Bill McNabb is predicting an inevitable new fee crunch ... in wealth management.

Frederick William McNabb III The Vanguard Group, Inc. Chief Executive Officer, President, Chairman of the Board of Directors *Photo by Jim Tweedie - Wyckoff-Tweedie Photography*

McNabb, chairman and CEO of low-cost mutual fund titan Vanguard [profile] (the world's largest mutual fund company by AUM), shared that prediction onstage this morning in a keynote Q&A session, moderated by Morningstar manager research chief Jeff Ptak, at the 2016 Morningstar Investment Conference at McCormick Place in Chicago.

"One of two things is going to happen, probably both. There's a high probability that we're going lower or you're going to be asked to do a lot more for what you charge," McNabb tells the audience of financial advisors. "You haven't really seen much pricing pressure [on distribution and advice]. I think that's next."

McNabb shared some numbers about where Vanguard's business is today: $3.5 trillion in AUM and 15,000 employees, including 3,000 systems engineers, and its asset-weighted average expense ratio is 12 basis points. (That puts Vanguard's asset management revenue at about $4.2 billion.) In terms of Vanguard's future, McNabb, said, "the two things you can pretty much write down in stone [are] no Vanguard branches and no Vanguard stadiums, at least while I'm here."

McNabb's discussion with Ptak touched on a host of other subjects, too, including: future returns for balanced portfolios (McNabb expects 3.5 percent, or 4 percent "on the high end"); how alternatives fit inside portfolios; the infamous collapse of the Third Avenue Focused Credit Fund (McNabb praises most high yield funds and worries that the regulatory response will go too far); proxy voting; Vanguard's growing global presence; picking subadvisors; strategic beta; active ETFs (McNabb's interested, for some strategies, pending "the right guidance from the SEC"); custody for advisors (McNabb says Vanguard is not getting back into that business); and of course the active-to-passive shift. 

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