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Friday, September 26, 2014

Bogle Reflects on an Innovation not Copied

News summary by MFWire's editors

Forty years ago this week Jack Bogle christened the "Vanguard Experiment." During that time Vanguard has grown into the mutual fund industry's largest firm with 18 percent market share and nearly $2.75 trillion in AUM. Yet, as "Saint" Jack points out in his anniversary email to Vanguard long-termers, no other firm has yet followed Vanguard's innovation.

If you do nothing else today to build your fund business, read the email that Joseph DiStefano obtained for Philadelphia's Inquirer.

Bogle's one innovation was the mutual ownership structure used by Vanguard. Bogle writes that the innovation flowed from his wanting to treat customers as owners. What better way than to make them owners?

That simple idea led to a focus on low cost, and indexing is the lowest cost way to invest.

Today, one simple idea has taken over the mutual fund world.

MFWire was lucky enough to have Jack around at our mutual fund influencer's conference in 2010 where MFWire (and Fuse Research) became one of many organization's to honor Jack's achievements.

During lunch I asked him why no other firm has copied the simple innovation of Vanguard's mutual structure. He thought and answered: "Greed".

That answer -- though seemingly true -- still makes no sense to me. Wouldn't greed lead others to copy such a compelling strategy? Put the customer first and you will win business. Jack showed us the way.  

Edited by: Sean Hanna, Editor in Chief


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