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The Daily Brief

Vanguard Responds to Fidelity. Is Cash the New Fee War?

The fund giant responds to Fidelity, saying its money market fund currently yields 2.17%.

Fidelity and Vanguard are often at odds with each other over whose index fund fees can go lower. But Fidelity, perhaps, has stoked a new war with the fund giant, when this week the firm highlighted its long-standing policy of sweeping client cash in retail brokerage and retirement accounts into its government money market fund, currently yielding 1.91%. Vanguard issued a statement Thursday and took to Twitter, saying that its brokerage clients are automatically swept into an even-higher-yielding money market fund.

The Vanguard Federal Money Market Fund has a seven-day yield of 2.17% (as of Aug. 7) and has an expense ratio of 11 basis points, the company said, in the statement.

In its press release issued Wednesday, Fidelity compared its money market fund with others’ default cash sweep accounts, including Schwab, E*Trade and TD Ameritrade. But it did not analyze Vanguard’s cash offerings.

"Fidelity changed the automatic default selection for brokerage cash to SPAXX in Q3 2015, and retirement cash to SPAXX in May 2019. What we’re doing today is shining a light on an industry practice that investors should be aware of to avoid potentially leaving money on the table," said a Fidelity spokesperson.

In its statement, Vanguard goes on to highlight some of the benefits of its brokerage platform, including its suite of commission-free ETFs, the 3,000 mutual funds (from Vanguard and others) that can be purchased with no transaction fees and its low transaction fees ($0 to $7) for buying equities online.

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