Earlier quoted context omitted.
Vanguard is owned by their funds, so incentives are aligned with the shareholders of the funds. They are very different than most fund companies.
That's a bit of a gimmick. Management still pays themselves from the % of invested funds, not fund performance. Same issue as with a nonprofit -- the corporate profit structure is only one source of moral hazard.
Their expense ratios are really low. Wellington, an actively managed fund, has an expense ratio of .25%. Their non-actively managed funds, such as the Index500, are under .2%. Those are very low fees compared to other similar investments. To compare with doing it yourself, at retail trade rates, that's about one potential trade per year per $2-3k invested.
Vanguard actively moves clients from their baseline funds to the lower cost/higher minimum Admiral versions.
I just don't see moral hazard in Vanguard, compared to other financial firms with remotely similar capabilities and offerings.