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Vanguard ETFs Ditched By Another Major Platform

October 17, 2017

TD Ameritrade is the latest financial services firm to drop certain funds from the Vanguard Group, which refuses to pay for fund distribution.

The discount brokerage has tripled the number of ETFs it offers through its commission-free program from 100 to 296 — and most of the funds are new additions, according to a TD Ameritrade press release. Investors and the more than 5,000 RIAs on TD Ameritrade Institutional now have access to commission-free ETFs from eight providers, including iShares, ProShares, JPMorgan Asset Management and PowerShares by Invesco, covering 77 Morningstar categories, according to the press release.

But conspicuously absent from that list of providers is Vanguard, and it may be related to the fund giant’s refusal to pay for distribution.

In May, Bill McNabb, Vanguard’s CEO, slammed the policy of collecting platform distribution fees as raising conflicts of interest. McNabb’s statement came a week after Morgan Stanley had announced it would stop offering Vanguard’s mutual funds. But Morgan Stanley, unlike TD Ameritrade, was trimming the number of mutual funds on its platform rather than expanding it.

Marco De Freitas, TD Ameritrade’s head of retail strategy, product and digital client experience, tells the Journal that some of the providers on the commission-free platform do indeed pay certain fees.

“We have relationships in place where certain fund providers pay us for shareholder, administrative and other services,” he tells the paper.

Nonetheless, TD Ameritrade will continue offering some Vanguard products outside the commission-free ETF platform, according to the Journal.

Bill McNabb

State Street Global Advisors, meanwhile, is hoping to attract more investors and financial advisors to its ETFs, slashing fees on 15 of them, the Wall Street Journal writes. Among the ETFs affected are the SPDR Portfolio Total Stock Market ETF and the SPDR Portfolio Large Cap ETF, which will now cost just 0.03%, down from 0.1%, according to the paper. This puts State Street’s offering on par with similar products from BlackRock and Charles Schwab, according to the Journal. In addition, the SPDR Portfolio Emerging Markets ETF’s management fee of 0.11%, down from 0.59%, will make it the cheapest emerging-market equity ETF available, the paper writes.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.
  • To read the Wall Street Journal article cited in this story, click here.