFs has been on the rise for more than a decade—first among traditional institutions, quickly followed by financial advisors.

And now we’re seeing increasing interest and adoption of ETFs among self-directed investors too. That’s true across the industry and within Vanguard. In fact, ETFs are the fastest-growing product category among self-directed investors.

Amy Chain: Really? Now what do you think is driving this interest?

Karin Risi: You know, Amy, I think investors are increasingly preferring to use ETFs to build low-cost, broadly diversified portfolios. They’re using them as these foundational building blocks for a long-term investment plan.

Amy Chain: Vanguard has always been committed to lowering costs for investors, and the industry has certainly taken notice. Do you expect Vanguard to stay at the forefront of this trend?

Karin Risi: Absolutely. Our commitment to low cost remains as strong as ever.

While we’re excited to be making this particular change with commission-free ETFs, in many ways this is an extension of what we do at Vanguard. For investors that know us well, they know that we’re built to make this change. It’s our structure and they understand it. It’s putting clients’ interests first—no compromise, no conflict.

But for investors that don’t know us well, if you’ve heard anything about Vanguard, you probably know one thing—and that’s that low cost is in our DNA. It’s really simple: When investment costs are lower, investors benefit.

Amy Chain: So really what you’re saying is while this change is new for Vanguard, lowering costs for investors really isn’t?

Karin Risi: That’s exactly right. This change is new, and we’re really excited about it. But lowering costs? Not a new concept for Vanguard. In fact, we’ve been doing it for four decades.

We started with products—lowering the expense ratios on our funds and our ETFs. We’re continuing with advice—offering comprehensive, personalized advice at a fraction of the industry average. And now we’re adding commission-free ETFs to mix. It’s just another example of Vanguard’s intent to drive down the complexity and the cost of investing.

So yes, a long way of saying, you should expect that to continue.

Amy Chain: So, Karin, when you say we want to lower the cost for investors, we don’t just mean Vanguard investors, do we?

Karin Risi: That’s right. Our mission is to take a stand for all investors. So if this particular change motivates our industry peers to lower their costs, well, we’re happy to have led the way because we think that leads to better investment outcomes for all investors.

Amy Chain: This decision marks a big change for the Vanguard investing community. Can we expect more change on the horizon?

Karin Risi: Always. Change is also in our DNA at Vanguard, particularly when it’s positive change for our clients. And we know that that actually extends beyond our low-cost product.

Vanguard clients experience us in many different ways, so we’ll be investing in technology to support the brokerage experience, but also the broader digital experience for clients.

Amy Chain: Tell us what we mean by that.

Karin Risi: Well, I’m really talking about the end-to-end experience at Vanguard, which we know will be increasingly digital. So we’re investing in exciting and innovative technology to increase the ease and convenience that clients have in interacting with Vanguard.

We’re also continuing to invest in advice. We want to continue providing affordable and accessible advice to as many clients as we know we can help meet their financial goals.

Amy Chain: So, Karin, certainly there are some things that will never change here at Vanguard. Take us through what they are.

Karin Risi: That’s true. At Vanguard, there are a few constants, and our investors can count on them. One of them I mentioned earlier, and that is our unique structure. That’s really important. Second, our investment principles and our client-focused culture.

When we think about big decisions at Vanguard, we test every decision we make against that philosophy of doing what’s in the best interest of our clients. And this latest decision to offer nearly 1,800 commission-free ETFs is just another example of Vanguard doing what our clients and the industry should expect from us.

Amy Chain: Investors will always come first at Vanguard. Karin, thank you so much for being with us. You can learn more about this by visiting vanguard.com. Thanks for watching.


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