Remembering Jack Bogle, a Pioneer of Client-Centric Investing

January 17, 2019 · Written By Robert Vogel, CFP®

On Wednesday, our industry and the world lost a true visionary.  John “Jack” Bogle was a pioneer and maverick who changed the world and impacted virtually everyone who has money invested through intermediaries.

I had the distinct pleasure of meeting Jack in person on more than one occasion and hearing him speak as a member of the Vanguard “crew” on several others.  His passion and commitment to giving everyone “a fair shake” was unassailable, and he never relented in his mission of keeping the financial services industry accountable to those whom we serve.  It was his example that inspired me to turn what was initially a job, taken out of financial necessity shortly after college, into a career.

Jack Bogle did not invent index investing, but he was the visionary who saw its potential for leveling the playing field in a growing field of financial services.

He saw how the “little guy” got fleeced by the high fees charged by many intermediaries like mutual funds, the primary way they could access the financial markets, and Jack sought to remedy it.

He accomplished this through driving down the cost of investing by bringing what was then an institutional idea to the masses via the S&P 500 Index fund.  By simply replicating this widely followed index at a cost that was a fraction of the industry average, he knew that it should, according to Nobel Laureate Bill Sharpe, outperform the majority of active management.  Not only has this vision for indexing been borne out in the years hence, the success of indexing and his relentless focus on cost has had the effect of driving down costs across the mutual fund industry.

Active managers know that higher fees create a higher hurdle they must clear just to match index returns, so it is in their best interest to find ways to reduce their own fees as much as possible to stay competitive.  As Jack liked to say, “You get what you don’t pay for.”  Others also took up the mantle of indexing so that today indexed investments have grown from about 4.5% of the total U.S. stock market value in 2002 to almost 17% in 2018.

Jack founded Vanguard Group, which has become one of the largest financial services companies in the world, but his impact was felt much more broadly.  He was the true heart and soul of our industry, never wavering from his belief that the reason our industry exists is solely for the benefits of our clients.  We thank him for his tireless advocacy and for making our corner of the world a better place.

 

Robert M. Vogel, CFP®

Director of Financial Planning, JFS Wealth Advisors