Bogle: What Investors Need to Know About Fees
Rather than an elaborate breakdown of fees, investors would benefit from more clarity on transfer agent fees and the impact of expenses on investment income, says Vanguard founder Jack Bogle.
Christine Benz: You've mentioned fees on a number of occasions today. Let's talk specifically about a recent case that involved a firm using transfer agent fees to pay for distribution. I guess the broader question that I have for you is whether there should be more clarity and transparency for fund shareholders in terms of how fees are broken out. Could it be a little bit clearer about what fund investors are paying for?
Jack Bogle: Well, I think there's obviously a good argument for that. But I have to say, deep down, I don't think it matters. Say you're paying 80 basis points a year for the management fee. Anybody who thinks that fee goes to management is dreaming. Half of it goes to profits for the manager. I did this analysis a few years ago; probably 15 basis points out of the remaining 40 basis points is used for investment management. The advisor's profit is up here; the amount actually used for investment may only be 10 basis points. A lot is spent on marketing.