Why no more Vanguards

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Tylenol Jones
Posts: 253
Joined: Mon Sep 14, 2009 6:54 am

Why no more Vanguards

Post by Tylenol Jones » Fri Sep 05, 2014 6:52 am

Why there are no more companies following Vanguard model and competing with Vanguard? It's surprising that the other countries do not have any similar companies either.

What does it take in terms of capital, regulation, expertise, etc. to start such a company today?

Call_Me_Op
Posts: 6794
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: Why no more Vanguards

Post by Call_Me_Op » Fri Sep 05, 2014 6:54 am

I suspect that the pay is better at one of the many high-fee companies. I think you have to be interested in doing the right thing rather than making the most money to work at a firm like Vanguard. Not a comprehensive answer to your question - just a comment.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

IPer
Posts: 1639
Joined: Sun Jul 28, 2013 8:51 pm

Re: Why no more Vanguards

Post by IPer » Fri Sep 05, 2014 7:01 am

They tried, but Jack didn't want to work for them.
Read the Wiki Wiki !

Rich11111
Posts: 12
Joined: Tue Aug 19, 2014 9:02 pm

Re: Why no more Vanguards

Post by Rich11111 » Fri Sep 05, 2014 7:12 am

Last week I recieved my schwab newsletter which has as an article on Indexing. It's on my to read stack.

cathyr
Posts: 60
Joined: Thu Jan 09, 2014 3:49 pm

Re: Why no more Vanguards

Post by cathyr » Fri Sep 05, 2014 7:27 am

I got the same newsletter and read the article - nothing really new, but interesting to see that Schwab featured it. Of course, most of their focus was on THEIR index (schwab 1000 or something, I think). I just thought that was amusing, since they have a total stock market index that's perfectly good :)

dickenjb
Posts: 2941
Joined: Tue Jan 05, 2010 1:11 pm
Location: Philadelphia PA

Re: Why no more Vanguards

Post by dickenjb » Fri Sep 05, 2014 7:38 am

Fidelity has its Spartan funds which are pretty much competitive with Vanguard's offerings. But I am sure they push their active funds and their high priced Fidelity Advisory Services offerings because that is where they make the big bucks.

Grt2bOutdoors
Posts: 18207
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Why no more Vanguards

Post by Grt2bOutdoors » Fri Sep 05, 2014 7:46 am

dickenjb wrote:Fidelity has its Spartan funds which are pretty much competitive with Vanguard's offerings. But I am sure they push their active funds and their high priced Fidelity Advisory Services offerings because that is where they make the big bucks.
They're offering the Spartan funds to keep the money in-house.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Call_Me_Op
Posts: 6794
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: Why no more Vanguards

Post by Call_Me_Op » Fri Sep 05, 2014 7:48 am

I don't think the OP is asking why more fund companies do not offer index funds. He is asking why there are not more share-holder owned companies - who also feature exclusively low-cost funds.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Professor Emeritus
Posts: 2628
Joined: Mon Aug 13, 2012 6:43 am

Re: Why no more Vanguards

Post by Professor Emeritus » Fri Sep 05, 2014 7:54 am

dickenjb wrote:Fidelity has its Spartan funds which are pretty much competitive with Vanguard's offerings. But I am sure they push their active funds and their high priced Fidelity Advisory Services offerings because that is where they make the big bucks.
We have Fidelity Spartan and have never been pushed towards anything else. We get good service when we need it.

My wife is handicapped and Vanguard's awful attitude about Durable powers of attorney made us pull her IRA.

User avatar
nisiprius
Advisory Board
Posts: 35722
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Why no more Vanguards

Post by nisiprius » Fri Sep 05, 2014 7:56 am

Wonderful as I think Vanguard is, the circumstances of its creation are complicated, unusual, and unlikely to be duplicated. They had at least as much to do with the happenstances of John C. Bogle's career path as the intrinsic virtues of index funds and the Vanguard corporate structure.

John C. Bogle gives a detailed account in his essay on The First Index Mutual Fund: A History of Vanguard Index Trust and the Vanguard Index Strategy I've underlined a few words in it, One of the key ones is "tenuous logic."
Vanguard began operations on May 1, 1975, with a limited charter: to direct the day-to-day administrative, financial, and legal operations—but neither the investment management nor the marketing activities—of what had been previously known as the Wellington Group of Funds. (Responsibility for those two activities would remain with Wellington Management Company.) We were a tiny enterprise, but we had great visions of the future, and we wanted to do everything we could within our narrow mandate. We concluded that we had a remarkable opportunity to run an unmanaged, low-cost index fund and to have the market to ourselves for at least a few years. No one else wanted to start a low-cost (indeed, "at-cost") mutual fund. After all, a sponsor's objective in forming a mutual fund is to increase assets under management, thereby increasing the advisory fees and thus the profits the firm earns. For better or worse in the fund business, that is "the American Way."

At the meeting, most of the discussion focused on whether this unique venture would be within the mandate that precluded our new company from engaging in investment advisory or marketing services—a mandate that had been won only after a considerable internal struggle. But we were able to persuade the Board that no advice would be involved and that a public underwriting could be handled by an outside syndicate of brokerage firms. The Directors accepted this tenuous logic and approved the idea.
In short, John C. Bogle acted out of a definite mixture of the best motives and a simple desire to make the best of a difficult personal career situation.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
tadamsmar
Posts: 7627
Joined: Mon May 07, 2007 12:33 pm

Re: Why no more Vanguards

Post by tadamsmar » Fri Sep 05, 2014 8:07 am

I thought TIAA CREF was similar to Vanguard, but I have not looked into the matter closely.

I don't see any reason why there could not be more non-profit self-capitalized mutual fund companies. There is a kind of chicken and egg problem with where the initial capital comes from, but sometime the conditions arise that make it possible.

Vanguard has an advantage in terms of economy of scale, I guess.

It's not like entrepreneurs are clamoring to get in to this non-profit space. And the need has been filled, so there is not much of a non-profit "it's good for society" motive for another Vanguard-like company.

Gropes & Ray
Posts: 1067
Joined: Wed Jul 16, 2014 7:28 am

Re: Why no more Vanguards

Post by Gropes & Ray » Fri Sep 05, 2014 8:37 am

Economy of scale is exactly right. In theory, the trustees of existing funds could choose to start a new company (which is what happened with Vanguard), but that would take a lot of coordination to get enough capital to capture the economies of scale that makes Vanguard so cheap. If a new company was not able to offer the low e/r that Vanguard offers, no one would buy the funds. Also, I suspect most fund trustees are beholden to the management company, much like Vanguard's fund trustees are the directors of Vanguard.

Vanguard's model takes third-party shareholders out of the equation, so to convert an existing company you would have to buy back all of the outstanding shares and distribute them to the funds, which would be insane.

User avatar
Munir
Posts: 2424
Joined: Mon Feb 26, 2007 4:39 pm
Location: Oregon

Re: Why no more Vanguards

Post by Munir » Fri Sep 05, 2014 9:06 am

Professor Emeritus wrote:
dickenjb wrote:Fidelity has its Spartan funds which are pretty much competitive with Vanguard's offerings. But I am sure they push their active funds and their high priced Fidelity Advisory Services offerings because that is where they make the big bucks.
We have Fidelity Spartan and have never been pushed towards anything else. We get good service when we need it.

My wife is handicapped and Vanguard's awful attitude about Durable powers of attorney made us pull her IRA.
I am curious to know the details about "Vanguard's awful attitude about durable power of attorney" since I just executed one with Vanguard with no problems that I am aware of.

ourbrooks
Posts: 1575
Joined: Fri Nov 13, 2009 4:56 pm

Re: Why no more Vanguards

Post by ourbrooks » Fri Sep 05, 2014 12:43 pm

Because there's absolutely no incentive for anyone to start another Vanguard. Vanguard is a mutual company; it's owned by the people who invest in its funds. That's part of what keeps the costs low; there are no dividends to pay to share holders. If I start another Vanguard like company, all I'd get out of the deal is my salary; I couldn't sell the company and make a fortune because I never owned the company in the first place.

TIAA-CREF is, in fact, another mutual company. It has a different mission than Vanguard; it's original goal was to provide portable pensions to university faculty. Today, that overlaps quite a bit with the mutual fund business, but TIAA still offers a number of investment options which very different from publically traded mutual funds.

Both TIAA and Vanguard are, essentially, non-profits, founded to provide a service rather than to make money. The sensible reason for founding another non-profit financial company would be to provide some additional service that the existing ones don't provide. I can't think what that would be, and, apparently, no one else can either.

denovo
Posts: 4026
Joined: Sun Oct 13, 2013 1:04 pm

Re: Why no more Vanguards

Post by denovo » Fri Sep 05, 2014 12:47 pm

Has everyone forgot about Ishares? They copy the low-cost model in the etf market.
"Don't trust everything you read on the Internet"- Abraham Lincoln

chead
Posts: 45
Joined: Fri Jul 26, 2013 2:08 pm

Re: Why no more Vanguards

Post by chead » Fri Sep 05, 2014 1:02 pm

While not always direct competitors to Vanguard, many of the life insurance companies (e.g. Guardian) are mutuals, and some wholly own broker dealers (e.g. Park Avenue Securities).
An important thing to note is that just because a company is set up as a mutual does not mean that you are getting a good deal as their customer (e.g. thousands of horrible whole life products sold each year).

User avatar
cfs
Posts: 4026
Joined: Fri Feb 23, 2007 1:22 am
Location: ~ Mi Propio Camino ~

Re: Why no more Vanguards

Post by cfs » Fri Sep 05, 2014 1:20 pm

A money maker?

The window of opportunity is closing fast. Trying to copy Vanguard is not going to be a money maker for the copy-catters and they must be willing to have a couple of years with loses until they are fully established--if they are ever established. Can it be done? Possibly. But it is going to be painful for the first couple of years. And the question to be asked is what percentage of Vanguard clients are willing to leave and join that other wannabee institution. Not me.

Thanks for reading.
~ Member of the Active Retired Force ~

placeholder
Posts: 3957
Joined: Tue Aug 06, 2013 12:43 pm

Re: Why no more Vanguards

Post by placeholder » Fri Sep 05, 2014 1:28 pm

It's a chicken and egg problem because most customers won't care about the ownership structure (if they even know) so it's the costs that matter and a start up mutual fund company will face an obstacle Vanguard didn't which of course Vanguard.

FrugalFrida
Posts: 98
Joined: Sat Jul 05, 2014 5:39 am
Location: Sweden

Re: Why no more Vanguards

Post by FrugalFrida » Fri Sep 05, 2014 1:38 pm

I have my funds at a local customer-owned bank, they have index funds but also (expensive) managed funds and other financial products. They are very different from Vanguard though. From their webpage:

"The LF Alliance is unique in the Swedish bank and insurance market. A federation of 23 customer-owned regional insurance companies in cooperation, each with local offerings.
All of the companies have a strong local base in their individual home markets and have no ownership interests other than those of their own customers. Everything developed in the form of products, concepts and system support is based exclusively on customer needs.
The company's task is to offer total solutions based on different combinations of non-life insurance, accident and medical insurance, life assurance, pension-saving plans, fund savings and various banking services."

User avatar
CABob
Posts: 4513
Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Re: Why no more Vanguards

Post by CABob » Fri Sep 05, 2014 2:17 pm

ourbrooks wrote:Because there's absolutely no incentive for anyone to start another Vanguard. Vanguard is a mutual company; it's owned by the people who invest in its funds. That's part of what keeps the costs low; there are no dividends to pay to share holders. If I start another Vanguard like company, all I'd get out of the deal is my salary; I couldn't sell the company and make a fortune because I never owned the company in the first place.
I think ourbrooks has nailed it. Who would put up the venture capital to start such a business without a means to get a return on and of principle.
Bob

ASUGrad
Posts: 259
Joined: Sun Oct 20, 2013 8:09 pm

Re: Why no more Vanguards

Post by ASUGrad » Fri Sep 05, 2014 8:11 pm

How would a new mutually owned company come along and offer anything close to what Vanguard has now without the same economies of scale?

Vanguard didn't have this problem in the beginning. They were the first to offer no load readily available index funds. So even though they didn't have economies of scale yet their funds were dirt cheap even at 0.8% compared to active funds with 5% loads and 2% ERs.

A new company won't have that advantage because they would have to compete with Vanguard, Fidelity, Schwab, etc.

I think the only way it would happen now is if it a major company decided to switch to that model. Pretty unlikely.

And mutually owned isn't always a wonderful thing. Technically Northwestern Mutual Life insurance is mutually owned, but the salesmen are 100% commission. So yes they would rather you have a million dollar whole life policy rather than a 200k term policy even if the term is the right thing for YOU. They would also rather you invest in their expensive variable annuities rather than a Vanguard index fund even if the index fund it the right thing for YOU. Ultimately they don't care as much about you as they do themselves and their incentives are geared to help THEM, not you. The fact that Vanguard is mutually owned, at cost, they really do care about YOU, and their incentives align with yours is why they will recommend you invest in an index fund with a 0.05% ER instead of one of their own funds with a higher ER. Its right for YOU, not them. Thats hard to find, and even if Fidelity had lower ERs I would always question why, what other crap are you going to try to sell me on the back end, what hidden fee is going to pop out of nowhere, etc.

Leeraar
Posts: 4109
Joined: Tue Dec 10, 2013 8:41 pm
Location: Nowhere

Re: Why no more Vanguards

Post by Leeraar » Fri Sep 05, 2014 9:00 pm

So, is it possible that technology can overwhelm or compete with Vanguard? That companies like Wealthfront or Betterment can offer equivalent services at a lower cost?

Does Vanguard have any resources to make an acquisition like WealthFront to improve their advisory services?

Or, does Vanguard's unique investor ownership structure restrict them to innovation only from within, unable to make external acquisitions?

I don't know the answer: Has Vanguard ever made an acquisition of another comapny?

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

User avatar
Blue
Posts: 1147
Joined: Sat Jul 12, 2008 10:18 pm

Re: Why no more Vanguards

Post by Blue » Fri Sep 05, 2014 9:18 pm

I recall Bill Bernstein making the point that instead of Booth et al selling off DFA funds to the highest bidder, they should instead "Vanguardize" it. Not sure exactly how the mechanics would work, but one can envision it being in the realm of possible.

minhnusa
Posts: 42
Joined: Sun Aug 03, 2014 2:18 pm

Re: Why no more Vanguards

Post by minhnusa » Fri Sep 05, 2014 9:53 pm

Professor Emeritus wrote: .... Vanguard's awful attitude .... made us pull her IRA.
I agree with you 100%. Vanguard staffs have extremely bad attitute toward customers.
It's degradatory and insulting everytime I had to talk to one of their so called "customer service" reps.
When dealing with personal finance, wouldnt anybody want someone on the other side to
give a little care as much as they would?
Vanguard just dont care. I'm also trying to pull my money out of Vanguard.
I cant wait to close down my Vanguard's accounts.

User avatar
Munir
Posts: 2424
Joined: Mon Feb 26, 2007 4:39 pm
Location: Oregon

Re: Why no more Vanguards

Post by Munir » Fri Sep 05, 2014 10:11 pm

minhnusa wrote:
Professor Emeritus wrote: .... Vanguard's awful attitude .... made us pull her IRA.
I agree with you 100%. Vanguard staffs have extremely bad attitute toward customers.
It's degradatory and insulting everytime I had to talk to one of their so called "customer service" reps.
When dealing with personal finance, wouldnt anybody want someone on the other side to
give a little care as much as they would?
Vanguard just dont care. I'm also trying to pull my money out of Vanguard.
I cant wait to close down my Vanguard's accounts.
My experience is totally the opposite. I encourage all my friends to move to Vanguard.

minhnusa
Posts: 42
Joined: Sun Aug 03, 2014 2:18 pm

Re: Why no more Vanguards

Post by minhnusa » Fri Sep 05, 2014 10:36 pm

Munir wrote:My experience is totally the opposite. I encourage all my friends to move to Vanguard.
I'm glad you have good experience with them. I personally will discourage anyone open an account
with Vanguard. Google Vanguard bad customer service.

Leeraar
Posts: 4109
Joined: Tue Dec 10, 2013 8:41 pm
Location: Nowhere

Re: Why no more Vanguards

Post by Leeraar » Fri Sep 05, 2014 10:47 pm

minhnusa wrote:
Munir wrote:My experience is totally the opposite. I encourage all my friends to move to Vanguard.
I'm glad you have good experience with them. I personally will discourage anyone open an account
with Vanguard. Google Vanguard bad customer service.
Where are you moving your accounts to?

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

toto238
Posts: 1879
Joined: Wed Feb 05, 2014 2:39 am

Re: Why no more Vanguards

Post by toto238 » Fri Sep 05, 2014 10:59 pm

minhnusa wrote:
Munir wrote:My experience is totally the opposite. I encourage all my friends to move to Vanguard.
I'm glad you have good experience with them. I personally will discourage anyone open an account
with Vanguard. Google Vanguard bad customer service.
Google the name of ANY large organization and "bad customer service". You're going to get a long list of horror stories. From any of them. No matter what. Completely irrelevant. Some may be true, some may be lies.

Regardless, when it comes to customer satisfaction surveys, Vanguard usually ranks either at the top or very near the top in the investment industry. Just because one person had a bad experience once does not mean it's a bad company. It means one person had one bad experience. Any organization with over 10,000 employees managing $3 trillion is likely to have plenty.

minhnusa
Posts: 42
Joined: Sun Aug 03, 2014 2:18 pm

Re: Why no more Vanguards

Post by minhnusa » Fri Sep 05, 2014 11:00 pm

Leeraar wrote:Where are you moving your accounts to?
I've had really good experience with Fidelity, so I'll go with them. They have similar funds to match with Vanguard.
But more importantly, Fidelity have local branches that I can come in person to get explaination, show and sign paper works, drop off important documents, etc.. I know it must cost some money to open a branch office.
However, when it's come to personal finance, I'd rather be safe to have all documents properly file away.
I'm also thinking Fidelity's branches will make it easier for my beneficiaries to deal with.

Leeraar
Posts: 4109
Joined: Tue Dec 10, 2013 8:41 pm
Location: Nowhere

Re: Why no more Vanguards

Post by Leeraar » Fri Sep 05, 2014 11:12 pm

minhnusa wrote:
Leeraar wrote:Where are you moving your accounts to?
I've had really good experience with Fidelity, so I'll go with them. They have similar funds to match with Vanguard.
But more importantly, Fidelity have local branches that I can come in person to get explaination, show and sign paper works, drop off important documents, etc.. I know it must cost some money to open a branch office.
However, when it's come to personal finance, I'd rather be safe to have all documents properly file away.
I'm also thinking Fidelity's branches will make it easier for my beneficiaries to deal with.
That's a rational choice. I do not have any further comment or opinion.

L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")

TravelerMSY
Posts: 194
Joined: Sun Mar 03, 2013 5:40 pm

Re: Why no more Vanguards

Post by TravelerMSY » Sun Sep 07, 2014 5:24 pm

Why does it matter if there's another V? You can invest in almost all of their products at the broker of your choice.

Tylenol Jones
Posts: 253
Joined: Mon Sep 14, 2009 6:54 am

Re: Why no more Vanguards

Post by Tylenol Jones » Tue Sep 09, 2014 6:13 am

Good insights... It seems reasonable that there is no market case for multiple US-based Vanguard-like companies. However, it's still surprising that Germany, Canada, Australia, Japan, etc. don't have their Vanguard equivalents.

Gropes & Ray
Posts: 1067
Joined: Wed Jul 16, 2014 7:28 am

Re: Why no more Vanguards

Post by Gropes & Ray » Tue Sep 09, 2014 6:27 am

Tylenol Jones wrote:Good insights... It seems reasonable that there is no market case for multiple US-based Vanguard-like companies. However, it's still surprising that Germany, Canada, Australia, Japan, etc. don't have their Vanguard equivalents.
Others have said something similar to this, but Mr. Bogle was fired by a group of rival managers at the old company after a merger. I don't know the details, but I suspect they had enough shares to control the board and remove Mr. Bogle. But, Vanguard has a much more insular system, where shareholders are the funds, and the funds are controlled by the board. So the board is self perpetuating and you can't have the kinds of proxy battles and hostile takeovers etc. that you see in other companies. Also, Mr. Bogle was prohibited form managing funds by the fund trustees, so he decided to try a "non-managed" fund (which was an idea he had in college). My point is, it required a unique set of circumstances for Vanguard to be able to come into existence. Mr. Bogle was backed into a corner and found a loophole that allowed him to get what he wanted, which was a company to run. Also, he probably lost out on hundreds of millions or even billions over a career by going with the Vanguard model, but stuck with it anyway. Not too many people would do that. I don't know if that is a common enough situation for it to happen in other countries.

deikel
Posts: 518
Joined: Sat Jan 25, 2014 7:13 pm

Re: Why no more Vanguards

Post by deikel » Tue Sep 09, 2014 8:58 am

Tylenol Jones wrote:Why there are no more companies following Vanguard model and competing with Vanguard? It's surprising that the other countries do not have any similar companies either.

What does it take in terms of capital, regulation, expertise, etc. to start such a company today?
ALthough this will not be liked very much in this forum:

a) you assume that there is a difference between Vanguard and other companies offering financial services (aka, the Vanguard model): Well, other comanies already do that (like Fidelity) - they all have now low cost funds, precisely because Vanguard forced them to compete - and customers were running to Vaguard....and now maybe the other way...

b) The assumption that Bogle equals Vanguard is also not quite correct. Bogle suggested the index funding at low cost (and he should get full credit there)....but the fact is that Vanguard offers a whole range of managed funds and those underperfrom and rip people of money just like from other componies....so this whole idea of Vanguard being 'all good' and the rest 'all evil' is a bit simplistic.

c) the fact that Vanguard's ownership is different than other financial companies. ALthough that is somewhat true - is does not mean that is gives you, the investor, any more or less power you have with say Fido - you have no direct say and all you can do is take your money elsewhere....so that ownership structure does little in my opinion
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immidiatly and destroy any copy or remembrance of it.

supernova
Posts: 279
Joined: Fri Feb 21, 2014 8:45 am

Re: Why no more Vanguards

Post by supernova » Tue Sep 09, 2014 10:14 am

I have had nothing but good experiences with Vanguard's customer service, but I have had even better experiences with Fidelity's customer service, both on the phone and at the local branch here. Both times I have gone in to Fidelity's local office, the man working there was at the front desk within 15 seconds of me walking in. I was very impressed with his helpfulness, too.

But the reason there are no more Vanguards is probably because there isn't as much money in an "at cost" fund company.

User avatar
CABob
Posts: 4513
Joined: Sun Feb 25, 2007 8:55 pm
Location: Southern California

Re: Why no more Vanguards

Post by CABob » Tue Sep 09, 2014 11:16 am

deikel wrote: a) you assume that there is a difference between Vanguard and other companies offering financial services (aka, the Vanguard model): Well, other comanies already do that (like Fidelity) - they all have now low cost funds, precisely because Vanguard forced them to compete - and customers were running to Vaguard....and now maybe the other way...
But there is a difference in the model specifically the ownership structure. I agree that other mutual fund companies can and do offer some low cost selections.

b) The assumption that Bogle equals Vanguard is also not quite correct. Bogle suggested the index funding at low cost (and he should get full credit there)....but the fact is that Vanguard offers a whole range of managed funds and those underperfrom and rip people of money just like from other componies....so this whole idea of Vanguard being 'all good' and the rest 'all evil' is a bit simplistic.
But even their active funds have no loads and low expenses and just because a fund has fees and expenses doesn't mean clients are getting ripped.

c) the fact that Vanguard's ownership is different than other financial companies. ALthough that is somewhat true - is does not mean that is gives you, the investor, any more or less power you have with say Fido - you have no direct say and all you can do is take your money elsewhere....so that ownership structure does little in my opinion
I agree that the client has very little power in either case, but, with Vanguards model there isn't a stockholder or company owner that is competing for money from the client.
Bob

User avatar
thirdman
Posts: 185
Joined: Wed Nov 12, 2008 7:11 pm

Re: Why no more Vanguards

Post by thirdman » Tue Sep 09, 2014 12:07 pm

Another company would have to find a niche, in order to compete in the investment marketplace. Wisdom Tree, a relatively recent start up, offers funds based on their unique indexes. They are a stock company, and their funds have a moderate ER. So, it is possible to form a new mutual fund company.

To differentiate itself, a mutual mutual-fund company might offer low cost cap weighted index funds, that:

1. have a transparent governing structure;
2. publish the compensation of key people;
3. allow voting by the owners on who is on the board of trustees of the funds;
4. have a record of proxy voting representing the interests of the owners of the funds;
5. publish an annual report on the management company and it’s fiduciary relationship with the funds.

This might be a basis for attracting investment dollars. The company could probably function with a few low expense index funds representing the broad markets.

Post Reply