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Investing Blog Roundup: Is Vanguard’s “At Cost” Model Even Good Enough?

Vanguard’s claim to fame is that it runs everything “at cost” because of its ownership structure (i.e., no external shareholders demanding a profit). And the benefit to Vanguard clients has been tremendous over the years.

In a recent article for Financial Planning, Allan Roth pointed out that Schwab is now basically able to run their entire asset management business below cost — offering what many would see as superior service, while charging fees as low or lower than Vanguard’s.

The key point is that Schwab simply has a different business model (most especially, a key other revenue source), so they are able to use their asset management business as a loss leader, whereas Vanguard must break even on theirs.

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