I've lived in the US and have mutual funds through vanguard where the management fee is around 0.2% (see link). I've moved to Australia, and I'm looking at fees of almost 1% (see link).

Why is this? Is this a Vanguard specific difference, or are Australian fees just much higher?

  • By "Vanguard specific difference", do you mean "Is Vanguard the only company to have much higher fees in Australia than in the U.S.?" – Jasper Oct 1 '15 at 17:29
  • @jasper Yes. And I guess, if all other companies have similar fee increases, what's the underlying reason? – Joel Oct 1 '15 at 19:32

This is a Vanguard-specific difference in the sense that in the US, Vanguard is a leader in lowering management fees for the mutual funds that they offer.

Of course, several US mutual fund companies have also been lowering the expense ratio of their mutual funds in recent years because more and more investors have been paying attention to this particular performance parameter, and opting for funds that have low expense ratios. But many US funds have not reduced their expense ratios very much and continue to have expense ratios of 1% or even higher.

For example, American Funds Developing World Growth and Income Fund (DWGAX) charges a 1.39% expense ratio while their 2060 Retirement Fund (AANTX) charges 1.12% (the funds also have a 5.75% sales charge); Putnam Capital Opportunities Fund charges 1.91% for their Class C shares, and so on.

Many funds with high expense ratios (and sometimes sales charges as well) show up as options in far too many 401(k) plans, especially 401(k) plans of small companies, because small companies do not enjoy economies of scale and do not have much negotiating power when dealing with 401(k) custodians and administrators.

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  • Among 401(k) plan fund managers, Vanguard has a few U.S. competitors with similarly low management fees, including T. Rowe Price. – Jasper Oct 1 '15 at 17:24
  • @Jasper Thanks for the downvote. The management fee charged by a typical US mutual fund is on the order of 1% or more and there are many 401k plans that offer only such funds. – Dilip Sarwate Oct 1 '15 at 17:32
  • Wow! I've never been thanked for a downvote before. And now that I look at the T. Rowe Price fee schedule, I am surprised to find that most of their 401(k) funds have management fees of about 0.60% - 0.80%. It is just the choices I used (including the Equity Index Trust) that had fees of 0.10% - 0.20%. Unfortunately, it is too late for me to reverse my downvote. – Jasper Oct 1 '15 at 17:41
  • You've said that this is Vanguard specific, but nothing you've said shows that Vanguard isn't also a leader in lowering fees in Australia. Maybe everything else in Australia is much more expensive. – Joel Oct 1 '15 at 23:11
  • @Joel Please look at some non-Vanguard Australian funds. Are their expense ratios more than 1%? If so, then Vanguard Australia is also a leader in reducing expense ratios there. If lots of funds have lower expense ratios and offer products very similar to Vanguard's, then Vanguard is not a good choice in Australia. – Dilip Sarwate Oct 1 '15 at 23:30

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