American Broker Giant Expands Free Offerings
Mutual fund broker Vanguard Group just added more assets into free trading, stocks, and options. The no-fee structure took effect on January 2 for all accounts, replacing previous charges which ranged from $2 to $7.
It used to offer 25-100 free trades per month only to investors with $1 million in their accounts. Now, Vanguard is making assets more affordable to clients as an attempt to catch up to its discount rivals.
Before the recent price cut, clients were able to trade exchange-traded funds without commissions.
Karin Risi, the Group’s managing director, said they’ve been dedicated to lowering funds for several offerings. She said the extension of their commission-free platform was a demonstration of their commitment to their clients.
Their business model will resemble Robinhood’s, which uses interest on customer accounts as income. When Vanguard noticed that the Millennial-based broker surpassed E-Trade in number of users, the giant fired back with enhanced free-trading.
Risi also encouraged investors to “look deeply at the total cost picture.” The broker remains as an advocate for clear and transparent fee disclosure.
Vanguard vs Robinhood
Questions of Robinhood’s transparency rise with its fame. Although the industry-disrupting firm is building its own clearing system, critics question if it’s sustainable enough.
There’s also speculation of potentially reaching a point of stricter regulatory action. Investors may come back to a time when brokerages fraudulently tell clients their services are free.
Several instances in the past also point towards governance issues that question their business model. Some reports raise concerns of where their revenue comes from.
Robinhood competitors shared the company’s lifetime revenues between $600 and $650 million. 25% of its current income comes from interest on customer accounts while 55% comes from their order flow.
The broker declined to comment on the figures. However, sources said the “vast majority” of its money is untouched.
