As you read here, here, and here, there’s a changing of the (Van)guard taking shape with the installment of former BlackRock exec Salim Ramji as Vanguard’s new CEO—a first for Vanguard in hiring from outside the firm for the position. Ramji was Global Head of iShares & Index Investing at BlackRock. I’m sure if he could hear the news of the new appointment, Vanguard founder Jack Bogle would be rolling in his grave.
Not that there’s been any lost love over the years at Vanguard for founder Bogle. It was the big shots in the Vanguard C-suite who pushed Bogle out to pasture, locating his office in a separate annex away from theirs (with friends like these…). But that didn’t stop Bogle from doing his research and commenting on how the passive index fund business had changed from when he founded the company.
There was a time when Richard C. Young’s Intelligence Report was loaded with Vanguard funds. That may not be the right word—loaded. Because what drove Bogle and Young to help shepherd you into Vanguard funds was the fact that there were no loads—no 12b-1 fees either, and the expense ratio was tiny. A perfect recipe, combined with their independent voice for you, the Main Street investor. Simple yet sophisticated. The truth usually is.
Today, Vanguard’s independent voice is gone. Along with BlackRock and State Street, the big three go hand in hand to Washington, D.C., lobbying for their future, not yours. They vote more shares for more publicly traded companies than any other—voting their politics with your money. Socially responsible investing, ESG, is a way to make investors feel good about paying higher fees and to allow fund company CEOs to pursue their own political agendas.
And with the passive index fund as the foundation of their business, the big three indiscriminately buy the same stuff with new money. Vanguard CEO Ramji will target new streams of income, to make Vanguard even bigger.
You’re seeing their power in Washington, D.C., with changes to the RMD rules and how IRAs and 401(k)s are legislated.
As a rule, never believe changes in laws are meant for your benefit. Raising the RMD age buys the big three more time to keep your money. New changes in legislation to require you to complete a DOL questionnaire before transferring an IRA out to say my favored Fidelity is a way to block or slow down the money from leaving.
The forms can be simplified: “Are you sure you want to leave? Are you really, really sure? Really?”
“Yes”
Action Line: It’s no accident this industry is loaded with confusion. The less you know the more you rely upon them. It doesn’t have to be this way.
When you’re ready to work with an independent voice, I’m here. But only if you’re serious.
