Vanguard's Irritating Perch on the Moral High Ground

Don't bother reading the article: I read the whole thing, and there's no substance beside the title.

The author asserts (without any facts) that Vanguard employees must be making a ton of money; otherwise they wouldn't work there. He makes no note even to other recent articles about the internal culture at Vanguard.

Wow, the author invokes the free market in the article then whines that firms seeking to charge their clients exorbitant fees are losing customers to Vanguard.

Maybe this article is a round-about argument FOR investment firms to take the moral high ground. The author can't even make a cogent argument against the idea, using circular logic to justify the opposite, leading to nonsense.

I would turn the question around and ask why other brokers and finance companies are percieved to occupy the moral cesspool and whether or not that's a fair assessment.

My personal take is that if Vanguard can build a strong following and product by relentlessly focusing on minimizing expenses being passed on that's a net good thing (Amazon may be an apt analogy). There are more than enough opportunities for an active firm to prove that high expense fees are worth it (don't forget the survivorship bias) and to date they are failing to do so consistently.

Vanguard is strictly-speaking a cooperative, not a "non-profit." The author very clearly recognizes that the company is owned by its funds, and in turn by its investors, but he mischaracterizes this as a "non-profit" model. Vanguard clearly makes a profit, but in the service of its ownership. Just like any other for-profit company.

I feel like it takes very little to have a moral high ground in this industry.

I've been watching with some amusement the furious opposition of "wealth managers" to the incoming fiduciary duty rule- where they will become required by law to do what is in the best interest of their client. Which, in most cases, will mean putting everything in Vanguard instead of high-fee funds with kickbacks. A bunch of them are saying they will have to close up shop once the rule goes into effect. If that's true, to me it seems tantamount to admitting that the only way they can stay in business is by fleecing their customers.

So, no, I'm not upset about Vanguard's claim to the moral high ground at all. They really are better than the various scum and villainy in the wealth management industry, and the schadenfreude of watching the latter get squeezed out of existence by index funds and algorithmic traders is wonderful.