Vanguard welcomes fee wars with rivals Fidelity and BlackRock

Vanguard's incoming chief executive officer said the company will keep lowering fund expenses as it grows.
AUG 04, 2017

Vanguard Group has a message for competitors trying to undercut its prices: Game on. In recent years, rival asset managers such as Fidelity Investments and BlackRock Inc. have cut their fund fees to match or beat Vanguard, the low-cost investing pioneer with $4.4 trillion in assets. Tim Buckley, Vanguard's new president and incoming chief executive officer, said the company will keep lowering fund expenses as it grows. "As we continue to get scale, as we continue to grow and we get more efficient, we pass a large part of that back to our clients in the form of lower expenses. That's not going to stop," Buckley said Thursday on a company webcast. "If other people want to offer index funds, great. But you better be ready to keep lowering price, and we're going to do it across every product." (More: Vanguard winning at bond inflows, too) Fee wars have broken out across the U.S. asset management industry. This week Fidelity announced fee cuts on 14 passive products and said some of its funds now have net expenses below comparable ones at Vanguard. BlackRock, the world's largest money manager, last year reduced expense fees on 15 exchange-traded funds and Charles Schwab Corp. has also attracted money to its ETFs by trying to undercut Vanguard on similar products. Last year alone 226 Vanguard funds and ETFs reported expense ratio declines, saving customers an estimated $337 million cumulatively, the company said. On Thursday's webcast, billed as a chance to introduce customers to the company's new leadership, Buckley also discussed Vanguard's efforts to expand outside the U.S. The company now has more than $300 billion in assets abroad, including direct businesses in the U.K. and Australia. (More: Vanguard targeting overseas market with active funds) "You can expect to see Vanguard continue to grow globally and that growth will help investors back here [in the U.S.]," Buckley said. "It gives us that added scale we talked about, that we can keep pushing prices down and continue benefiting from having a global investment team." Buckley, who previously was Vanguard's chief investment officer, succeeds current CEO Bill McNabb on Jan. 1. (More: Can Buckley run the house that Bogle built?)

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