Recently, Forrester published our CX predictions for 2019. Our first prediction was that stagnating CX quality will cause short, destructive price wars. We cited Fidelity’s two new zero-fee investment funds as an example of how this is already starting to play out. We also noted that Vanguard responded to Fidelity by highlighting its many funds without transaction fees and hinting at more fee cuts.

People have asked me why two well-run, successful companies would mix it up like this given some of the famously painful price wars of the past. One reason is that holding a market advantage through superior CX is extremely hard, especially in a highly competitive industry such as wealth management. Take, for example, the unique advantage provided by Vanguard Personal Advisor Services: It was short-lived, even though, from a CX perspective, Vanguard did everything right.

Here’s how it’s still playing out: The Vanguard Group has a history of serving self-directed individual investors, and it assumed that most of its customers were savvy, confident investors who liked to manage their own finances. However, when Vanguard interviewed a sample of 100 clients, it discovered that only two fit that profile. The rest fell along a spectrum from “confident in their ability to invest but don’t want to spend time doing it” to “not confident in personal investing.”

Karin Risi, managing director of the Retail Investor Group at Vanguard, described the study’s findings at Forrester’s CXNYC 2016 Forum. She shared a quote from one interviewee, a judge: “Every investment decision I have ever made in my entire life has gone the wrong way. I have no confidence on these issues. I need help.”

So, it became clear that many Vanguard customers want financial advice. The obvious problem is that financial advice from a human is expensive, typically costing 1% of assets under management (AUM) per year. But the economics of charging even 1% for full-service advice rarely work out for a wealth management firm unless an investor has at least $1M under management, which is many times the assets of a typical Vanguard client. The inescapable conclusion: The standard approach to investment advice would have been a bad experience for most Vanguard customers and bad business for Vanguard.

Out of this conundrum, Vanguard developed an innovative solution that is a good experience: its groundbreaking Personal Advisor Services, a hybrid digital/physical offering. Here’s how Forrester described it in a 2015 quick take, soon after it debuted: Human advisors work with clients to create a financial plan and provide ongoing support; an automated platform sets the strategic asset allocation; collaborative advice technologies enhance advisor-client interactions; and a robust web presence enables clients to see how their investments are performing and track progress toward their goals.

This approach allowed Vanguard to deliver high-quality advice at a price that worked for them and their clients: 0.3% of AUM per year. What’s more, the service was (and is) available with a minimum investment of just $50,000.

Vanguard clients loved it, and it was a wild business success: It attracted $37 billion in assets in its first year. Coincidentally, between 2015 and 2016, Vanguard had a small score increase in Forrester’s Customer Experience Index (CX Index™). That was just enough to put it in second place in the “direct or discount brokerage” industry due to another brand slipping. And in 2017, Vanguard held onto second place, right behind CX powerhouse USAA.

But as we finish out 2018, Vanguard Personal Advisor Services, while still successful, is far from unique. It competes against a crowd of alternatives in the human/digital hybrid space. Traditional Vanguard competitors Charles Schwab, TD Ameritrade, and E-TRADE all have well-reviewed hybrid offerings, as do newcomers such as Betterment and Wealthfront. (And yes, Fidelity has its own offering, Fidelity Go.)

Meanwhile, The Vanguard Group has slipped to No. 3 in the CX Index behind Charles Schwab due to a small but statistically significant drop in its score, while Schwab had an even smaller, statistically insignificant rise in its score. This highlights the fact that, at this level of play, CX is a game of inches.

The lesson is clear: Getting and keeping a CX advantage in a highly competitive industry requires a constant stream of innovations fueled by customer insights. Aspiring leaders must innovate — and keep on innovating — faster than others can follow. No wonder giving up and starting a price war is tempting.