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Speaker 1: Welcome Atrillian's.

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Speaker 2: I'm Joel Webber and I'm Eric Blchernas.

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Speaker 1: We talked about Blackrock last episode, huge player obviously in ETFs,

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Speaker 1: and now they've made this foray into to crypto and

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Speaker 1: specifically bitcoin. The other big asset manager is Vanguard, which

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Speaker 1: will probably get nowhere near crypto ever. But what's even

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Speaker 1: more significant is there there's a new CEO who happens

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Speaker 1: don't come from Blackrock. Who is he?

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Speaker 2: Yeah, this is It was a bit of a shock,

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Speaker 2: although I will say on ETFIQ I said he was

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Speaker 2: one of my possible candidates because I knew he was available.

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Speaker 2: This is Salem Ramji, who was the head of all

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Speaker 2: their global ETFs at Blackrock, so big wig he was.

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Speaker 2: There was some shatter he might succeed Larry Fink at

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Speaker 2: some point, but he just left. That was surprise, by

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Speaker 2: the way, about six months ago, so he was available.

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Speaker 2: I thought he might do something nonprofit and just sort

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Speaker 2: of slowly go out of the scene. But when he

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Speaker 2: got hired, I was like, Okay, it's it's a little shocker,

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Speaker 2: but Vanguard is evolving all the time and this makes

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Speaker 2: sense to me on a couple levels. I think Vanguard

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Speaker 2: is they have new challenges. You know, get getting flows

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Speaker 2: into ETFs isn't exactly a huge challenge for them, but

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Speaker 2: they have some new challenges. Will go over. But also

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Speaker 2: I think that Salim, you know, probably won them over.

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Speaker 2: He's a true indexing advocate and he can run an

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Speaker 2: ETF business, and Vanguard is very into ETFs these days.

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Speaker 2: So if you when I started to think about it,

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Speaker 2: it wasn't that big of a shake up. Plus he

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Speaker 2: got a report to the board. He can't go crazy.

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Speaker 2: But it is interesting because he was advocate for the

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Speaker 2: Bitcoin ETF and that is there's a couple kinds of

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Speaker 2: things he's done that I think we're probably pushing the

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Speaker 2: would push the envelope there for sure. So it's going

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Speaker 2: to be interesting. But you know, Vanguard is almost fifty

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Speaker 2: years old, and my guess is that their culture he

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Speaker 2: adapts to it more than he and you know, pushes

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Speaker 2: a blackgron culture on Vanguard, that's my guess.

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Speaker 1: Oh so you mean he becomes like part Bogel.

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Speaker 2: Yeah, he gets absorbed by the cult more than he

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Speaker 2: changes things too dramatically.

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Speaker 1: Okay, well, we're gonna get into all of this with

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Speaker 1: Sylla Brush, who covers asset management for Bloomberg News. Also

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Speaker 1: worth mentioning if you want to hear Selim Ramji in

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Speaker 1: his own words when he was at black Rock. We

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Speaker 1: had him on the podcast in December of twenty twenty one.

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Speaker 1: Go ahead and search for that in your feeds. This

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Speaker 1: time on Trillions, Vanguard gets black rocked Silla, Welcome to Trillions.

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Speaker 1: Great to be with you. Okay, just how significant is

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Speaker 1: this leadership change because there has not been that many

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Speaker 1: CEOs since Jack Bogel stepped down in ninety five ninety five, right,

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Speaker 1: so this is a little bit of a legacy issue.

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Speaker 3: I thanks the legacy issue. It's also, you know, the

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Speaker 3: first CEO that they picked who's an outsider, and I

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Speaker 3: think that's, you know, one of the rises about it.

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Speaker 3: You know, every person who's led Vanguard has had a

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Speaker 3: long tenure at Vanguard prior to being elevated to the CEO.

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Speaker 3: So of course Bogel, the founder, and the following three CEOs,

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Speaker 3: you know, worked with the man himself and spent quite

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Speaker 3: a bit of time each of them at the firm.

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Speaker 3: And so it's an interesting pick as an outsider coming

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Speaker 3: into a firm which has a very strong I mean,

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Speaker 3: I guess on some level, all cultures are unique, but

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Speaker 3: a very strong and unique culture. And I think that's,

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Speaker 3: you know, one of the things that caught people by surprise,

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Speaker 3: maybe a touch less you know who they picked, but

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Speaker 3: just that they picked somebody, you know, coming in describe

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Speaker 3: the vanguard culture. So it's you know, I think they

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Speaker 3: kind of talk about it almost as a mission, sort

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Speaker 3: of a zeal about low cost index investing for the masses.

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Speaker 3: That basically, you know, Jack Bogel took a product that

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Speaker 3: you know, wasn't very postpopular in the seventies and an

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Speaker 3: index fund and index fund, and you had a very

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Speaker 3: strong furv and belief that it could be marketed and

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Speaker 3: sold to the masses, and over time it would outperform

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Speaker 3: and low costs would be a winner for investors across

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Speaker 3: America and then later on essentially the world. And that

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Speaker 3: really is the mission of the company. And it's not

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Speaker 3: a for profit company. It has this almost sort of

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Speaker 3: unique ownership structure, all kind of geared towards keeping costs low.

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Speaker 2: Yeah, And let's go into that because the book I wrote,

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Speaker 2: the Bogel Effect, the whole premise of the book was

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Speaker 2: that the ownership structure to me was the primary thing

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Speaker 2: driving everything you see, because every time money came in

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Speaker 2: in the seventies and eighties, instead of spending the money

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Speaker 2: on like sponsoring a sports stadium or paying executives more,

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Speaker 2: the board was representing the investors and they were like, actually,

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Speaker 2: I'd rather have the money for lower fees from me

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Speaker 2: because I'm the investor. And so that's why the fees

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Speaker 2: came down little by little. The first index film was

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Speaker 2: like sixty, seventy basis points, but it went down, down,

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Speaker 2: down until it got to like twenty ten in the nineties.

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Speaker 2: That's when it took off. So to me, indexing wasn't

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Speaker 2: really that grade of an invention. It was okay, it

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Speaker 2: was cheapness that was sweeping the nation. So indexing kind

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Speaker 2: of got lucky, I think, but they were kind of

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Speaker 2: hand in glove, right, this idea of low cost and

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Speaker 2: then you put an index fund on top of that. Boom.

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Speaker 2: I mean, that's the big idea. But an index fund

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Speaker 2: at seventy basis points, I don't really think is that

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Speaker 2: grade of a concept.

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Speaker 3: What was active then though probably well above.

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Speaker 2: You're right. So my premise in the book is that

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Speaker 2: indexing would have like maybe five to ten percent of

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Speaker 2: the assets it has if it was seventy eighty basis points,

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Speaker 2: because indexing would be okay, but it wouldn't be like

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Speaker 2: crushing every active manager where you're like, oh my god,

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Speaker 2: the evidence is so strong, I will put my money

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Speaker 2: because but again, the low fees are really the thing.

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Speaker 2: And it's interesting Salim I interviewed for the book, and

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Speaker 2: I could tell he was a fan of Bogel. He had,

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Speaker 2: he has his books. He's a very he's a student

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Speaker 2: of the index. But he he kept trying to give

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Speaker 2: credit to Wells Fargo, who technically invented the index fund.

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Speaker 2: Bogel saw it and ran with it and came out

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Speaker 2: with the second index fund. But Bogel always said he

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Speaker 2: did it, but he always glorified his story. But my

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Speaker 2: point is, I think Selim couldn't say that Bogel and

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Speaker 2: Vanguard were the big deal because he's a black rock.

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Speaker 2: So in his podcast and on arts, he would say

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Speaker 2: Wells Fargo indexing, low friction, low cost, He's into all

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Speaker 2: of he checked all the boxes, but he wouldn't save

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Speaker 2: the V word. I think of black rock, you can't

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Speaker 2: say the vword. Now he's at Vanguard and I think

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Speaker 2: he'll go a little wild promoting this, and I think

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Speaker 2: he'll be able to now be more full throated about

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Speaker 2: how he feels about Bogel. And I thought I'd like

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Speaker 2: to get your take on this, Sola that when he

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Speaker 2: was in the interview, to go over an outsider, you

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Speaker 2: have to win over their hearts. My guess is he

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Speaker 2: went for three four interviews and it was this passion

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Speaker 2: for indexing and low costs and access that won them

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Speaker 2: over because they knew he had the experience, but did

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Speaker 2: he have the did he have the cult DNA? And

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Speaker 2: I think he showed he had that.

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Speaker 3: Yeah, I think that's right. I mean I think he

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Speaker 3: you know, one word that comes up a couple of

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Speaker 3: words that come up pretty often when you know talking

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Speaker 3: to people about Salem cerebral academic and very much sort

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Speaker 3: of a strategy consultant. So I think, you know, kind

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Speaker 3: of a student of the markets and a student of

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Speaker 3: the industry. And prior to being at Blackrock, he was

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Speaker 3: a partner at McKinsey for a long time where he

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Speaker 3: also advised Blackrock, but you know, he was in the

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Speaker 3: asset management and wealth management practice there and so I

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Speaker 3: think I think that kind of a background, perhaps a

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Speaker 3: little less on as a trader. You know, that's Wall

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Speaker 3: Street trader. That's not his sort of sort of origin

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Speaker 3: story formative years. It's very much a kind of you know, advisors,

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Speaker 3: strategic consultant, academic if you will. You know, he's a

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Speaker 3: lawyer by training. I can see that being, you know,

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Speaker 3: more of the mold or model that if Vanguard were

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Speaker 3: to pick somebody, that would be kind of the person

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Speaker 3: that they would consider. So yeah, I mean, I think

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Speaker 3: he really is a student in the markets. Lots of

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Speaker 3: people are, but I think I think that is a

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Speaker 3: kind of a personality that you know, that's how a

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Speaker 3: lot of people describe them.

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Speaker 1: Okay, so you have this outsider from Blackrock now entering Vanguard,

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Speaker 1: where the culture has been relatively unique. They've had some

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Speaker 1: old ways of doing things. The ETF even has been

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Speaker 1: a thing that I think has been a source of

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Speaker 1: friction internally. Bogul, as we know, didn't love the ETF,

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Speaker 1: and yet that increasingly looks like a bigger share of

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Speaker 1: their business. What do we expect from the new guy?

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Speaker 1: I mean, I think you know the real question is

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Speaker 1: continuity and change. Right, the culture is so strong that

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Speaker 1: there's like an entire you know, millions of people who

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Speaker 1: are investors, who are you know, bocal heads, and they've

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Speaker 1: bought into this philosophy and it has been good for

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Speaker 1: them and they don't want to see that just die away.

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Speaker 1: So being true to that while also finding areas for growth,

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Speaker 1: right like that is the challenge. As Eric said, you know,

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Speaker 1: ETFs and indexing has really taken off, maybe took off

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Speaker 1: the trajectory of it took off more in the last

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Speaker 1: ten to twenty years than maybe in the prior twenty years,

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Speaker 1: but nonetheless is taken off. There's a question of how

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Speaker 1: much more can it grow. There's a lot of talk

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Speaker 1: now about whether active management or more active selections of

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Speaker 1: funds because rates are higher now the task of investing,

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Speaker 1: maybe there are more opportunities for active managerement. Part of

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Speaker 1: this is all marketing and spin, but there is a

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Speaker 1: lot of discussion about that being more growth there than

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Speaker 1: just basically put it in a fond and forget about

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Speaker 1: it and you'll be fine. And so I think for

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Speaker 1: Vanguard and the question is are there areas that they

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Speaker 1: can find and try to exploit And they've been trying

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Speaker 1: to do this and advised you to account. They've been

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Speaker 1: getting into it more international, they've tried and fits and

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Speaker 1: starts and not been terribly successful. And then you know,

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Speaker 1: not necessarily an area for growth, but it kind of

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Speaker 1: goes across everything is the technology of the firm, and

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Speaker 1: I think, you know, there are a lot of criticisms

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Speaker 1: of its ease of use, whether it's technologically as sophisticated

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Speaker 1: as other firms. So there are lots of areas in

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Speaker 1: the firm that are sort of growth potentials, and I

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Speaker 1: think that the challenge, obviously is to realize them and

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Speaker 1: to actually grow. And I think that's part of the

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Speaker 1: mission well, that somebody with the little McKinsey blood would

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Speaker 1: have some appeal. I think then.

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Speaker 2: Two things on this. First of all, this idea of

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Speaker 2: growth in general a Bogel would hate. But he hated

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Speaker 2: it when John Brennan did it. He hated it when

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Speaker 2: McNabb did it. I remember going to interview him the

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Speaker 2: first time and he goes, can you believe we have

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Speaker 2: four trillion in assets? That's obscene? And he goes and

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Speaker 2: because he loved he had this frame picture of his

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Speaker 2: book Enough and underneath he had Trump's book Never Enough.

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Speaker 2: He goes isn't this great? So he was like he

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Speaker 2: was all about enough. He didn't think we should grow

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Speaker 2: at all because he thought we're going to lose track

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Speaker 2: of the hearts and souls of the actual customers and

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Speaker 2: they're all going to be numbers. Thus, I think they're

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Speaker 2: well beyond that now they have like eight point three

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Speaker 2: triol and they have double what when he was upset.

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Speaker 2: So I do think within the current vanguard CEOs, he

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Speaker 2: fits perfectly. To me, he's like a Buckley. It's Bogel

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Speaker 2: that's so different and will always be the anomaly in physics.

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Speaker 2: Everyone else, to me is a more normal and he's

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Speaker 2: very reserved. He's not going to say anything. Stupid. Bogel

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Speaker 2: would just drop bombs right and left. And he was

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Speaker 2: a pr person's nightmare, but in a fun way, in

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Speaker 2: a good way. And at the time, I think to

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Speaker 2: break through the industry at that time, and because you're

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Speaker 2: not distributing, you have no distribution fees, so you have

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Speaker 2: to get everybody to come to you. You have to

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Speaker 2: be pretty maverick, pretty maverick. Everyone else is more of

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Speaker 2: a caretaker, but they they're all trained in like MBA

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Speaker 2: to grow, like what else. He supposed to do. They're

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Speaker 2: supposed to go to do a new firm. Ago, let's

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Speaker 2: actually retract. So everybody's you know, been trained to grow.

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Speaker 2: I think the point you brought up was interesting about

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Speaker 2: the advisory business. So I don't think he has to

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Speaker 2: do much with ETFs. I think the fish are jumping

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Speaker 2: in the boat. They're at this point you could probably

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Speaker 2: say don't invest with us, and the money would still

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Speaker 2: come in. They taken nine hundred million dollars a day

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Speaker 2: for the past decade. Their ETFs this year have taken

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Speaker 2: in thirty six percent of all flows. This had a

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Speaker 2: six hundred shores. It's fine. Advisory is interesting. So most

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Speaker 2: of the people in the wealth management business are Vanguard

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Speaker 2: fund investors who got old. That's why they launched it.

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Speaker 2: But this got three hundred billion. But the fees are

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Speaker 2: real low droll. They're like point two five and below,

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Speaker 2: So if you have a lot of money, you can

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Speaker 2: get to for point five or point ten per Most

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Speaker 2: advisors are one percent. So this is dramatically cheaper, and

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Speaker 2: I think Salim could make that one of his legacies.

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Speaker 2: Tim Buckley even called the wealth management engine number two.

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Speaker 2: I think he'd be good at that. And may basically

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Speaker 2: taking their advisory service externally. The only thing with that

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Speaker 2: is once you become an advisor and your full service

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Speaker 2: and you have all different types of people who want

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Speaker 2: different things. They're going to request private equity, they might

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Speaker 2: request crypto, they might request options like it's going to

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Speaker 2: take you into some Unboglian areas. But again, Vanguard's past

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Speaker 2: that because remember Bogel got pissed off at every CEO,

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Speaker 2: especially his successor. I mean there was like twenty five

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Speaker 2: years of him dropping bombs on management from his research office.

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Speaker 2: So he would drop the same bombs on Salim. I

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Speaker 2: don't see anything that different there.

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Speaker 1: Maybe in some ways this is like a perfect job

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Speaker 1: because you don't have to deal with the maverick still

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Speaker 1: throwing bombs or ever having a direct connection to him

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Speaker 1: other than you know, probably through the industry.

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Speaker 2: That's true. And you know it's funny is that he'll

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Speaker 2: have to answer to the board. But I think the

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Speaker 2: board is probably going to be more like him. Again,

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Speaker 2: the board kicked out Bogel in ninety five. How about that?

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Speaker 2: How about you start this company and you're so crotchety

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Speaker 2: and like annoying that the board's like you got to go.

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Speaker 2: So I just find that That's why I wrote the book.

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Speaker 2: I'm like, this guy is wild anyway. The other thing,

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Speaker 2: the technology, I think that relates to customer service. That's

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Speaker 2: another thing Vanguard needs a lot of help with. Did

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Speaker 2: you look at that at all? Because I know I

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Speaker 2: looked at their Yelp reviews are bad. Bogle Heads forums.

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Speaker 2: They're even these bugle heads they love Bogel They're like,

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Speaker 2: I don't like Vanguard. I was at the Bugleheads convention.

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Speaker 2: I met somebody who's like, I am in low cost

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Speaker 2: Vanguard funds but on Fidelities platform. Yeah, so well, what

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Speaker 2: do you think he's going to do?

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Speaker 1: That would just irk him to know end that you're

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Speaker 1: using it, that would be in traueving Guard funds.

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Speaker 2: He would his head would explode.

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Speaker 1: It's also worth mentioning Blackrock known for its technology, which

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Speaker 1: is a software called Aladdin. So yeah, how do you

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Speaker 1: think don't go about wrestling with this technology question?

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Speaker 3: So I think it's really it goes down to the

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Speaker 3: question of what how do they want to change the company.

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Speaker 3: If they want to change it, right, like, if they

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Speaker 3: really go full force into an advisory business, they're going

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Speaker 3: to have to really up their game on technology. It

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Speaker 3: also brings them into a new kind of competition with

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Speaker 3: the Schwabs and the Fidelities of the world, companies that

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Speaker 3: have branches in major cities and smaller cities across America.

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Speaker 3: That's not something Vanguard has. And it is a kind

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Speaker 3: of a connection that a lot of clients like to

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Speaker 3: have that you know, you can walk into a branch

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Speaker 3: and talk to your advisor. Vanguard doesn't have that, and

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Speaker 3: it's entirely by phone, and unless you have a lot

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Speaker 3: of money, you're basically put into kind of like a

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Speaker 3: bucket of advisors and you kind of call or email

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Speaker 3: and you get like whoever responds. That's not, you know,

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Speaker 3: always the case, but it's not like having one personal connection.

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Speaker 3: And so I think they kind of have to decide,

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Speaker 3: you know, if they really want to expand greatly into

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Speaker 3: that and if they need to change the business model

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Speaker 3: at all, and then you know, the company does become

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Speaker 3: more and considerably different than what it is today. Comparison

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Speaker 3: is also different. Blackrock is not a you know, people

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Speaker 3: don't have personal individuals don't have personal black Rock accounts.

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Speaker 3: You're holding Iyeshirt's ad Fidelity or ad a broker unless

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Speaker 3: you're like a foundation or a large institutional investor, and

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Speaker 3: that's you know, these companies, while they do many things

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Speaker 3: that are the same, they also do they also very

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Speaker 3: important differences between like how they sell stuff, who they

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Speaker 3: sell it, the lineup of products, the advisory business. So

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Speaker 3: you know, I think that kind of institutional business is

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Speaker 3: very much core to Blackrock. It's not as core to

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Speaker 3: Vanguard except on the four oh one k accounts.

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Speaker 1: So Eric, if you're Vanguard and you have this existing

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Speaker 1: portfolio and here comes new guy, what do you think

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Speaker 1: the product offerings could be, How could they change? What

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Speaker 1: could they look like?

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Speaker 2: Yeah, I think there'll be incremental changes. Vanguard launches very

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Speaker 2: few products, maybe one or two a year. They're very picky.

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Speaker 2: I could see that doubling. Maybe it just depends on

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Speaker 2: what his focus is. When I interviewed for the book,

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Speaker 2: one of the quotes he said to me was, you

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Speaker 2: know our traffic light system where we give red lights

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Speaker 2: to like leverage. Blackrock tried to implement a system and

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Speaker 2: call all of those I think ETI's because he didn't

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Speaker 2: want ETF to be contaminated by the crazy stuff. And

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Speaker 2: that's something that Bogel and Vanguard and Salim all would

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Speaker 2: agree on.

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Speaker 1: And there's money there too.

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Speaker 2: Yeah, that leveraged Like, there's so much stuff that they

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Speaker 2: would consider a distraction.

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Speaker 1: You know file Bogo is rolling over.

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Speaker 2: Yeah, but this is a everybody would be on the

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Speaker 2: same page here, whether it's the successor is Bogle or Salim,

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Speaker 2: which is leveraged inverse, things that roll, commodities, futures, that

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Speaker 2: stuff should not be part of any account. So the

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Speaker 2: question is things like gold right single gold. Yeah, you

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Speaker 2: can buy a gold ETF on Vanguard's platform, but you

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Speaker 2: can't buy a bitcoin ETF. Well maybe the lad bitcoin

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Speaker 2: it's only long only. Then there's things like black Rock

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Speaker 2: has a Fallen Angels bond ETF. Well, Vanguard has the

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Speaker 2: next level up, but they don't go one level down

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Speaker 2: to the niche of just double b's. Maybe there'll be

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Speaker 2: a Vanguard double B. Vanguard has a market neutral mutual fund,

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Speaker 2: maybe they launch something like that, which'd be interesting in

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Speaker 2: an ETF format. The active equity the Vanguard active equity

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Speaker 2: mutual funds have a lot of money, but they're seeing outflows.

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Speaker 2: That's one area of Vanguard is like having problems just

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Speaker 2: like every other active equity mutual fund manager. But if

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Speaker 2: they came into the ETF world, people are buying active

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Speaker 2: equity ETFs, and they're buying them if they're cheap. So

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Speaker 2: they're already cheap. So if they launched like a Wellington

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Speaker 2: Wins or a variety of their active if it made

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Speaker 2: them available in the ETF format, I think they would sell.

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Speaker 2: But again the question is how much is he going

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Speaker 2: to convince the board we need to sell more versus

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Speaker 2: we're fine work on this other stuff. But I could

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Speaker 2: see some tiny incremental changes on the product line, but

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Speaker 2: I don't see them say launching you know, a double

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Speaker 2: leveraged high old bond ETF or anything like that. May Yeah, No,

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Speaker 2: they're not going to go. He's not gonna get that

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Speaker 2: just won't happen. Again, this is obviously describing kind of

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Speaker 2: new versions of vanilla basically, Yeah.

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Speaker 3: A lot of those products. Also, like in the Blackrock comparison,

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Speaker 3: a lot of their products that are sort of these

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Speaker 3: precision or specific parts of the market are geared towards

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Speaker 3: very active traders, if not institutional traders. Like sometimes there's

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Speaker 3: a misconception that ETFs are traded mostly by retail and

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Speaker 3: they go in and out ETFs, Blackrock and a bunch

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Speaker 3: of other large firms are become a tool for various

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Speaker 3: sophisticated institutional portfolio managers to go in and out of

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Speaker 3: the market, and like, that's one of the reasons that

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Speaker 3: Blackrock has many more and many more specific funds.

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Speaker 2: Vanguard traditionally only made funds that you bought and hold ETFs,

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Speaker 2: so their turnover the trading of the ETFs relative to

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Speaker 2: the assets was tiny, and Bogel actually loved that. He

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Speaker 2: was like, hey, at least ours are ETFs are traded

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Speaker 2: that much. That was the one thing saving grace he

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Speaker 2: could take, even though he didn't like ETFs. Black rocks

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Speaker 2: trade more, and then something that pro sharees they trade

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Speaker 2: a ton, But some Vanguard ETFs is starting to trade more.

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Speaker 2: Vu is in the top twenty most traded ETFs consistently,

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Speaker 2: and if Voo starts to get more volume will at

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Speaker 2: some point it's going to start to peel away investors

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Speaker 2: from spy because it is three times cheaper. It's three

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Speaker 2: base points versus nine. So it's interesting if Salim's black

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Speaker 2: rocky in mind, which would be like, we should go

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Speaker 2: after the trading crowd because it's going to help us

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Speaker 2: get more assets from spy. That would be what he

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Speaker 2: thinks as an IVV manager, But will he think that

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Speaker 2: as a VU manager? That's going to be interesting because

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Speaker 2: you could argue that if you get more volume, the

401
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Speaker 2: spreads are lower, so the costs will be lower people

402
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Speaker 2: coming in and out, and the more people in it,

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Speaker 2: the more you could lower the fee based on the

404
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Speaker 2: mutual fund structure, So you could actually do some mental

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Speaker 2: gymnastics that say, actually trading in our ETFs is good

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Speaker 2: for everybody long term for the mission. You could definitely

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Speaker 2: do that, and I think he did it at Blackrock,

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Speaker 2: Get will will those connections be made at Vanguard? I'm

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Speaker 2: fine with it. And at some point if an ETF

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Speaker 2: like VU is the most traded and cheapest, I mean

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Speaker 2: look out like these ETFs that trade a lot and

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Speaker 2: their low cost like IVV and VU. It's unbelievable how

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Speaker 2: powerful these things are going to be are in the future.

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Speaker 2: There's whole ecosystems around them with options and VU alone

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Speaker 2: this year is taken in thirty six billion dollars right

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Speaker 2: the record in a year is like forty five, so

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Speaker 2: it's already like halfway there at fifty maybe, so it's

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Speaker 2: already fourteen billion away from the record. It's unbelievable how

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Speaker 2: powerful some of these, I'd say the top twenty ETFs

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Speaker 2: at Vanguard and I shares are becoming.

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Speaker 1: What about conversions? You mentioned the mutual fund ETF tension

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Speaker 1: and obviously conversions have been a theme. Do you think

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Speaker 1: that's an area of opportunity for him to bring over

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Speaker 1: sort of heritage Vanguard funds and bring them into the

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Speaker 1: ETF world.

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Speaker 2: So this is interesting, love to get your take on this, Sola.

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Speaker 2: Vanguard has been pushing people to the ETF as much

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Speaker 2: as possible. Some of their ETFs they already have the

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00:22:02,440 --> 00:22:04,159
Speaker 2: ETF share classes part of the mutual fund and the

430
00:22:04,160 --> 00:22:06,560
Speaker 2: ETF I believe is cheaper in some cases. So a

431
00:22:06,560 --> 00:22:07,760
Speaker 2: lot of people who would be in the S and

432
00:22:07,760 --> 00:22:11,040
Speaker 2: P five hundred mutual fund have moved to VU right,

433
00:22:11,080 --> 00:22:15,280
Speaker 2: and it's tax free move That's that's going to be interesting.

434
00:22:15,359 --> 00:22:17,959
Speaker 2: And will they as part of that, will they convert

435
00:22:18,040 --> 00:22:20,119
Speaker 2: mutual funds literally into an ETF? Will they take like

436
00:22:20,160 --> 00:22:22,040
Speaker 2: I don't know the windsor and just make it an ETF.

437
00:22:22,400 --> 00:22:24,320
Speaker 2: If you do that, what you do is you push

438
00:22:24,359 --> 00:22:27,920
Speaker 2: everybody to a brokerage account and the question is where

439
00:22:27,920 --> 00:22:30,240
Speaker 2: do they push them. The good news for that is

440
00:22:30,280 --> 00:22:32,880
Speaker 2: it takes some I think, burden off of your customer

441
00:22:32,920 --> 00:22:35,720
Speaker 2: service desk because remember everybody who was in Vanguard had

442
00:22:35,760 --> 00:22:37,879
Speaker 2: to go to their website and buy the funds and

443
00:22:37,920 --> 00:22:40,960
Speaker 2: now their Vanguard's problem. Whereas if you buy it on Fidelity,

444
00:22:41,000 --> 00:22:43,320
Speaker 2: they could call Fidelity person and not a Vanguard person

445
00:22:43,359 --> 00:22:44,840
Speaker 2: even if you own the Vanguard fund, you know what

446
00:22:44,880 --> 00:22:49,639
Speaker 2: I'm saying. So by pushing the ETF, they they start

447
00:22:49,680 --> 00:22:53,120
Speaker 2: to help their customer service burden. But at the same time,

448
00:22:53,200 --> 00:22:55,080
Speaker 2: I just don't see them converting a mutual fund. That

449
00:22:55,119 --> 00:22:57,920
Speaker 2: just doesn't seem like their culture. But I the only reason,

450
00:22:57,960 --> 00:22:59,520
Speaker 2: the only way I could see it is if they convince,

451
00:22:59,760 --> 00:23:02,919
Speaker 2: if they come up with the idea. Again, little mental gymnastics.

452
00:23:03,320 --> 00:23:06,480
Speaker 2: The more we get people, our own people into ETFs,

453
00:23:06,960 --> 00:23:09,879
Speaker 2: the more we disperse their customer service needs.

454
00:23:10,840 --> 00:23:14,560
Speaker 3: But I still think Vanguard likes that the mission of

455
00:23:14,600 --> 00:23:17,800
Speaker 3: the company resonates so strongly with their client tele right

456
00:23:17,880 --> 00:23:20,760
Speaker 3: like I think they the company is known for a

457
00:23:20,760 --> 00:23:23,919
Speaker 3: couple really core things that coret since the founding of

458
00:23:23,920 --> 00:23:28,000
Speaker 3: the company. Basically and with more levels of detachment from

459
00:23:28,040 --> 00:23:31,320
Speaker 3: their clients, the like. It's that kind they're kind of

460
00:23:31,400 --> 00:23:34,040
Speaker 3: juggling multiple things, like a technology, a sort of you know,

461
00:23:34,080 --> 00:23:37,360
Speaker 3: all companies wrestle with that, but also at the same

462
00:23:37,400 --> 00:23:40,080
Speaker 3: time thinking about having even deeper connections with their clients

463
00:23:40,080 --> 00:23:42,480
Speaker 3: by way of advisory, so they kind of it kind

464
00:23:42,480 --> 00:23:45,520
Speaker 3: of cuts both ways. I think that's probably mission number one.

465
00:23:45,560 --> 00:23:48,040
Speaker 3: And you saw Saliam sort of mention it. Approaching his

466
00:23:48,160 --> 00:23:50,040
Speaker 3: job with the zeal of a convert I think was

467
00:23:50,240 --> 00:23:55,120
Speaker 3: some close to the line. And I think that that

468
00:23:55,240 --> 00:23:59,400
Speaker 3: kind of sentiment is just so central to the company.

469
00:24:00,119 --> 00:24:02,479
Speaker 3: It's basically in his inbox when he starts right, like,

470
00:24:02,680 --> 00:24:04,400
Speaker 3: you know, how much does he stray and how much

471
00:24:04,400 --> 00:24:06,399
Speaker 3: does he stay true? I mean, that's clearly the question.

472
00:24:07,440 --> 00:24:10,320
Speaker 2: Now let's talk about younger people, because I do think

473
00:24:10,400 --> 00:24:14,040
Speaker 2: if you talk to Jen Why or my kids Jen Alpha,

474
00:24:14,560 --> 00:24:17,320
Speaker 2: I forget really cut off is and maybe even some millennials,

475
00:24:17,600 --> 00:24:20,480
Speaker 2: but I would say younger than millennials. I just get

476
00:24:20,520 --> 00:24:23,679
Speaker 2: the feeling that something like Vanguard and low cost indescing

477
00:24:23,800 --> 00:24:27,719
Speaker 2: isn't penetrating as well as you'd think it would, because

478
00:24:27,800 --> 00:24:30,879
Speaker 2: obviously it's a great deal. Like the people in the

479
00:24:30,880 --> 00:24:33,080
Speaker 2: middle get less of your money, you get more retirement.

480
00:24:33,520 --> 00:24:36,359
Speaker 2: But I see their commercials, it's like a typical mutual

481
00:24:36,359 --> 00:24:39,240
Speaker 2: funk commercial. It's like somebody with a golden retriever on

482
00:24:39,280 --> 00:24:41,359
Speaker 2: the beach and their kids just graduated college. You know,

483
00:24:41,400 --> 00:24:44,359
Speaker 2: It's like that kind of boomer thing. And I know

484
00:24:44,359 --> 00:24:46,840
Speaker 2: they have all the money, But do you think that

485
00:24:47,040 --> 00:24:51,480
Speaker 2: Selene will help maybe make Vanguard a little edgier or

486
00:24:51,520 --> 00:24:55,280
Speaker 2: make their message resonate more with younger people, because the

487
00:24:55,320 --> 00:24:58,439
Speaker 2: boomers are going to transfer the wealth down soon and

488
00:24:58,520 --> 00:25:01,160
Speaker 2: younger people get more money. It's just the nature of life.

489
00:25:01,680 --> 00:25:04,400
Speaker 2: And so I think they have a little problem there

490
00:25:04,800 --> 00:25:07,800
Speaker 2: in converting that really punk rock message. I mean, I

491
00:25:07,800 --> 00:25:11,000
Speaker 2: Thinkvogel to me is as you know, we run the Oracle,

492
00:25:11,520 --> 00:25:16,080
Speaker 2: is punk rock interesting. But it seems like Vanguard's kind

493
00:25:16,080 --> 00:25:18,160
Speaker 2: of gotten a little less of that and they become

494
00:25:18,200 --> 00:25:21,560
Speaker 2: a little more smooth boomerash.

495
00:25:21,640 --> 00:25:23,960
Speaker 3: I mean, I think lots of companies are wrestling with this,

496
00:25:24,160 --> 00:25:27,240
Speaker 3: right like ever since you know, Meme Stocks and Robinhood

497
00:25:27,280 --> 00:25:30,080
Speaker 3: took off a couple of years ago, right, like, so

498
00:25:30,200 --> 00:25:33,600
Speaker 3: much energy and excitement about you know, trading day trading

499
00:25:33,680 --> 00:25:35,840
Speaker 3: all sorts of complex things, or just putting money into

500
00:25:35,880 --> 00:25:39,560
Speaker 3: stocks that just have you know, shoot, the moon crypt

501
00:25:39,640 --> 00:25:42,840
Speaker 3: is obviously a version of that. It's interesting that a

502
00:25:42,840 --> 00:25:45,399
Speaker 3: bunch of companies, and not necessarily Vanguard specifically, but a

503
00:25:45,400 --> 00:25:49,240
Speaker 3: bunch of companies sort of bizarrely like seeing that because

504
00:25:49,240 --> 00:25:53,520
Speaker 3: if Robinhood was the first stop on a younger investors traders,

505
00:25:54,000 --> 00:25:58,040
Speaker 3: person's sort of financial journey or whatever that they want

506
00:25:58,080 --> 00:26:00,800
Speaker 3: to call it, once they kind of get that out

507
00:26:00,800 --> 00:26:03,800
Speaker 3: of their system, they're sort of like attuned to now

508
00:26:03,840 --> 00:26:06,080
Speaker 3: doing something with their money, and then the question is

509
00:26:06,080 --> 00:26:08,040
Speaker 3: like where else can they put it? And a lot

510
00:26:08,040 --> 00:26:10,480
Speaker 3: of other companies that are perhaps you know, more staid

511
00:26:10,560 --> 00:26:13,560
Speaker 3: and boring are not necessarily opposed to some of that

512
00:26:13,640 --> 00:26:18,040
Speaker 3: sentiment among younger investors because it at least gets people interested,

513
00:26:18,320 --> 00:26:21,320
Speaker 3: and once they're interested, it's at least an opening that

514
00:26:21,359 --> 00:26:23,480
Speaker 3: they can entice them their own way.

515
00:26:23,840 --> 00:26:26,760
Speaker 2: That's interesting way to put it. Yeah, you're right, and

516
00:26:26,840 --> 00:26:29,200
Speaker 2: I do agree that young people sometimes have to get

517
00:26:29,200 --> 00:26:31,399
Speaker 2: something out of their system with investing. I did it

518
00:26:31,400 --> 00:26:34,800
Speaker 2: with tech stocks in the late nineties. You're a little

519
00:26:34,920 --> 00:26:35,320
Speaker 2: I don't.

520
00:26:35,200 --> 00:26:37,280
Speaker 1: Know if I did it. Got a taste of that, yeah, probably,

521
00:26:37,680 --> 00:26:38,880
Speaker 1: I'm a little of ice cream.

522
00:26:39,000 --> 00:26:43,720
Speaker 2: Yeah, but everybody goes through this then you get responsibilities exact,

523
00:26:43,840 --> 00:26:46,119
Speaker 2: you're in a relationship and you can't mess around with

524
00:26:46,240 --> 00:26:46,800
Speaker 2: game stop.

525
00:26:46,920 --> 00:26:49,400
Speaker 3: It's what financial advisors say, right, Like some people start

526
00:26:49,680 --> 00:26:51,840
Speaker 3: do it yourself investing and then like maybe that doesn't

527
00:26:51,840 --> 00:26:54,320
Speaker 3: go so well, and then they're like, well, how do

528
00:26:54,400 --> 00:26:56,399
Speaker 3: I prevent a worst thing happening the next time? And

529
00:26:56,400 --> 00:26:58,199
Speaker 3: then they reach out to some financial advisor and then

530
00:26:58,200 --> 00:26:58,920
Speaker 3: that's how it goes.

531
00:26:59,480 --> 00:27:01,760
Speaker 2: That set a lot of the GameStop people, and I

532
00:27:01,800 --> 00:27:04,360
Speaker 2: know the crypto people, they have this feeling that Wall

533
00:27:04,400 --> 00:27:06,280
Speaker 2: Street's rigged against them and this is the way to

534
00:27:06,320 --> 00:27:08,359
Speaker 2: get back at all of the big Wall Street big shots.

535
00:27:08,400 --> 00:27:11,320
Speaker 2: But if you look at the data and you look

536
00:27:11,359 --> 00:27:13,960
Speaker 2: at the real way to get back and like stick

537
00:27:14,000 --> 00:27:16,360
Speaker 2: it to Wall Street, like a low cost index fund

538
00:27:16,880 --> 00:27:18,679
Speaker 2: is the most powerful way to do that. It's just

539
00:27:18,760 --> 00:27:21,480
Speaker 2: not it's boring because it takes a long time, but

540
00:27:21,560 --> 00:27:25,480
Speaker 2: that's the tried and true way to accomplish that populous

541
00:27:25,600 --> 00:27:28,120
Speaker 2: goal they have. That be My other point is that

542
00:27:28,119 --> 00:27:31,040
Speaker 2: that's the populism part of the memestocks and crypto that

543
00:27:31,080 --> 00:27:35,760
Speaker 2: I think there's something not being translated that this is

544
00:27:35,840 --> 00:27:38,520
Speaker 2: the way to do that. The problem is, I just

545
00:27:38,560 --> 00:27:40,840
Speaker 2: think this becomes like a faster way to do it

546
00:27:41,280 --> 00:27:44,560
Speaker 2: and more fun. So when I'm on podcasts with Meme

547
00:27:44,600 --> 00:27:47,919
Speaker 2: and especially the Memestock people, I'm like, look, just admit

548
00:27:48,000 --> 00:27:49,919
Speaker 2: this is just the good time with you and your friends.

549
00:27:50,359 --> 00:27:52,400
Speaker 2: Just admit that's what it is. Because if your real

550
00:27:52,440 --> 00:27:55,480
Speaker 2: goal is to make money and sort of like stick

551
00:27:55,480 --> 00:27:58,879
Speaker 2: it to the man, there's this other way that really

552
00:27:58,920 --> 00:28:01,920
Speaker 2: does it in a true way, in a scientifically proven way.

553
00:28:02,520 --> 00:28:05,199
Speaker 2: Your way is the exact opposite. It's really just making

554
00:28:05,280 --> 00:28:09,120
Speaker 2: like hedge funds that make markets richer and they.

555
00:28:09,040 --> 00:28:12,320
Speaker 1: Which is Bogo's original message, right, Like the game is rigged.

556
00:28:12,400 --> 00:28:15,080
Speaker 1: This is the dread and true way to win. Which

557
00:28:15,119 --> 00:28:16,800
Speaker 1: makes me think to go back to all the other

558
00:28:16,840 --> 00:28:18,560
Speaker 1: things that we've hit on, this is a tech and

559
00:28:18,680 --> 00:28:21,560
Speaker 1: product challenge that the new guy will probably have to

560
00:28:21,600 --> 00:28:24,320
Speaker 1: wrestle with. The point of an advisor in all of

561
00:28:24,320 --> 00:28:26,280
Speaker 1: this is like, hey, I just got all this money

562
00:28:26,480 --> 00:28:29,840
Speaker 1: from you know, boomer generation or whatever, what am I

563
00:28:29,920 --> 00:28:30,920
Speaker 1: gonna do with it? Right?

564
00:28:31,160 --> 00:28:33,359
Speaker 3: That is where it's also just have a real plug

565
00:28:33,400 --> 00:28:36,040
Speaker 3: and play solution. It's also a question of their clients, right,

566
00:28:36,119 --> 00:28:39,480
Speaker 3: like do they want more of the same clients grow

567
00:28:39,520 --> 00:28:42,040
Speaker 3: the you know they're you know, designated part of the

568
00:28:42,080 --> 00:28:45,040
Speaker 3: market or do they want to hit new kinds of clients.

569
00:28:45,560 --> 00:28:47,239
Speaker 3: And you know, I think that's one of the main

570
00:28:47,320 --> 00:28:48,680
Speaker 3: questions that they're gonna have to wrestle with.

571
00:28:49,640 --> 00:28:53,240
Speaker 2: Interesting about Vanguard is that they the recently, I don't

572
00:28:53,240 --> 00:28:56,800
Speaker 2: think they use Bogol enough. In fact, like they got

573
00:28:56,880 --> 00:28:59,000
Speaker 2: rid of the ship logo. But you know, maybe you

574
00:28:59,000 --> 00:29:00,480
Speaker 2: could say that is a way to it's a little

575
00:29:00,480 --> 00:29:04,760
Speaker 2: older looking. But I feel like if I was Salem,

576
00:29:04,840 --> 00:29:08,080
Speaker 2: I might actually bring up some clips of Bogel and

577
00:29:08,120 --> 00:29:10,440
Speaker 2: maybe even use them because some of the stuff he

578
00:29:10,520 --> 00:29:13,760
Speaker 2: says and the way he says them is powerful and

579
00:29:13,800 --> 00:29:17,680
Speaker 2: it can break through more than something that's smoother. It's

580
00:29:17,760 --> 00:29:20,840
Speaker 2: more rough around the edges. But we'll see. I just

581
00:29:20,880 --> 00:29:22,440
Speaker 2: think they should embrace it, just like if I was

582
00:29:22,600 --> 00:29:25,680
Speaker 2: Tim Cook, I would totally embrace Steve Jobs and be like, Yeah,

583
00:29:25,680 --> 00:29:28,000
Speaker 2: this guy found out our company is great, and here's

584
00:29:28,040 --> 00:29:31,040
Speaker 2: what he said and did and whatever. So I would

585
00:29:31,080 --> 00:29:33,360
Speaker 2: just keep that in mind. If I was running Vanguard,

586
00:29:33,360 --> 00:29:35,120
Speaker 2: I would use that as a tool in my toolbox

587
00:29:35,520 --> 00:29:37,400
Speaker 2: rather than like, oh, you know, that happened a long

588
00:29:37,400 --> 00:29:39,720
Speaker 2: time ago, we're this new company. I think they could

589
00:29:39,760 --> 00:29:42,560
Speaker 2: benefit from really bogolizing their message a little.

590
00:29:42,600 --> 00:29:44,280
Speaker 1: You're just trying to sell books.

591
00:29:44,200 --> 00:29:47,680
Speaker 2: That too, if you do want to learn more about everything.

592
00:29:47,400 --> 00:29:50,680
Speaker 1: I just said. All right, sel A Brush, thanks for

593
00:29:50,760 --> 00:29:59,440
Speaker 1: joining us on Drake You thanks for listening to Trillions

594
00:30:00,000 --> 00:30:02,360
Speaker 1: till next time. You can find us on the Bloomberg Terminal,

595
00:30:02,720 --> 00:30:07,400
Speaker 1: Bloomberg dot com, Apple Podcasts, Spotify, or wherever else you'd

596
00:30:07,440 --> 00:30:10,040
Speaker 1: like to listen. We'd love to hear from you. We're

597
00:30:10,080 --> 00:30:14,480
Speaker 1: on Twitter. I'm at Joel Webber Show. He's at Eric Baltunas.

598
00:30:15,600 --> 00:30:21,080
Speaker 1: This episode of Trillions was produced by Magnus Hendrickson. Bye