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Integrated Wealth Management

Thank Vanguard for Lower Investment Costs. What Makes Them Different?

Most investors do not know this but The Vanguard Group is radically different from all other investment firms. What makes them different is that they are owned by the funds they manage – a unique arrangement that eliminates conflicting loyalties.

There are no shareholders who take a portion of the profits or who have an incentive to increase profits. In fact Vanguard is mandated to operate “at-cost” – only charging their funds enough to cover the cost of operations. Because of this they have been able to leverage economies of scale – and reduce expenses – as fund assets grow. And grow they have from 1.4 billion under management when they were founded in 1974 to over 5 trillion today. Vanguard’s average expense ratio is under .20% which is less than ¼ of the industry average. The expense ratio on the Vanguard funds we use for clients is closer to .10%.

Thanks to Vanguard’s competition other firms now also have a wide selection of extremely low cost funds to choose from. Vanguard’s relentless drive to reduce investment costs has been and will continue to be a positive force for good in a financial world riddled with conflicts of interest.

Blog, GeneralJim Freeman, CFP®