This was a good question I saw posted at a forum I read, so I thought I’d copy it here and post my response as well:

When I mentioned to a friend that I was leaning towards Vanguard he told me that I shouldn’t put my eggs in one basket. In other words, I shouldn’t open up the Roth directly with Vanguard, but rather use a brokerage such as Schwab. Now, firms like Schwab offer no fees on their own funds, but wouldn’t I get charged a lot of money every time I made my monthly/quarterly/etc. deposit on a fund that’s not in-house such as Vanguard?

That doesn’t make any sense to me. If you’re investing in a Vanguard index fund, open an account with Vanguard. Like you said, most discount brokers only have a limited selection of funds you can deposit in without paying a charge. Vanguard recently changed their fees so you can invest with whatever amount you want and never get charged a dime as long as you elect to use their electronic paper system.

If you ever decide you want to invest in individual stocks, or other non-Vanguard funds, just open up another IRA account at a different brokerage (you are allowed to have more than one IRA account).