The Powerful Signal Vanguard Is Sending to Investors

Ivanna Hampton: Vanguard is evolving as it grows bigger while keeping its investor-first reputation intact. Investing Insights recently examined the 2026 outlook for the large asset manager in a two-part series. I spoke with Dan Sotiroff on April 8, 2026. Here’s what the Vanguard analyst and associate director of US passive strategies research for Morningstar had to say about the firm.

Vanguard made it a two-peat. They cut fund fees two years in a row. How does this year’s trim compare to last year’s, and how much are investors expected to save?

Daniel Sotiroff: It’s a little smaller in terms of the number of funds and the total amount of revenue that Vanguard’s forgoing here. It’s not a small amount. Let’s be clear about that. Last year’s cut was $350 million, or estimated to be around $350 million in revenue foregone. This year’s cut was expected to come in around $250 million. So, you add those two up, and you get to roughly $600 million. So, small, like I said, but not exactly small. It’s still a meaningful cut, and you have to remember that’s revenue that’s foregone, not just this year, but in subsequent years. And then you got the compounding effect. So, 10, 15 years from now, $600 million is going to add up, and it’s going to be a much, much bigger revenue hit later down the road. It’s important from that standpoint.

Hampton: How’s the company making up that loss, though?

Sotiroff: Well, they’ve been very successful over the last couple of years. I don’t think that’s a secret. Both in terms of flows and performance of their funds. Being in broad index funds that are very cheap, those have been some of the best-performing funds over the last 10, 15 years. And people have latched on, and they’ve attracted a lot more clients over the years. It’s a combination of both those organic flows coming in, as well as just the appreciation of the fees, the assets themselves. And over time, that throws off more revenue, and it gives you some freedom to go do these things, to make more investments, to give money back to your clients, all with the aim of promoting their best interest at the end of the day. So, the thing is, as big as these are, the investments going into things like technology and client service and other things are actually much bigger.

I think some people don’t understand that sometimes. It’s like they think you’re sacrificing one for the other. I think they’re trying to do both as best they can, but there’s different trade-offs and decisions that you have to make around both of them. So, they had the money, is basically what it comes down to. The bigger point that I make with this is Vanguard didn’t have to do this. And that’s what sends such a big, powerful signal to me. Most of their funds were already really cheap. The cuts were maybe a basis point, maybe two, to a lot of these funds on average. So it’s not going to be life-changing money for me or anybody else that’s holding a Vanguard fund. But the fact that they’re willing to part with a pretty big chunk of revenue, I think sends a real signal about their financial stability as well as their intention to continue the mission.

Hampton: Has the so- called Vanguard effect prompted their rivals to follow suit and lower their fees?

Sotiroff: Not as much as we saw in the past. If you go back maybe nine, 10 years, we did see these fee wars break out where BlackRock would cut fees, and then Vanguard would follow, or Vanguard would cut fees and BlackRock and Schwab would follow, something like that. We’re not seeing as much of that anymore. And again, I think it goes back to the point I made where everything’s pretty much cheap right now. The fees more or less round to zero on a lot of this stuff. And I think a lot of people, they got into a fund that either was at BlackRock or State Street or Vanguard or Charles Schwab, wherever it is. They’ve been in that fund now for a number of years. So, seeing Vanguard come a basis point lower isn’t going to cause them to sell, realize taxes, move over to a marginally cheaper fund.

It may influence decisions about where future money goes. So it might help them win new clients because they’re slightly cheaper, but I think that’s probably the big reason why we haven’t seen a lot of competition come out.