Vanguard was in town last week for a confab at the Langham Hotel. The discussion covered many topics but by far the most compelling subject was The Future of Advice. What did Vanguard say?
Let’s get right to it from the client point of view. Don Bennyhoff, Senior Investment Strategist of the Vanguard Investment Strategy Group, spoke eloquently about three trends Vanguard sees right now in the investment advisory business.
All three trends are good for you, in my view. Lower cost helps increase your returns and allows you to see more easily the value you get for your cost. Secondly, it’s great to see the regulatory sphere aligning with investor interests. The fiduciary standard protects you. Lastly, fee choice expands your control. If you want your money managed by a robot, you can get that. If you want to talk to a human being, you can get that, too. Getting past commissions is a big step forward.
Change is good, I believe, but it is not costless or beneficial to everyone. When I look at high cost models like those 50 story Goldman Sachs, Bank America, and Merrill Lynch buildings in New York with their large floors of traders, salespeople and analysts, I wonder how long before they have to change. For example, even the uber-profitable Goldman just announced 10% cuts in its trading staff. Ouch for them, more money for you.
PS – if you want to see the future of money management execution I recommend a visit to the Vanguard campus in Valley Forge, PA. While there, Max and I visited their trading floor. It moves $1trillion(!) per day globally in passive style, has 12 people in it, and is as quiet as a library. Very Vanguard.
John Osbon – firstname.lastname@example.org