Vanguard CEO McNabb on Fees, Passive Management

The transcript discusses Vanguard's approach to reducing fees and its impact on the market. It covers Vanguard's cost strategy, future fee predictions, and the role of competition. The discussion also touches on Vanguard's business model, regulatory impacts, and the rise of robo-advisors. The trend of passive over active investing is highlighted, with insights into how technology is shaping the industry.

What is Vanguard's primary strategy for reducing fees?

• Offering promotional discounts

• Increasing marketing efforts

• Reducing costs through economies of scale

• Competing on a product-by-product basis

How has Vanguard's average fee changed since its founding?

• It has decreased significantly

• It has remained the same

• It fluctuates frequently

• It has increased significantly

What is a potential outcome of increased competition in the investment industry?

• Increased fees for investors

• Decreased transparency

• Consolidation of firms

• More high-cost active management

Why does Vanguard not disclose senior executive compensation?

• To maintain a competitive advantage

• Because it is a public company

• To avoid paying taxes

• Because it is required by law

What impact does the Department of Labor Fiduciary Standard have on investors?

• Eliminates passive investment options

• Saves investors billions in fees

• Decreases investment transparency

• Increases investment fees

What is a key driver for the shift towards passive investment vehicles?

• Higher returns compared to active management

• Lower costs and increased transparency

• Government regulations

• Investor preference for high-risk investments

How does Vanguard's personal advisor service compete with traditional advisors?

• By charging lower fees through technology

• By providing personalized in-person consultations

• By offering higher returns

• By focusing on high-net-worth individuals

What is a potential benefit of robo-advisors for investors?

• Limited investment options

• Increased efficiency and lower costs

• Higher fees

• Less personalized service

What trend is observed in the 401K business regarding investment management?

• A decrease in the use of target date funds

• A preference for individual stock selection

• An increase in passively managed target date funds

• A shift towards high-cost active management

What is the expected trend for the use of target date funds in 401K plans?

• A decrease in usage

• A plateau at current levels

• An increase to 65-70% usage

• Complete replacement by individual stocks