With many brokerage firms and mutual fund companies already dipping their feet into retail banking, it may come as no surprise that Vanguard, one of the largest mutual-fund companies in the country, is considering doing the same.

In addition to offering more bank-like services, Vanguard could start its own retail bank or partner with an existing one, the company’s department head of portfolio review Sean Hagerty told Reuters. Customer have been asking for more banking services, so Vanguard sent out a customer survey recently to measure demand, Hagerty said.

Products like savings accounts and certificates of deposit (CDs) could be in the cards.

One checking-like account by the company already offers check-writing, bill payment and ATM privileges through an agreement with PNC Bank. Called VanguardAdvantage, it is only available to clients that have at least $500,000 in assets in Vanguard investments.

Currently, many other brokerages and mutual fund companies offer full-fledged deposit accounts. Fidelity, Charles Schwab, Scottrade and ETrade are some examples of companies that have become viable alternatives to traditional banks. However, they tend to act more like online banks because they do not have vast branch and ATM networks.

Some of the most notable benefits of banking with these companies include low costs and neat perks. Fidelity’s Cash Management account charges no monthly fees or ATM-access fees. Scottrade offer free overdraft protection through a linked brokerage account. In a time when checking accounts are riddled with fees, they appear to be the cost-friendly options.

With savings accounts and CDs, Vanguard can hope to retain some of the client money that has exited money-market funds and gone to deposit accounts. Vanguard’s Prime Money Market Fund currently has a 0.04% annual yield. Most online savings accounts and CDs can beat that return without breaking a sweat.

TIAA-CREF, another large fund company, was the latest to enter the banking industry with the online bank TIAA Direct. Currently, it tops the charts with a whopping 1.25% APY savings account and has competitive products in interest checking and CDs. Similar offerings are within the realm of possibility for Vanguard.

Vanguard carries a reputation for low-cost index funds, which has made it popular among do-it-yourself investors. If its low-cost culture is adopted in its future banking arm, consumers may have more options if they choose to leave the traditional banking scene.

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  • Sally G

    NObody asked me; I am a Vanguard customer and got no survey.
    I would vote No, and I will probably pull out what money I have left in Vanguard if true.
    Of course, nobody from Vanguard will read this comment.

  • Simon Zhen

    It is likely that Vanguard did not survey every single customer. (I am a Vanguard client and I don’t recall being offered to take this survey.)

    I’m looking forward to see the offerings before banking with Vanguard. Is there a reason you would leave Vanguard if it went into banking?