Even though the low-cost revolution is moving from the financial product side to advice, it will be a "good thing" for advisors who can adapt, Vanguard CEO William McNabb told attendees at the ninth annual Inside ETFs conference in Fort Lauderdale, Fla. this morning.

One reason McNabb said he expects pricing pressures to intensify more in the advice business is that there isn't much room left for expense compression on the asset management side. Index equity mutual funds and ETFs now represent 34 percent of all managed equity assets in those two vehicles.

McNabb cited Morningstar data stating 28 percent of advisors were fee-only while only 3 percent were commission-only as evidence that advisors were already adapting. But those who adapt successfully will be the ones who embrace technology while those who don't "will struggle."

Though robo advisors may already have established a floor for how low the price of advice can go, McNabb said comparing their services to many advisors was like "comparing apples to oranges." Volatility conversations are normal, but McNabb questioned whether automated models could communicate as effectively as human advisors when the driver of volatility is China.

Advisors will need to counsel retiring baby boomers to expect lower than historical returns over the next ten years. Vanguard expects a 60 percent equity/40 percent bond portfolio to produce between 5 percent and 7 percent over the next decade and 3 percent to 5 percent after inflation.

In a subsequent session, Vanguard's inflation expectations were implicitly challenged. Robert Boyda, head of global asset allocation at John Hancock Asset Management, said he expects virtually no inflation over the next five years. "The Fed has been fighting inflation for 35 years and they succeeded, maybe oversucceeded," he noted.

In this context, clients who receive 4.75 percent real returns on equities and 2 percent real returns on bonds are getting "a good deal."