For decades, Jack Bogle has let Wall Street know what he thinks of it: That the army of besuited money managers crowding the island of Manhattan and city of Boston are beneath his contempt as they literally steal their clients’ money to do a lousy job, all the while literally eating their lunch while doing so—Bogle’s Vanguard Group has gobbled up $3.5 trillion in assets during Bogle’s 80s.
Well, the downtrodden aren’t going to take it anymore. Poor little Fidelity Investments, which manages just $2.3 trillion of the $6.2 billion entrusted to it overall, isn’t going to pay for the pleasure of looking stupid at Bogle’s hands anymore.
Fidelity, the largest 401(k) plan administrator in the country, will now charge some new corporate customers that hire the firm to run their 401(k) plans a fee of 0.05% on assets invested in Vanguard funds. That new fee covers administrative services that Fidelity provides as a 401(k) record-keeper, a spokeswoman for the Boston firm said….
Executives from the two firms have been in talks for years over Vanguard’s refusal to pay the servicing costs. In December, leaders from both firms met at Vanguard’s Pennsylvania headquarters, and Fidelity executives pressed the firm to reconsider its stance, according to people familiar with the matter. Fidelity ultimately put the fee change in place without notifying Vanguard, the people said.
And it’s not just Fido! Morgan Stanley won’t be doing Vanguard’s bidding anymore, either, and neither will TD Ameritrade, all on principle, since shutting clients out of popular products easily available elsewhere is at best a dubious business proposition.
TD Ameritrade late last year overhauled its commission-free ETF trading lineup, dropping all 32 Vanguard products it had previously included….
While some moves have made rival funds relatively less expensive, they have so far done little to halt the tidal wave of new cash flowing into Vanguard’s products and in some cases risk driving investors loyal to Vanguard to the firm’s own retirement administration and brokerage businesses.