Morgan Stanley advisers will no longer be able to offer clients Vanguard mutual funds as part of the firm's overhaul of its platform, a spokeswoman said.
The move follows an announcement by the company in April to reduce the number of funds on its platform by about 25% in a bid to close funds that have underperformed, haven't achieved scale or create potential conflicts of interest.
Although a marquee brand best known as being the industry’s lowest-cost provider is being removed from the available mutual fund offerings, its impact won't be felt too widely at Morgan Stanley. The spokeswoman said that the funds in question represent less than 5% of total mutual fund assets, and that the firm has other low-cost options.
In addition, no client will be forced to liquidate existing positions, the spokeswoman said. Indeed, clients invested in Vanguard mutual funds can maintain those holdings and add to existing positions until early 2018. The move does not apply to the asset manager's ETFs.
A Vanguard spokesman was unavailable for comment.
The company is one of the world's largest asset managers with over $4 trillion in AUM as of Dec. 31. Vanguard offers about 180 U.S. funds, including variable annuity portfolios, according to the company.
ONGOING SHAKEUP
In response to the Department of Labor's fiduciary rule, many brokerage firms have been re-evaluating the offerings on their platforms, with some cutting fees and commissions as well as culling the number of investment products available on their platforms in order to simplify compliance procedures.
For example,
Morgan Stanley recently announced changes to the commissions it pays advisers for certain products. "Beginning in May, we will introduce new commission structures for equities/ETFs, annuities and UITs in brokerage accounts that will better align client costs with the value of the service provided. Overall, these changes will lower client costs, in some cases substantially," the spokeswoman said.
