Vanguard is boosting fees to urge holdout customers to do their own trades online
Customers pushed to move their money to Vanguard brokerage accounts now face service fees.
Investment giant Vanguard Group is renewing its effort to get customers to embrace online banking, annoying some longtime clients.
The company, which has spent the past decade urging longtime fund investors to move their savings into the company’s brokerage accounts, now plans to raise brokerage fees in a bid to get holdouts to finally start doing their own transactions online.
New fees, effective July 1, reflect “changes to our digital interaction expectations” for its 50 million customers, the company said in a recent email. Vanguard invests nearly $9 trillion and employs 20,000 staff, more than half in or near its Malvern headquarters.
“The hits just keep coming!” says South Jersey-based Vanguard investor John Marshall, who felt doubly frustrated after the hassle of moving his money to a brokerage account last year to avoid earlier fees to be confronted now by the new brokerage fees.
“Vanguard made a big push” in recent years to get longtime mutual fund investors to move their money into brokerage accounts, said Jeff DeMaso, who publishes the Independent Vanguard Adviser newsletter. “Fees are now going up. It’s not a good look,” even if only a minority of customers will actually end up paying more.
In a statement, the company said: “Vanguard is committed to helping clients navigate toward secure, simpler and more seamless digital pathways.” The statement went on to say Vanguard mutual funds and exchange-traded funds (ETFs) can still be traded commission-free online — which is how “the vast majority” of Vanguard’s mutual fund and ETF trades are made, the company added.
If 99% of all Vanguard customers are online, that would still leave half a million affected by the new fees.
Those fees include:
a $25 “broker-assisted commission” for purchases or sales of Vanguard mutual funds and ETFs over the phone, and for margin calls and debt payments — for customers with less than $1 million invested. (Vanguard already imposes such a fee on stock trades.)
a $100 processing fee for closing a Vanguard account or transferring the assets to another firm.
a 20% charge for money recovered through class-action settlements in which Vanguard’s brokerage will handle the payments, a new service for the company.
a 1% charge on dividends collected on foreign stocks (and ADRs — American Depository Receipts — which are foreign companies’ U.S.-traded shares).
De Maso said he finds the new $25 trade fee “disappointing, to say the least. This is going to impact seniors with sub-$1 million accounts who aren’t comfortable” with moving their money on the internet.
“They’ve probably been with Vanguard their whole lives. Is that any way to treat long-term customers?” he asked.
Yet, De Maso concluded, even a $25 fee “is still cheaper” than buying a Vanguard fund as a customer of rival mass-market brokerages — though those firms have lured some Vanguard clients seeking “better service and technology.”
Vanguard officials have noted the company has posted higher customer-satisfaction ratings than big rivals in recent surveys of online-focused “self-directed, do-it-yourself investors” by market researchers at J.D. Power.
Vanguard is less of a leader, Power added, “among investors seeking guidance,” a sector Vanguard has been trying harder to reach with help from its automated digital advisory services.
There’s a growing group of relatively affluent Americans who are retiring younger, living longer, and in need of “financial planning, cash-flow management, trust and estate [planning], business exit planning,” and other stressful services, which haven’t been Vanguard’s strong point, said Matt Topley, head of the Lansing Street Advisors investment agency in King of Prussia.