Money Managers Make Big Fees and Close Eyes

John Bogle, founder of Vanguard, is one of the few smart people in the investment world. He always tells it like it is, even when he strikes close to home. In an interview recently, Bogle pointed his finger at mutual fund managers, retirement account managers, pension managers, money market managers, institutional money managers and the like -- people who charge or make large fees for their work and who together control some 70% of the shares of large public companies today.

These money managers, Bogle said, were every bit a culpable as the borrowers, lenders, scrutinizers, regulators, and traders. The only difference, until he spoke up, was that they had gotten off free of attention and criticism. It is, in fact, quite amazing that the very people we trusted to care for our monies and to represent our interest were too busy making money from fees for themselves to care much about the very people they were supposed to serve. They were exactly like (in fact they are the same as) the feeder funds that plowed billions of other people’s money into Madoff’s schemes.

That they have avoided public scrutiny for so long is what is so stunning. They are still out there hawking their wares, trying to convince us all that their funds or services are to be trusted. The whole system is broken, and until there is both change and accountability one must be on guard in ways never before thought necessary. Bogle thinks these managers need to relearn what it means to be a fiduciary – to act for the sole benefit and interest of another. Until they do, we as investors would do as well or a lot better managing our own money. We are not being served by money managers today, and it is going to be some time before I trust the stuff coming out of their mouths. We all need to listen with more skepticism and to demand far more from these crooks.