Less than a month ago, BlackRock aggressively cut the management fees on several of its core ETFs. The boldest move was to slash the fee to just 0.05% on its broad-market Canadian equity fund, the iShares S&P/TSX Capped Composite (XIC). That seemed to get the attention of the competition, because BMO has hit back with similar fee reductions on several of its own ETFs. (Good thing I didn’t update my model portfolios.)

On April 30, BMO will reduce the fees on the following ETFs:

In the major equity asset classes, the management fees are now identical on comparable BMO and iShares products. Surprisingly, the Vanguard counterparts are now the most expensive in the group. I’m pretty sure no one saw that coming, and I would be surprised if it stayed this way for long.

Equity asset class BMO iShares Vanguard Canadian ZCN 0.05% XIC 0.05% VCN 0.12% US ZSP 0.10% XUS 0.10% VFV 0.15% International ZEA 0.20% XEF 0.20% VDU 0.28% Emerging markets ZEM 0.25% XEC 0.25% VEE 0.33% .

One of the disappointments in the BlackRock announcement last month was the iShares Canadian Universe Bond (XBB) was not among the ETFs with a fee reduction. Instead, the newly launched Core Series included the iShares High Quality Canadian Bond (CAB), which has just $65 million in assets, compared with $2 billion for XBB. That gave BMO little incentive to reduce the fee on its own core bond ETF, the BMO Aggregate Bond (ZAG). Though to be fair, ZAG’s fee was reduced in late 2012 and last year its MER was just 0.23%, identical to that of theVanguard Canadian Aggregate Bond (VAB), and a full 10 basis points lower than XBB.

However, BMO aggressively cut the fee of the BMO Short Corporate Bond (ZCS) from 0.30% to just 0.12%: that undercuts the Vanguard Short Corporate Bond (VCS) by a few basis points and is less than half the fee of the iShares 1-5 Year Laddered Corporate Bond (CBO). (The iShares Canadian Short Term Corporate + Maple Bond is comparable at 0.12%.)

What does this mean for investors?

Let’s start by stating the obvious: the ongoing price war among Canada’s big three ETF providers has been a boon for index investors. The total MER on a balanced ETF portfolio is now about half what it was in 2011, before Vanguard arrived on the scene and shook things up. Can fees go any lower? I doubt it, but I have been wrong before.

Now to the more subtle point. Costs are always an issue, but incremental fee reductions are relatively unimportant, and even a bit distracting. Reducing your portfolio’s fees from 2% or more in actively managed mutual funds to below 0.20% with ETFs could mean the difference between investment success and failure over your lifetime. Shaving 0.10% from your fees—or $100 a year on every $100,000 invested—means you’ll be able to afford an extra dinner at a nice restaurant. A sweet bonus, to be sure, but not a game changer. For young people just starting out, increasing your savings by a couple of bucks a month would have a far more dramatic impact.

Moreover, lowering your MER a few basis points doesn’t guarantee your performance will improve accordingly: the ETFs from BMO, iShares and Vanguard don’t always track the same indexes, so their returns will vary from year to year in unpredictable ways. In a year where large caps outperform, for example, VDU will likely beat XEF, even if its fee is 0.08% higher.