The Vanguard Group is getting cozy with an old rival: full-service brokerages. Falling behind in the race to grab investors for exchange-traded...

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PHILADELPHIA — The Vanguard Group is getting cozy with an old rival: full-service brokerages.

Falling behind in the race to grab investors for exchange-traded funds (ETFs), the nation’s second-largest mutual-fund company has quietly formed alliances with its higher-fee competitors.

While investors can buy ETFs on their own through a broker, Vanguard’s inclusion in the portfolios recommended by full-service brokers boosts the do-it-yourself firm’s exposure to clients it hasn’t fully targeted before — those who want someone else to manage their money.

“It will be very weird to hear a broker start talking about Vanguard,” said Dan Wiener, editor of The Independent Adviser for Vanguard Investors in Potomac, Md. “Vanguard is a no-load outfit.”

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Established in 1975, Vanguard was founded by John Bogle, who believed in the idea of providing low-cost services to ordinary mutual-fund investors. It introduced the first indexed mutual fund to individual investors, now known as the Vanguard 500 Index Fund.

In 1977, Vanguard ended its reliance on outside brokers, got rid of sales commissions and began directly marketing its funds to investors. Currently, Vanguard manages $850 billion in U.S. mutual-fund assets, including $245 billion in employer-sponsored retirement plans.

Partners in the new venture include Smith Barney, Morgan Stanley, Union Bank of Switzerland, Raymond James, Wachovia and Park Avenue Securities. Several brokerages will offer Vanguard’s ETFs through their model portfolios.

Exchange-traded funds are securities that represent a basket of investments and are traded like a stock. Like mutual funds, they offer diversification. But unlike them, ETFs tend to be cheaper and more tax-efficient.

Vanguard’s ETFs are called Vanguard Index Participation Equity Receipts, or Vipers.

ETFs have been gaining in popularity. In the week ended July 13, three-fourths of $3.4 billion in net cash inflows earmarked for equity funds went to ETFs, according to AMG Data Services, an Arcata, Calif., firm that tracks fund flows.