John Bogle: Demise of fiduciary rule would be 'step backward' for nation

'Fiduciary principle' will survive regardless of rule outcome, Times op-ed predicts

Feb 9, 2017 @ 1:36 pm

By InvestmentNews

Vanguard founder John Bogle said in a New York Times op-ed piece today that annulling the Department of Labor's fiduciary rule “would clearly be a setback for investors trying to prepare for retirement.”

Even if that happens, he said, “the fiduciary principle itself will live on, and even spread,” he wrote.

Bogle said the existing proposal doesn't go far enough because it is limited to retirement plan accounts and “ignores the other three-quarters of the assets owned by individual investors.” Any effective rule, he said, must encompass all investors.

(Related read: 2016 InvestmentNews Icon: John C. Bogle)

One point that has been overlooked in the debate, Bogle noted, is that the $20 billion in estimated lost revenue to the investment industry and Wall Street through 2020 as a result of the rule would mean a similar-sized gain to investors in terms of net returns.

"By any definition, that's a social good," he wrote, adding that "one must wonder how Wall Street, broadly defined, has been able to defy the interests of its millions of clients for so long."

The now-endangered fiduciary rule, he wrote, is based on the "seemingly unarguable principle that in giving advice to clients with retirement funds, stockbrokers, registered investment advisers and insurance agents must act in the best interests of their clients. Honestly, it seems counterproductive to go to war against such a fundamental principle. It simply doesn't seem like a good business practice for Wall Street to tell its client-investors, 'We put your interests second, after our firm's, but it's close.'”

Regardless of what happens, he observed that the principles of fiduciary duty are strengthening. Last September, Mr. Bogle wrote an op-ed in InvestmentNews making the case for why fiduciary principles are here to stay.

"Investor awareness grows with each passing day," he wrote in the New York Times. "The nation's investors are already awakening to the role of low costs and broad diversification, and understand that long-term investing is a far more profitable strategy than short-term trading."

Watch: John Bogle on how he changed the industry and the qualities that helped him succeed

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