Jack Bogle, founder of The Vanguard Group and an advocate for a federal fiduciary standard, will lead an independent board that will set standards for advisors at the recently launched RIA consortium, Advizent.
The consortium aims to build a national brand for RIAs in part by establishing best practices that its member firms would be obligated to abide by. Advizent is recruiting practices with assets of $250 million and up; last month it reported that 80 firms with AUM of more than $107 billion had expressed tentative interest in joining the outfit.
Bogle will serve as senior chairman on the seven-member board of standards. Other members will be announced in the months to come, the organization said.
“Jack Bogle has demonstrated in words and deeds a history of candor and insight in serving the investors,” Advizent co-founder Charles Goldman said in a statement. The rest of the board “will be completely independent and without conflict, just as anyone who holds themselves out as an investment advisor should be.”
“I have worked for over sixty years to give investors a fair shake,” Bogle said in the statement. “Yet, there is still too much talk about what the industry needs as opposed to what investors need.”
Bogle sounded a similar note in an interview last week with Fortune magazine. He called for a federal statute that would require fiduciaries to place their own interests behind those of their clients.
“Conflicts of interest like conglomerates would be disallowed. You can't serve two masters,” Bogle said in the interview. “The statute would outline the rights and responsibilities of corporate governance. It would include providing services at low costs, putting the interest of shareholders (i.e. their customers) ahead of their public shareholders.”
Advizent’s rule of practice could establish itself as a national standard in the RIA industry “if it’s careful and well-defined,” said Philip Palaveev, president of Fusion Advisor Network, a group of 240 independent advisors.
“We really need a good standard for what a good firm is,” he said. “I know the CFP Board of Standards defines what is a good CFP, a good practicioner, a good planner, but we need someone to define what is a good advisor, a good wealth management firm. Advizent has taken on that project. I admire that.”
A good board of standards would need broad representation from the industry, including advisors, custodians, and products, Palaveev added. Bogle is a good fit to chair the group.
“When you start an effort like that, you need credibility,” he said. “Who else can lend better credibility to a project like that than someone who already has a history of participating in high-profile efforts in the industry?”
He wasn’t surprised that Bogle was interested in the position at Advizent.
“If you have any intellectual interest in how advisors function, or if you have any kind of passion for the advisor industry, it seems that’s the place to be.”