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Welcome to Investing Insights. I'm your host, Ivana Hampton. Vanguard is reminding investors about its low-feet roots. The world's second biggest money manager made a historic cut this week.

It reduced the expense ratios of almost 90 mutual funds and exchange-traded funds. The list

includes popular, passive, and actively managed funds. What does this mean for Vanguard's customers

and its rivals? I checked in with Dan Soteroff to get his insights. He's a senior

manager research analyst for Morningstar Research Services and covers the firm. It's good to see you, Dan.

Good to see you too, Ivana. I want to know. What was your reaction to Vanguard's news?

Overall, it's like overwhelmingly positive, right? Like, I think we love fee cuts, especially being an analyst at Morningstar, right? It's like, it's a direct way we can see that an asset manager is giving money back to clients at the end of the day. So it overall, it's great. There's a little bit of nuance here. I think that we have to unpack. First of all, fee cuts were pretty modest when you looked at it on an individual share class level, right? The

median cut was about one basis point. I think the asset weighted came out to be a little under two

basis points per share class. So it's not life-changing money that these fee cuts are really going,

the impact's going to be pretty small at the individual investor level. I think the bigger signal here

is really the revenue hit that Vanguard's

taking. A $350 million hit this year. And if you think about it, it compounds over subsequent years,

right? So that's a lot of revenue. They're essentially just giving up. It's foregone revenue.

They're essentially giving back to investors. So it's, yeah, usually positive signal.

Well, Vanguard is already well known

for charging cheap fees. Why do you think they trim them now? Yeah, it's a good question, and I kind of

hinted at this in my article that I wrote from Morningstar.com. First, the obvious Vanguard's been

massively successful over the last couple of years, right? Like, I don't think that's a surprise.

I think when I was talking with Susan, I said they took in around $222 billion last year, or something close to that. That was in net flows. If you look at over the past three years, the number is even bigger. I think it's somewhere around $530 plus billion. So they've taken a ton of revenue. Their funds are growing a lot because the market's up. So I think some of it was just passing on that incremental revenue to investors, as we've come to No Vanguard to do, right? I think that's it. Also, you have to kind of look at the context around what's been going on in the news. They've made some mistakes over the last couple years. I think it's safe to say. I don't think they're intentional mistakes. They are humans after all and make mistakes. But they've got some bad PR for that. And then you throw in, you know, you hire an outsider to come in and run the company from one of your biggest competitors. And it's sort of put a cloud over everything, right? So is Vanguard still going to be the Vanguard that we know and loved over the last 50 years? Is that going to continue? And so I think a little bit may have been just to buy some goodwill from their clients, too. As an analyst, I can't overlook that, right? I don't want to be the Debbie Downer, but I do have to sort of acknowledge that. But either way, if you're trying, like, this is a great way to do it, Right, directly giving back a really big pile of money to investors is a really good signal to send.

And I will point the audience to the show notes.

Dan, you and Susan Jubinsky talked about what's ahead for Vanguard in 2025.

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