Products July 5, 2018

Vanguard Reduces Investing Costs with Latest ETFs

The firm will offer commission-free online transactions for specific funds. 

Reported by

Vanguard has announced reductions in the cost of investing with the firm by providing commission-free online transactions for the vast majority of exchange-traded funds (ETFs). The program will exclude highly speculative and complex ETFs, according to Vanguard.

Vanguard expects online transactions to be available in August and will include the majority of ETFs traded on the major exchanges. 

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

“Vanguard wants to be the premier provider for long-term investors who want the flexibility to hold a wide array of low-cost funds and ETFs, coupled with the convenience of interacting with a single firm,” says Karin Risi, managing director of Vanguard’s Retail Investor Group. “Investors will be able to assemble balanced, diversified portfolios from virtually the full universe of ETFs to meet their financial goals, add additional assets regularly, and periodically rebalance—all without paying a commission.”

In February, Vanguard broadened its ETF family beyond index-based portfolios by introducing the firm’s first actively managed ETFs. Vanguard’s five single factor funds seek to achieve specific risk or return objectives through targeted factor exposures—minimum volatility, value, momentum, liquidity, and quality. The sixth ETF follows a multi-factor approach. Vanguard has also recently announced plans to introduce two new environmental, social and governance (ESG) ETFs, expected to launch in September of this year. 

To help investors better understand ETFs, Vanguard has developed educational content and interactive tools on its website, including a “Compare ETFs” tool, enabling investors to conduct a side-by-side review of the expense ratios, portfolio characteristics, and other data of available ETFs.

Data & Research July 5, 2018

Pre-Retirees Expect to Need More Money Than What Retirees Spend

In the U.S., pre-retirees think they will need 74% of income, but retirees only receive 58%.

Reported by

People ages 55 and up expect to need 13% more income to live comfortably in retirement than retirees actually receive, according to Schroder’s “Global Investor Study: Saving for a Comfortable Retirement,” based on a survey of 22,000 people in 30 countries. In the U.S., pre-retirees think they will need 74% of their income to live comfortably in retirement, but retirees actually receive 58%, a difference of 16 percentage points.

However, the cost of living in retirement takes up more income than expected. In the U.S., pre-retirees expect they will spend 32% of their income on living costs, while retirees actually spend 54%.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

The majority of retirees consider their income to be sufficient (92% in the U.S.), but most could actually do with more (44% of that total say they could do with more income). Upon retirement, people allocated more of their financial resources to investments than pre-retirees expect to. In the U.S., pre-retirees expect to invest an average of 8% of their portfolio in retirement, but once retired, they invest 18%.

Expectations for financial allocation at retirement matures as people approach retirement. For example, Millennials expect to allocate 23% of their retirement savings to their retirement income, and Baby Boomers, 38%. In reality, retirees allocate 36% on average.

Globally, people feel they should be saving 2% more of their income for retirement. In the U.S., people are saving an average of 15% of their income for retirement, but they think they should be saving 16%. The level of investment knowledge people think they have correlates with retirement expectations and behaviors. For instance, those who think they are financially savvy have a smaller gap between what they save and what they think they will need.

People’s top two sources of information when making decisions about investments for retirement are their own research from independent sources and insight from advisers. In the U.S., 8% are doing their own research and 8% are relying on advisers.

Research Plus Ltd. conducted the online survey for Schroders last March and April. The full report can be downloaded here.

«