Vanguard's average fee is now 0.07% after biggest-ever cut

Original Article ↗ Hacker News Discussion ↗

Vanguard vs. Fidelity and Other Brokers

  • Many compare Vanguard with Fidelity: Fidelity is praised for better UX, apps, and customer service; Vanguard for lower costs and perceived alignment with investors.
  • Fidelity “Zero” index mutual funds have 0% expense ratios but are captive (can’t be ACATS‑transferred); this is fine in tax‑advantaged accounts but risky vendor lock‑in in taxable accounts.
  • Investors often use Fidelity (or others) as broker but hold Vanguard ETFs (e.g., VOO/VTI) because ETFs transfer easily and trade free.
  • Some criticize Vanguard offloading small 401k/SIMPLE/solo plans to third‑party administrators and forcing fund‑only accounts into brokerage structure.

Mutual Funds vs. ETFs, Transfers, and Taxes

  • Vanguard mutual funds with ETF share classes can be converted to ETFs at Vanguard without a taxable event; otherwise you may need to sell and realize gains.
  • Non‑proprietary mutual funds at a broker usually incur transaction fees; Vanguard ETFs trade free at most large brokers.
  • ETFs are generally more tax‑efficient; mutual funds still have conveniences (simple auto‑invest, daily NAV, no bid‑ask spread, long‑established workflows for dividends).

Fees, Bond Funds, and Non‑US Investors

  • Commenters link to Vanguard’s own release listing the fee cuts, especially on bond funds (e.g., some intermediate‑term and emerging markets bond ETFs drop a few basis points).
  • Bond yields around 4–5% lead some to reconsider heavy equity allocations.
  • Several note non‑US products (e.g., UCITS VWRA/VWRP) remain much more expensive than equivalent US ETFs (e.g., VT), and UK platform fees have risen.

Payment for Order Flow, “Front‑Running,” and Trust

  • Strong debate around “front‑running” and payment for order flow (PFOF):
    • Some fear hidden costs or illegal behavior akin to Robinhood/Citadel dynamics.
    • Others clarify PFOF is legal, distinct from illegal front‑running (which requires trading on material non‑public client order info).
    • There’s argument over whether trading ahead of predictable index rebalances should be called “front‑running” at all.
  • Fidelity is said (by multiple commenters) not to use PFOF in equities, similar to Vanguard; some argue customers still benefit from market makers.
  • Securities lending is highlighted as a “hidden” source of fund revenue; Vanguard tends to share more of that with investors, effectively reducing net costs.

Ownership Structure and Governance

  • Vanguard’s mutual ownership (funds owned by investors) is seen by many as a major plus vs. family‑owned Fidelity, aligning incentives toward lower fees.
  • Others say in practice small investors have no real control in either case.
  • Concern about index giants concentrating voting power; interest in pass‑through voting or delegating votes to aligned proxies. Vanguard is starting limited proxy‑voting options for some fund holders.

Crypto Stance

  • Some criticize Vanguard’s anti‑crypto stance as ignoring “financial technology”; others say this increases their trust, preferring focus on companies producing real goods/services.
  • Debate over whether crypto is investment vs. speculation; usability, custody risk, and UX are recurring concerns.

UX, Customer Service, and Platform Experience

  • Heavy criticism of Vanguard’s recent web redesign: less information‑dense, broken or buried tools (e.g., tax‑lot sorting), clunky order flows, and forced migrations.
  • Experiences with customer service are mixed: some report long phone trees and unhelpful reps; others say they consistently reach knowledgeable humans quickly.
  • Fidelity’s apps and card integration get praise but also complaints about slow, dated interfaces and third‑party card servicer issues.

Indexing vs. Active and Leveraged Strategies

  • Broad agreement that low‑cost index funds are hard to beat; arithmetic arguments (Sharpe) and time‑value calculations show even 0.5% fees compound heavily.
  • Some argue tiny differences (0.07% vs. 0.09%) are practically negligible; others point to long‑term compounding and tracking difference as still worth watching.
  • A minority describe success with long‑term holdings of 3x leveraged ETFs (e.g., TQQQ/UPRO), while acknowledging high risk, volatility drag, and potential for large drawdowns.