Cost of Mutual Fund Ownership

The mutual fund industry needs to do some serious soul searching to serve the individual investors better. John Bogle commented on the issues facing the mutual fund industry in an article (Mutual Fund Industry 60 years later: For Better or Worse) published in CFA Digest. Accordning to Bogle, operating expenses of mutual funds have increased dramatically over the last 60 years. While the assets have increased 3600-fold since 1945, the mutual fund fees and operating expenses have increased 6,600-fold. It is a stunning rise. And this increase excludes all the cost saving coming from usage of soft dollars. Where are the economies of scale that the mutual fund industry talks and brags about all the time? This is another one of the revelations that makes me believe that the mutual fund industry is ready for a change. Just like manufacturing in the 80's and the IT industry in the late 90's, mutual fund industry needs to focus on reducing the costs and fundamentally change the way business is done.