It’s not easy to impress Jack Bogle, founder of Vanguard, the largest mutual fund company in the world, and the father of indexing. But for registered investment advisors listening to Bogle speak at the CFA Institute’s annual conference on Tuesday, they’ve already earned the 88-year-old investment guru’s respect.
“I have tremendous respect for most registered investment advisors,” Bogle said. “They have a personal relationship with their clients; they’re doing, by and large, the right thing. Indexing is becoming more important.”
So how does a firm morph into one Bogle would admire? RIAs should take costs into account and avoid individual stock trading — clearly a loser’s game, he argues.
“You pay a big price for overdoing asset allocation [and] for overdoing market timing,” he said. “Activity is the enemy of the investor, and as the enemy of the investor, it’s probably the enemy of the registered investment advisor.”
Advisors ought to instead focus on the things that really help clients, such as making sure they understand everything about their investments, including choosing between a Roth IRA or traditional IRA, tax law, capital gains and loss carryforward, he said.
“When markets fall apart, be available to talk to them,” he advised.
Still, Bogle believes there will be some change in the way advisors get compensated.
“Maybe it should be a fee business, just like your doctor or your lawyer."