In the ongoing ‘race-to-zero,’ Vanguard and Dimensional  both cut fees this week.

Vanguard lowered expense ratios on three international income-oriented funds and four externally managed equity funds on December 19. For good measure, on December 24, the fund house followed that up with another reduction in fees on nine stock and bond ETFs and two active funds. Dimensional, too, added to the Christmas cheer with its own fee reductions.

After Vanguard’s December 19 cuts , aggregate savings to clients had totalled $41.7 million across 50 fund and ETF shares this year.

Moreover, the second round of changes represent $27.7 million in savings returned to investors. This brought the total 2019 Vanguard client savings to $69.3 million.

Dimensional

Meanwhile, Dimensional Fund Advisors, the fund manager known for its factor-based, or “smart-beta” investing strategies, also announced wide-ranging fee cuts.

The fund manager reduced fees on 77 of its 120 US funds. However, the fee cuts will take effect from February 28, 2020.

Moreover, across Dimensional US Funds, there will be an average management fee reduction of 8% on an asset-weighted basis, the firm said in a statement. Furthermore, the reduction in fees will affect flagship Dimensional funds such as its Core, Value and Fixed Income portfolios.

“We evaluate expense ratios and management fees for every fund on an ongoing basis and look to make adjustments where appropriate,” said Co-CEO Dave Butler. “We have made previous reductions to US Fund management fees or expense caps in 2015, 2017, and 2019.”

Race to zero

Fee wars have escalated in the financial industry as technological advances have made it possible to lower operational costs. Therefore, fund managers such as Vanguard and Dimensional are passing these on to investors to remain competitive.

“This is an example of a continuing trend of ‘race to zero,’” Ric Edelman, the chairman, and co-founder of Edelman Financial Services, told Barron’s, referring to Dimensional fee cuts.

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