Bogle Hailed as Warrior for the Common Investor

Michael Zeuner and Jim Patrick of Institute for the Fiduciary Standard remain optimistic, tying John Bogle's 'investor-first' approach to the fiduciary standard

Vanguard founder John Bogle (Photo: Bloomberg) Vanguard founder John Bogle (Photo: Bloomberg)

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“Simply put, a fiduciary does the right thing. Sounds straightforward, right? As straightforward, perhaps, as investing in low-cost index funds. Shouldn’t everybody be doing it?”

Thus did Michael Zeuner, a founder and board member of The Institute for the Fiduciary Standard, begin the festivities at a Thursday luncheon in New York honoring John Bogle on the occasion of his new book, The Man in the Arena (Wiley), and for his career-long advocacy not just of index investing but of putting the investor first.

(Bogle's book was edited by Knut Rostad, the institute's president and a ThinkAdvisor contributor.)

Zeuner, managing partner of WE Family Offices, then listed the specific legal definitions of the fiduciary standard before summing up the standard as "doing the right thing," admitting that nevertheless the concept is “anathema” in the financial services industry.

“It’s far more profitable and lucrative to sell things and exploit the knowledge gap,” he said, between individual investors and “those who are paid to create and/or sell investment products.”

Many of the forecasts about the SEC’s intention to mandate one fiduciary standard for all financial advice-givers have been negative lately for advocates like the institute. The SEC this week placed a fiduciary rulemaking on its schedule for 2014, though it said in a filing that the timing of its “next action” on the fiduciary rule was “undetermined.” Melanie Waddell of ThinkAdvisor wrote in her December column in Investment Advisor that there was a possibility of the SEC instituting two fiduciary standards.

But fiduciary proponents, suggested Jim Patrick of Envestnet, remain optimistic.

Patrick, also a founder of the institute, said “we’re optimists; we’re hopeful” still about prospects for one fiduciary standard, and listed the different ways the institute was “mobilizing” to have such a standard implemented. Those ways include advocating with regulators and legislators in Washington, sponsoring third-party research on relevant issues, awarding the annual (Tamar) Frankel Fiduciary prize (which will be presented to Robert Monks on Dec. 10 in Washington) and sponsoring events like last year’s John Bogle Legacy Forum in New York.

A key step in that mobilization was enticing 12 well-known leaders in the financial services community to sign The Fiduciary Declaration and presenting it to then-SEC Chairwoman Mary Schapiro. Two signers of that declaration were at Thursday’s event: Bogle himself and Alan Blinder, the Princeton economist who served on Bill Clinton’s Council of Economic Advisers and as vice chairman of the Federal Reserve Board of Governors.

“I’m a charter member of the John Bogle Appreciation Society,” Blinder joked as the event turned to comments from a panel of luminaries from the investing and academic world. The financial industry, he said, “is short on heroes, and we’re here to honor one of them.” He called Bogle a “tireless warrior for the ordinary investor” and an innovator. Noting that Wall Street produces “lots of famous innovators,” he said that “very few” innovate on behalf of the ordinary investor.

Cliff Asness of AQR Capital Management, while far from being an index investor, said he’d often turned to Bogle for counsel through the years, saying “I could always rely on him that his advice would be in the best interests of the investor.” Moreover, in a “world riddled with confirmation bias,” Asness said Bogle could always be counted on to seriously consider well-reasoned arguments even on positions that he would naturally disagree with. 

Referring to the “special meal” that Bogle demands at events (which turned out to be a peanut butter and jelly sandwich), Asness said he was happy to be at an event where he could tell an index-investing joke. “If Jack were getting a special meal, shouldn’t he just have a little bit of everybody else’s lunch?”

Following additional encomiums of both the serious and humorous variety from panelists Jim Grant of Grant’s Interest Rate Observer and Richard Sylla of NYU’s Stern School and the Museum of American Finance, Bogle took a microphone to respond. “I feel like I’m at my own funeral,” he joked, before turning more serious as he spoke of the “revolution of index investing” that employs the simple and powerful traits of “simplicity and thrift,” which he predicted will continue to “shrink Wall Street and its trading” excesses.

“Indexing works,” he proclaimed, and encouraged his listeners to “challenge conventional wisdom. Do it!”

Envestnet’s Patrick had the last word, however, returning to the benefits of a fiduciary standard, declaring that data he was just reviewing confirmed the value of a fiduciary approach to serving clients. “We’re seeing growth” among the fiduciary advisors Envestnet serves on its platform, he said, A report released this week by Cerulli Associates confirms RIA growth. It found that RIAs are the only advisor channel that grew over an eight-year period, while other channels—wirehouses, IBDs, regionals—have seen their numbers decline. 

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