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Speaker 1: This is Mesters in Business with very Results on Bloomberg

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Speaker 1: Radio this weekend. On the podcast, I have an extra

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Speaker 1: special guest, Tom ram Poula has been with the Vanguard

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Speaker 1: Group since He has worked with every CEO, starting with

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Speaker 1: Jack Bogel all the way up to the curren CEO,

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Speaker 1: Tim Buckley, and has essentially helped to establish the Financial

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Speaker 1: Advisors Group, essentially the group at Vanguard that works with

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Speaker 1: r A s and broker dealers and other UH financial

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Speaker 1: professionals who provide portfolios, advice, financial plans UH to the

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Speaker 1: investing public. He has a unique perch from with which

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Speaker 1: to view the financial services industry, both from within Vanguard

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Speaker 1: as well as looking out over the financial landscape and

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Speaker 1: seeing what's going on with such trends as mutual funds,

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Speaker 1: E t f s, direct indexing, the rise of passive,

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Speaker 1: the rise not just a Vanguard, but the dominance of

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Speaker 1: Vanguard and the associated Vanguard effect, the pressure on fees

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Speaker 1: that have helped make investing so affordable. We we discuss

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Speaker 1: all these things, as well as why there has never

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Speaker 1: been a better tell him to be a retail investor

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Speaker 1: than right now, right here in this era. I found

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Speaker 1: the conversation to be absolutely fascinating and I think you

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Speaker 1: will also, So, with no further ado, my conversation with

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Speaker 1: the Vanguard groups Tom Rampulla. I'm Barry rit Halts. You're

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Speaker 1: listening to Masters in Business on Bloomberg Radio. My special

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Speaker 1: guest this week is Tom Rampulla. He is the managing

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Speaker 1: director of Vanguard's Financial Advisor Services Division, where he began

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Speaker 1: back in two thousand and two. That group provides investments, services, education,

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Speaker 1: and research to more than a thousand financial ad lisory

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Speaker 1: firms representing more than three trillion dollars in assets. Tom

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Speaker 1: joined Vanguard back in Tom Rampula, Welcome to Bloomberg. Thanks, Barry,

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Speaker 1: it's great to be here. Yeah, it's good to have you. So.

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Speaker 1: So I've worked my way through, uh, just about the

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Speaker 1: whole c suite at Vanguard, and I'm glad we finally

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Speaker 1: got to you. Um, tell us a little about about

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Speaker 1: your plans coming out of college. How did you ends

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Speaker 1: up at Vanguard? Yeah, I believe it or not, Barry,

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Speaker 1: I wanted to go to Wall Street coming out of

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Speaker 1: school and came up to New York and, uh, wall

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Speaker 1: Street didn't work out for a variety of reasons, but

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Speaker 1: I ended up working sort of an adjacent industry and

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Speaker 1: the portfolio management software business, and it really wasn't where

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Speaker 1: my passion was. So decided to make the move from

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Speaker 1: New York to Philadelphia. And I had a friend that

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Speaker 1: worked at Vanguard. I honestly knew nothing about Vanguard. In fact,

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Speaker 1: that was at of Philadelphia career Fair when I first graduated,

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Speaker 1: and there was a Vanguard table there and somebody said,

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Speaker 1: you want to go interview a Vanguard. I looked and

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Speaker 1: I was like, no, I don't think so. And they said,

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Speaker 1: what do they do. I think that's a supermarket or

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Speaker 1: something that. So that's how clueless was. But um, it

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Speaker 1: was really lucky. I had this friend started Vanguard in

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Speaker 1: March of quickly realized it was a pretty special place. Um,

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Speaker 1: you know, it's a It's a place where it's really

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Speaker 1: incredibly mission driven, It's got such a sense of purpose,

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Speaker 1: were owned by our clients, all these things that actually

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Speaker 1: took me a while to realize working there. But yeah,

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Speaker 1: it was a little bit of a by chance. Wasn't

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Speaker 1: really looking for Vanguard, but somehow I found it and

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Speaker 1: got really really lucky. So so going back to Philadelphia

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Speaker 1: is not a big change to you you went. I

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Speaker 1: went to Bloomsburg University, which is a midside school in

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Speaker 1: central Pennsylvania, and then Drexel, which is right in the

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Speaker 1: middle of Philly. Went to Drexel part time while I

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Speaker 1: was at Vanguard. Um did that commute down to Philadelphia

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Speaker 1: from the suburbs, you know, three times a week for

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Speaker 1: a number of years, which isn't too bad if you

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Speaker 1: go in the opposite the direction of traffic. Right, I

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Speaker 1: don't know about that. Not a lot of great mass

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Speaker 1: transit from Malverne to Film, from Malvern to Philly. Actually

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Speaker 1: you could, you can. You can take the train, but

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Speaker 1: at that time it was a long time ago. I

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Speaker 1: think I graduated ninety three. Um, it was more convenient

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Speaker 1: to drive. So so you mentioned of Vanguard was a

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Speaker 1: special place when you joined it. It's clearly a different

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Speaker 1: place today than it was in the eighties and nineties. Uh,

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Speaker 1: tell us a little bit about what it was like

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Speaker 1: working there, you know, pretty much before Vanguard became the

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Speaker 1: beheamoth we know it as today. Yeah, it was a startup.

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Speaker 1: It felt like a startup. I mean, it wasn't. It

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Speaker 1: wasn't quite a startup. Probably we probably had seven employees

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Speaker 1: at the time, but only about thirty billion in assets

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Speaker 1: under management, and we were trying to figure things out

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Speaker 1: and grow. Nobody really cared about indexing, and if they

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Speaker 1: did care about it, usually pretty negative thoughts about indexing.

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Speaker 1: You know, we were called un American and you are communist. Yeah,

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Speaker 1: that's right, we were Communists. Why settled for average? All

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Speaker 1: those things? But you know, Jack Bogel was at the

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Speaker 1: home when I started. I was fortunate enough to work

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Speaker 1: with him for about eight years, and you know, he

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Speaker 1: was so passionate about our mission. Um. You know, he

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Speaker 1: would we have partnership picnic every summer and he would

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Speaker 1: get up and speak and it would fire you up

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Speaker 1: for the rest of the year. The guy was incredibly

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Speaker 1: inspirational and you really felt like you were you were

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Speaker 1: taken on the ablishment and doing something special. So it

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Speaker 1: was really really fun start up, very collaborative, felt like

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Speaker 1: a family. Um. And you know, it took a while

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Speaker 1: to start growing, to be honest with you, I mean,

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Speaker 1: we really didn't start growing probably in mid nineties, you know,

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Speaker 1: started to get a little bit of attention. Then Now

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Speaker 1: in the nineties everybody was growing, stocks were going high,

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Speaker 1: or you're the middle of an eighteen year or so

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Speaker 1: giant thousand percent bowl market. What was Vanguard doing in

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Speaker 1: the mid nineties that finally began to gain traction? Was it?

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Speaker 1: Was it the underlying philosophy started to find some some

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Speaker 1: adherents or was it just the rising tide lifted all?

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Speaker 1: But I think I think a couple of things, Barry.

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Speaker 1: First of all, we had some real zealots, you know,

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Speaker 1: the Bogel heads of today, which you probably familiar with. Um,

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Speaker 1: they stumbled onto Vanguard. We didn't do advertising, we didn't sell.

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Speaker 1: We were actually Jack Bogle wouldn't let us say the

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Speaker 1: word sell or product or advertising. UM. He actually had

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Speaker 1: to put a dollar in a jar near his office

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Speaker 1: if you did UM. But you know, we had something special,

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Speaker 1: and I think people realize that people may not even

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Speaker 1: really understood that they owned the company, you know, by

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Speaker 1: investing in the funds on the company. But you've got

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Speaker 1: this core base of of people that really identified with Vanguard,

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Speaker 1: felt like they're part of the club, and great word

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Speaker 1: of mouth, so that was helpful. We had some great

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Speaker 1: performance from some of our active funds early days, winds

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Speaker 1: Or Fund, John Neff's superstar fund manager that helped UM.

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Speaker 1: You know, really talking about indexing, Jack taking that on,

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Speaker 1: taking the industry on. People started to get disappointed in performance.

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Speaker 1: You had star managers in the early nineties. That sort

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Speaker 1: of the shine came off the star a little bit,

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Speaker 1: so indexing had a little bit more of appeal cost,

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Speaker 1: you know, when you really camera home to what you

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Speaker 1: can control as an investor. Cost. It finally started to

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Speaker 1: catch on with people like, hey, I can get low

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Speaker 1: cost through indexing and get the market return, which, by

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Speaker 1: the way, over time is pretty darn good returns. And

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Speaker 1: and around the same time you started to see the

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Speaker 1: rise of some UH academics saying, a the market sufficient

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Speaker 1: very few if anybody can beat it, and those who can,

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Speaker 1: you don't know. It's persistent, if it was luck, if

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Speaker 1: it was whatever. And there was a lot of UM

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Speaker 1: academic defense of the idea of the advantages passive that's right, Yeah,

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Speaker 1: I mean Bert mackiel, Sure, that's right. Random walked down

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Speaker 1: while she was a Vanguard board member for many years.

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Speaker 1: Charlie Ellis another one, um you know, the Losers game

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Speaker 1: his book there. So there was a lot of academic

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Speaker 1: research around and it started to become practical. People started

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Speaker 1: to release see it and feel it and that that

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Speaker 1: started to give us a little bit of wind in

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Speaker 1: our sales. So back in the forget late eighties, even

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Speaker 1: in the early nineties, when you start to attract more capital,

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Speaker 1: did you ever imagine, hey, in twenty years, twenty five

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Speaker 1: years will be you know, six seven, eight trillion dollars. Uh? No,

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Speaker 1: not at all. It was it was a tough go

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Speaker 1: early early on UM and Jack was adamant about, Hey,

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Speaker 1: cash flow and market share is an outcome. We have

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Speaker 1: to just do what's focused on, doing what's right for investors.

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Speaker 1: Don't worry about growth, you know. He really hammered that

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Speaker 1: home to us. So we didn't really think big like that.

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Speaker 1: We're just trying to do the right thing. So yeah,

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Speaker 1: I'd say absolutely not. Had no idea how big we'd be.

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Speaker 1: When did it become clear that this was going to

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Speaker 1: be a multi trillion dollar I'm not I'm not sure

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Speaker 1: if there was ever a moment where I said, wow,

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Speaker 1: this is you know, we're big. Um. I do think

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Speaker 1: after the Global financial crisis we really start to get momentum.

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Speaker 1: Our funds held up well. We served during the everybody

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Speaker 1: saw outflows except Vanguard. That's right. We picked up share

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Speaker 1: there um, and I do think that that trusted brand.

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Speaker 1: People started to understand that they own the company, and

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Speaker 1: you know that the benefits of that structure are enormous

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Speaker 1: and many. Um. And so coming out of the financial

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Speaker 1: into the financial crisis, now the financial crisis, we really

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Speaker 1: start to take off. I was in London at the

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Speaker 1: time and you could see, Wow, things are really starting

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Speaker 1: to happen here. You mentioned London. You served as head

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Speaker 1: of Vanguard's UK and European operations. Tell us a little

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Speaker 1: bit about that experience. It was a fabulous experience that

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Speaker 1: was coming off helping start our financial advisor business, the

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Speaker 1: business i lead today. I did that for about six

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Speaker 1: or seven years, and then Bill McNab, the CEO at

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Speaker 1: the time, asked me if i'd go and start a

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Speaker 1: similar business in in the UK and run the European operation.

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Speaker 1: So packed up my wife and my four kids and

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Speaker 1: went to London and it was an unbelievable experience. It

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Speaker 1: felt like the the old days at Vanguard. You know,

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Speaker 1: you were coming in starting up. I was employee number

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Speaker 1: one in London. Um, we're taken on high cost funds,

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Speaker 1: active managers sort of the industry trying to bring transparency

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Speaker 1: and low cost of the industry, and it was just

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Speaker 1: really fun to build that business and we had a

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Speaker 1: great team there. What was that always supposed to be

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Speaker 1: a finite amount of time or did something specific bring

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Speaker 1: you back to the U S now it was I

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Speaker 1: was told three d years to five years and ended

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Speaker 1: up being there seven years and probably would have stayed

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Speaker 1: even longer, but I got the opportunity. Bill McNab again,

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Speaker 1: who I know, you know, was CEO and asked me

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Speaker 1: if i'd come back and joined senior f and lead

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Speaker 1: the f A S business, which was a lot bigger

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Speaker 1: than when I left in two thousand eight, and I

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Speaker 1: was thrilled to be able to do that. That's fantastic.

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Speaker 1: So let's talk a little bit about the Advisor Services division.

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Speaker 1: What exactly does it do and what sort of clients,

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Speaker 1: uh and customers are you working with? Yeah, well, first

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Speaker 1: of all, we work with financial advisors of all types

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Speaker 1: in the industry, UM, non vanguard financial advisors, so you've

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Speaker 1: got broken dealers, independent regter investment advisors are a S

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Speaker 1: and bank wealth advisors and uh, you know, we have

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Speaker 1: a team that serves those advisors and the home offices

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Speaker 1: of those advisors talking about vanguards product and educating about product.

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Speaker 1: We also do a lot of education around advice and

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Speaker 1: behavioral finance and coaching and all these things to help

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Speaker 1: advisors drive great outcomes for their clients. Well, we'll talk

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Speaker 1: a little bit about advisors alpha in a bid. But

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Speaker 1: you mentioned broker dealers. I did not realize they were

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Speaker 1: part of this group because I recall back in the

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Speaker 1: day they used to arg for shelf space like supermarkets

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Speaker 1: do for serials. How does Vanguard operate and not advertise,

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Speaker 1: not pay shelf space. Yeah, we still don't do that.

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Speaker 1: We like the transparency of an explicit fee. But I

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Speaker 1: think the move to fee based advice in the broker

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Speaker 1: dealer community really helped drive that. So advisor charges for

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Speaker 1: the advice that they provide the clients, and that pays

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Speaker 1: pays the bills and so um, we don't we don't

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Speaker 1: do the payment for distribution. Now it's pretty limited to

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Speaker 1: et f s with our broken dealer relationships, not exclusively,

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Speaker 1: so that the model around ETFs is a little different.

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Speaker 1: There isn't that same payment for service with the metro funds.

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Speaker 1: That's right, Barry. Really interesting and and let's talk a

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Speaker 1: little bit about the research and education that you provide.

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Speaker 1: Is this aimed at the advisor community, is it aimed

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Speaker 1: at the investor of public within your group? Who's your focus?

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Speaker 1: It's both, Um, you know, we do the typical stuff

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Speaker 1: market economic outlooks and research their product research, but importantly

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Speaker 1: being advisors work with their clients, coaching them through tough

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Speaker 1: times like this. Um, So we we do have uh

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Speaker 1: materials and research target at the advisor, but we also

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Speaker 1: helped them out and target their end client. You know,

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Speaker 1: Vanguards deals with tens of millions of individual investors and

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Speaker 1: we know how to speak to them very clearly and

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Speaker 1: very candidly and very openly. So we leverage that expertise

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Speaker 1: and we help advisors speak to their clients about you

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Speaker 1: name it, market savings, all all the things that they

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Speaker 1: talked about. So so I think it was fran Kinnary

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Speaker 1: a Vanguard came up with the concept of advisors Alpha.

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Speaker 1: Tell us a little bit about that, Yeah, advisor's alpha. Um,

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Speaker 1: we all know and believe very strongly today that advisors

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Speaker 1: help clients and in fact, the Vanguard, which is a

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Speaker 1: big shift from many years ago. We think most investors

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Speaker 1: would be well served with using a financial advisor, and

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Speaker 1: they bring a lot of value. Right, So there's the hey,

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Speaker 1: I'll i'll work with you and we'll develop goals and

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Speaker 1: a plan how to get there. They'll they'll construct a portfolio,

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Speaker 1: they'll do tax planning, right so the harvest losses to

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Speaker 1: offset future gains. They'll do a state planning, other complex

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Speaker 1: financial planning. And so what Fran and his team did

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Speaker 1: they did research and said how how much alpha does

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Speaker 1: an advisor add through the services they provide? And you

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Speaker 1: know it's hard, it's hard to pin that down exactly, Barry,

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Speaker 1: but we've come up with about three basis three basis

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Speaker 1: points or three percentage points of alpha working with an advisor.

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Speaker 1: And if you think about that, you know, you pay

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Speaker 1: an advisor fifty basis points a hundred basement whatever they're

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Speaker 1: providing on average annually. So really good value there. And

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Speaker 1: a lot of that comes from, believe it or not,

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Speaker 1: the behavioral coaching. To say the very least, that there

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Speaker 1: was a study done not too long ago that showed

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Speaker 1: when people panic out of the market, something like of

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Speaker 1: them never returned back to equities. That that leaves a

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Speaker 1: mark when it comes time to mark. Uh, you add

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Speaker 1: in tax lost harvesting, and just helping with having a

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Speaker 1: financial plan. I'm I'm a believer. Hey, that's that's my

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Speaker 1: day job. But I'm always curious to hear how you

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Speaker 1: guys came up with that phrase, which is so funny

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Speaker 1: because when I think of Vanguard, I think of beta.

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Speaker 1: I don't think of alpha. Developing a way to obtain

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Speaker 1: alpha seems sort of contrary. That's right, you can obtain

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Speaker 1: alpha even even if you use all beta as underlying investments.

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Speaker 1: The real value is the behavioral coaching and the tax management. Again,

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Speaker 1: the more complex value add around financial planning. So you

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Speaker 1: mentioned um transparency and low fees. Price obviously has a

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Speaker 1: big impact on long term returns. How can Vanguard keep

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Speaker 1: lowering its fees? At what point do you just run

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Speaker 1: out of runway? Yeah, our fee cuts are not a

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Speaker 1: pricing marketing strategy, Barry, It's it's a function of the

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Speaker 1: corporate structure of Vanguard. So we're really a mutual mutual

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Speaker 1: fund company. What I mean by that is, if you're

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Speaker 1: an investor in one of our funds, you own a

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Speaker 1: little pro rata piece of Vanguard. And if you think

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Speaker 1: about that from a leadership perspective, of management perspective, You

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Speaker 1: focus on one constituent, you the investor, and that's it.

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Speaker 1: Don't have to worry about my shareholders on Wall Street.

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Speaker 1: I don't have to worry about some family or family

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Speaker 1: office that owns me. It's all about you. So as

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Speaker 1: we grow become more efficient, we get scale. We sort

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Speaker 1: of make a profit, and we take that profit and

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Speaker 1: we do two things with it. One, we invest in

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Speaker 1: the business to better serve you, right so better digital

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Speaker 1: experience if your retail investor, more services for advisors. We

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Speaker 1: also take that profit and drive down expense ratios. And

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Speaker 1: really that's what we're all about, delivering value back to

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Speaker 1: those investors in our funds who own the company. And

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Speaker 1: as we grow and grow, that scale helps us drive

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Speaker 1: down the expense ratios. So so when I think of

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Speaker 1: owning a financial I think of three things. Uh. First,

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Speaker 1: I control I get to vote my shares in a proxy. Second,

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Speaker 1: if there's a dividend distribution, I capture some of that

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Speaker 1: in Third, if it's ever sold, I participate in the

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Speaker 1: equity when it's a mutual. Those things will kind of

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Speaker 1: roll into one. They do. Yeah, we I mean, we

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Speaker 1: could pay you a dividend, but it's actually more tax

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Speaker 1: efficient if we lower your fees. Huh. So that that's

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Speaker 1: really that's really quite fascinating. Um, we talked about research

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Speaker 1: and education. Let's let's talk a little bit about portfolio analytics,

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Speaker 1: financial planning tools. I didn't know you guys have a

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Speaker 1: healthcare calculator. Tell us about some of the software and

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Speaker 1: other analytical tools you guys have made available. Yeah, so, UM.

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Speaker 1: I think one of the unique things about Vanguard is

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Speaker 1: we serve a lot of different markets, right, So, we

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Speaker 1: serve financial advisors, we serve retail investors, and we actually

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Speaker 1: have an advice business of our own, and through that

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Speaker 1: advice business, we've developed a lot of capabilities, whether it's

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Speaker 1: the Thought Leadership Advisors ALPHA that we talked about before,

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Speaker 1: or some technology capabilities for our advisors to use. And

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Speaker 1: what we've done is taken some of those capabilities and

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Speaker 1: deliver them to the f a S clients, the Financial

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Speaker 1: Advisor Services client to help them drive better outcomes for

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Speaker 1: their their clients. So healthcare cost Estimator is a really

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Speaker 1: great example. We partnered with a firm in this space

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Speaker 1: and developed a module to help with healthcare cost and

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Speaker 1: determining healthcare costs in retirement, and we offer that module

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Speaker 1: and a lot of materials around it and client and

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Speaker 1: client materials to advisers to help them talk about healthcare

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Speaker 1: with their clients. It's it's typically the largest expense people have.

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Speaker 1: They have trouble getting their head around it, and it's

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Speaker 1: a really valuable tool. It's just an example of you know,

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Speaker 1: one of the things we do quite quite interesting. So

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Speaker 1: one of the other giants in the space is black Rock.

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Speaker 1: They have a risk management technology. How do you guys

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Speaker 1: think about risk management? What does that mean to advisors

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Speaker 1: who are trying to serve their clients in a somewhat

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Speaker 1: volatile environment. Yeah, we have a really good risk management

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Speaker 1: tool as well. Uh, it's it's through our Portfolio and

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Speaker 1: Analytics and consulting service and uh, you know, you run

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Speaker 1: a portfolio through it and will give you all your

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Speaker 1: risk exposures. We can consult with you on Hey, you

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Speaker 1: might be overexposed here under exposed. Did you know that?

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Speaker 1: Oh you didn't? You want to do something about it?

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Speaker 1: We can help you with that. So we provide a

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Speaker 1: similar service to our clients. They deem it really really valuable. Um,

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Speaker 1: it's interesting. I get every day, I get net promoter

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Speaker 1: scores from clients and and this service in particular, I

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Speaker 1: can't remember a time when it hasn't been like a

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Speaker 1: nine out of ten or a ten out of ten.

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Speaker 1: They see it as incredibly valuable. And one thing they

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Speaker 1: cite verbatim all the time is objectivity. You know, hey,

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Speaker 1: it really feels like Vanguard's trying to help me out,

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Speaker 1: not trying to necessarily sell me a product. And so

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Speaker 1: we distributed through that through thousands of advised We have

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Speaker 1: thousands of those engagements a year. Quite quite interesting. So

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Speaker 1: there's a quote I really love UM, and I want

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Speaker 1: to get your feedback on it. There has never been

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Speaker 1: a better time to be a retail investor than right now.

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Speaker 1: True false true? Why is that? Why is now so

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Speaker 1: great to be I'm an optimistic guy, Barry, but but seriously,

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Speaker 1: I think, UM, if you think about the markets and

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Speaker 1: market structure, you know, you think about this, you can

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Speaker 1: get exposure to the entire stock market and ETF for

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Speaker 1: two and a half three basis points. That's pretty Penny's

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Speaker 1: pen Henny's UM. Think about trading. I'm buying into It's free, right,

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Speaker 1: advice more accessible now than ever I can decide to

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Speaker 1: do it digitally. I can go hybrid and have digital

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Speaker 1: and an advisor with me, or I can you know,

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Speaker 1: see my advisor down the street and go in person.

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Speaker 1: So there's so many services there. There's so many tools

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Speaker 1: for investors, or so many tools for advisors to help investors.

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Speaker 1: I think it's a fabulous time. Yeah, no, I totally agree.

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Speaker 1: And I wasn't referring to what's going on in the market.

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Speaker 1: I just mean generally, if you have a long term perspective,

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Speaker 1: it's cheap, it's easy, it's transparent. You know, you go

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Speaker 1: back to the early days of Jack Bogel, and we'll

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Speaker 1: talk about that in a little bit about how hard

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Speaker 1: it was to simply try and come up with an

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Speaker 1: execution for here's the whole market or here's the SMP five.

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Speaker 1: You couldn't do that fifty years ago. It was practically impossible.

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Speaker 1: That's right. It was. It was tough. The technology wasn't there,

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Speaker 1: The cost, the frictional costs were high. You know, in

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Speaker 1: trading UM it's really um come in favor of retail

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Speaker 1: investors quite quite interesting. So when you began at Vanguard,

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Speaker 1: Jack Bogel was a CEO. Jack Brennan followed him Bill McNabb,

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Speaker 1: now it's Tim Buckley that that's kind of a a

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Speaker 1: list of CEOs tell us about the way the CEOs

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Speaker 1: you work with impact how the firm operates. Yeah, I

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Speaker 1: was fortunate to work with all four CEOs of Vanguard.

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Speaker 1: I worked with Jack Bogel for about eight years before

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Speaker 1: he retired, and you know, Jack was the visionary, the

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Speaker 1: guy that would get everybody motivated that we're doing something special.

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Speaker 1: We were small at the time. Uh, people thought we

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Speaker 1: were a little quirky. We're out in Pennsylvania, you know,

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Speaker 1: far away from Wall Street. But he was such a

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Speaker 1: motivator and instilled this sense of purpose. You know, you're

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Speaker 1: you're part of something bigger than yourself, which was really exciting.

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Speaker 1: And you know, Jack his words, he he could give

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Speaker 1: a speech like nobody else, and you know what he

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Speaker 1: wrote in the press and on interviews. He was just

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Speaker 1: so inspirational. So the perfect guy to to get us

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Speaker 1: really going. And then Jack Brennan took over after Jack

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Speaker 1: Bogel retired, hand pick successor. We started starting to grow

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Speaker 1: a little bit there, and I think Jack Brennan was

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Speaker 1: the right guy at that time as well. And there's

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Speaker 1: a common theme here you'll hear from me about the

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Speaker 1: right guy at the right time. Jack was helping us

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Speaker 1: grow up and mature. So we're growing like crazy, and

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Speaker 1: you know, we're financial services firm, so growth is good,

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Speaker 1: but you have to have control and processes and quality

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Speaker 1: and you know, you got to make sure you can

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Speaker 1: handle the volumes, both from an investment perspective but also

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Speaker 1: importantly from a processing and client service perspective. And Jack

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Speaker 1: was great at that. He brought in, you know, the

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Speaker 1: old total quality management programs and centers for excellence and

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Speaker 1: really matured us as an operator. He retired and uh

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Speaker 1: in two thousand eight, Bill McNab took over. We all

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Speaker 1: know what happened in two thousand and eight. But again,

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Speaker 1: I think Bill was was the right guy at the

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Speaker 1: right time. There was such turmoil and you know Bill,

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Speaker 1: he's a calm guy. Um and and really you know,

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Speaker 1: harness the power of the team to get us through

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Speaker 1: that tough environment. Leaned really hard into leadership development. You know,

426
00:21:54,800 --> 00:21:58,719
Speaker 1: we uh, we had a bunch of really great technical experts,

427
00:21:58,800 --> 00:22:00,520
Speaker 1: but as you grow immature, you want to have a

428
00:22:00,560 --> 00:22:03,280
Speaker 1: strong leadership team and Bill really invested in that lean

429
00:22:03,359 --> 00:22:05,159
Speaker 1: of that and that's that's a big part of his legacy.

430
00:22:05,240 --> 00:22:08,520
Speaker 1: Also looked outside of the US to to grow a

431
00:22:08,560 --> 00:22:11,719
Speaker 1: little bit more aggressively there. And again, great guy at

432
00:22:11,760 --> 00:22:14,920
Speaker 1: the right time. Bill retires, Tim Buckley takes over. Tim's

433
00:22:14,920 --> 00:22:18,240
Speaker 1: a fabulous CEO. UM. You think about his background in

434
00:22:18,320 --> 00:22:22,800
Speaker 1: today's and very interesting. He was chief information officer, head

435
00:22:22,800 --> 00:22:26,280
Speaker 1: of all I t Advantguard and then chief investment officer.

436
00:22:26,600 --> 00:22:29,400
Speaker 1: Think about the trends in our our industry today, tech,

437
00:22:29,560 --> 00:22:33,239
Speaker 1: the intersection of investments, advice and technology, and Tim's got

438
00:22:33,280 --> 00:22:36,840
Speaker 1: that intersection in his portfolio of experience, which is pretty incredible.

439
00:22:36,840 --> 00:22:42,000
Speaker 1: And he's a really smart guy, very disciplined, very creative. UM.

440
00:22:42,320 --> 00:22:43,960
Speaker 1: And I think the way we think about the world

441
00:22:44,000 --> 00:22:46,840
Speaker 1: now has changed under Tim. I think we're much more

442
00:22:46,880 --> 00:22:49,600
Speaker 1: focused on outcomes and driving great outcomes for clients. Were

443
00:22:49,640 --> 00:22:52,199
Speaker 1: much more nimble than we ever were through some new

444
00:22:52,280 --> 00:22:55,520
Speaker 1: management systems of pushing decision making down and being more nimble,

445
00:22:55,560 --> 00:22:58,520
Speaker 1: and uh, it's been really nice to be a big

446
00:22:58,640 --> 00:23:03,840
Speaker 1: organization yet pretty responsive. That's really uh, quite quite interesting.

447
00:23:04,320 --> 00:23:06,479
Speaker 1: You were in London and eight o nine is that right?

448
00:23:06,640 --> 00:23:10,200
Speaker 1: So so there's a story. I'm curious if you saw

449
00:23:10,480 --> 00:23:13,520
Speaker 1: or witness this from your perch in the UK at

450
00:23:13,560 --> 00:23:17,720
Speaker 1: the time. Bill McNabb tells the story about I guess

451
00:23:17,800 --> 00:23:21,480
Speaker 1: it's just part of regular quality control. They audit customer

452
00:23:21,520 --> 00:23:25,359
Speaker 1: service reps on the phone with Vanguard investors and there's

453
00:23:25,400 --> 00:23:29,439
Speaker 1: a pretty clear freak out going on as the market

454
00:23:29,920 --> 00:23:33,920
Speaker 1: melts down in in oh eight and this eventually reachs

455
00:23:34,040 --> 00:23:36,720
Speaker 1: reaches McNabb, or maybe he was listening on one of

456
00:23:36,760 --> 00:23:40,320
Speaker 1: these calls and does an all hands on deck conversation

457
00:23:40,400 --> 00:23:43,160
Speaker 1: and says, listen, we're growing like a weed. There're gonna

458
00:23:43,160 --> 00:23:46,359
Speaker 1: be no layoffs. Were hiring, Stop worrying about your jobs

459
00:23:46,560 --> 00:23:50,480
Speaker 1: and serve the client and make everybody comfortable. UM. What

460
00:23:50,760 --> 00:23:54,160
Speaker 1: was your view of that from from across the ponds. Yeah,

461
00:23:54,200 --> 00:23:57,400
Speaker 1: I think, um, look, we we we ask our employees

462
00:23:57,440 --> 00:23:59,359
Speaker 1: to be loyal to us, and I think you know

463
00:23:59,480 --> 00:24:01,919
Speaker 1: they deserve loyalty as well, and there was a lot

464
00:24:01,960 --> 00:24:05,359
Speaker 1: of uncertainty. UM, people were worried about their jobs. I mean,

465
00:24:05,400 --> 00:24:07,480
Speaker 1: the market takes such a big hit, you know, were

466
00:24:07,520 --> 00:24:09,440
Speaker 1: paid off of sts under management and they all of

467
00:24:09,440 --> 00:24:11,440
Speaker 1: a sudden declined by significant ount so a lot of

468
00:24:11,480 --> 00:24:14,119
Speaker 1: people were worried. I think Bill's leadership got us through that,

469
00:24:14,800 --> 00:24:17,280
Speaker 1: UM saying Hey, well, phones have slowed down, lots of

470
00:24:17,320 --> 00:24:18,840
Speaker 1: slowed down. We got plenty of work for you to do.

471
00:24:18,960 --> 00:24:21,480
Speaker 1: And I think, uh, the team really appreciated that, and

472
00:24:21,600 --> 00:24:23,639
Speaker 1: I think it allowed them to serve clients better and

473
00:24:23,960 --> 00:24:27,040
Speaker 1: more calmly. From my vantage point, honestly, I was employee

474
00:24:27,080 --> 00:24:29,440
Speaker 1: number one and in London, as I mentioned, so I

475
00:24:29,560 --> 00:24:32,200
Speaker 1: had my head down. Um. You know another thing Bill

476
00:24:32,280 --> 00:24:34,800
Speaker 1: did that I thought was really great at the time

477
00:24:34,920 --> 00:24:38,720
Speaker 1: is in London Sky's following everybody's laying off. Bill said,

478
00:24:38,720 --> 00:24:41,119
Speaker 1: don enough, we're gonna keep investing. Just go with your

479
00:24:41,119 --> 00:24:43,720
Speaker 1: business plan. I was able to get great people that

480
00:24:43,840 --> 00:24:48,520
Speaker 1: were dislodged or not dislodged, but wanted stability, wanted a

481
00:24:48,600 --> 00:24:51,160
Speaker 1: great brand, and came to Vanguards. We hired great people.

482
00:24:51,440 --> 00:24:53,520
Speaker 1: We were able to buy advertising really cheap. I mean,

483
00:24:53,560 --> 00:24:55,080
Speaker 1: we were able to really lean in. And that's the

484
00:24:55,119 --> 00:24:58,280
Speaker 1: beauty of Vanguards corporate structure. We can really focus on

485
00:24:58,400 --> 00:25:00,439
Speaker 1: the long term. And hence Bill could say that too.

486
00:25:00,960 --> 00:25:04,119
Speaker 1: Two employees, Hey, we're with We're in this for the

487
00:25:04,320 --> 00:25:06,240
Speaker 1: long term. We're committed to you. I don't have to

488
00:25:06,280 --> 00:25:08,600
Speaker 1: worry about a quarterly earnings call. So so let's talk

489
00:25:08,640 --> 00:25:10,760
Speaker 1: about that brand a little bit, what what makes it

490
00:25:10,920 --> 00:25:14,480
Speaker 1: so unique? What create what makes that culture so special

491
00:25:14,600 --> 00:25:17,200
Speaker 1: and different from what we typically see uh in the

492
00:25:17,240 --> 00:25:19,639
Speaker 1: world of finance. Yeah, I think people feel in the

493
00:25:19,720 --> 00:25:22,879
Speaker 1: Vanguard brand a sense of trust and you know, they

494
00:25:22,960 --> 00:25:26,360
Speaker 1: get that their owners, they're what's most important all decisions

495
00:25:26,400 --> 00:25:28,240
Speaker 1: around doing what's best for them. And I think that

496
00:25:28,359 --> 00:25:30,720
Speaker 1: just permeates and and we the brand were known as

497
00:25:30,760 --> 00:25:33,880
Speaker 1: a really trusted brand and financial services. That's a really

498
00:25:33,920 --> 00:25:36,520
Speaker 1: good thing obviously when you're when you have people's money,

499
00:25:37,160 --> 00:25:40,000
Speaker 1: and then it creates a culture of again, um, being

500
00:25:40,080 --> 00:25:42,600
Speaker 1: part of something bigger than yourself. You know, it's not

501
00:25:42,760 --> 00:25:45,119
Speaker 1: it's not just a business, it's a cause, it's a purpose.

502
00:25:45,160 --> 00:25:47,960
Speaker 1: We're trying to make people's lives better by helping them

503
00:25:48,200 --> 00:25:51,679
Speaker 1: save for retirement, fund college, by a home, whatever their

504
00:25:51,800 --> 00:25:54,199
Speaker 1: financial dreams are. We're there to help them and they

505
00:25:54,240 --> 00:25:56,639
Speaker 1: know that. People people understand that and it's all about

506
00:25:56,720 --> 00:25:59,520
Speaker 1: them and UH permeates both the brand and the culture

507
00:25:59,560 --> 00:26:03,720
Speaker 1: within Van Card. So given given that framework of Brandon culture,

508
00:26:04,080 --> 00:26:07,159
Speaker 1: obviously lots of things have changed since the days of

509
00:26:07,320 --> 00:26:10,159
Speaker 1: Jack Bogel. He wasn't a big fan of ETFs. He

510
00:26:10,280 --> 00:26:14,320
Speaker 1: wasn't a big fan of uh international investing. They're probably

511
00:26:14,920 --> 00:26:19,399
Speaker 1: half a dozen different UM initiatives that Vanguard has come

512
00:26:19,520 --> 00:26:23,080
Speaker 1: up with that Jack isn't a fan of. How has

513
00:26:23,200 --> 00:26:28,040
Speaker 1: that culture persisted even as the company itself has gone

514
00:26:28,119 --> 00:26:32,080
Speaker 1: through pretty substantial changes, not just growth but the products

515
00:26:32,080 --> 00:26:35,280
Speaker 1: you're offering. Yeah, so, um, it's funny Jack. Jack had

516
00:26:35,320 --> 00:26:38,119
Speaker 1: a lot of things that were off limits. I think

517
00:26:38,119 --> 00:26:40,920
Speaker 1: I mentioned earlier. We weren't allowed to say sell. We

518
00:26:40,960 --> 00:26:43,520
Speaker 1: weren't allowed to call products products. We had to call

519
00:26:43,560 --> 00:26:47,760
Speaker 1: him programs for some reason. Uh Colin's stand ETFs UM.

520
00:26:48,119 --> 00:26:50,200
Speaker 1: Wasn't interested in international, didn't think you had to do

521
00:26:50,280 --> 00:26:53,600
Speaker 1: it um either business or investing. Wasn't a big fan

522
00:26:53,640 --> 00:26:55,760
Speaker 1: of advice, you know, Jack, like, you don't need really

523
00:26:55,920 --> 00:26:59,120
Speaker 1: Oh yeah, Jack, Jack was you don't need advisor. Total

524
00:26:59,160 --> 00:27:02,000
Speaker 1: stock market, total, on market total international thrown together, that's

525
00:27:02,000 --> 00:27:04,600
Speaker 1: all you need. Isn't that advice in and of itself?

526
00:27:04,720 --> 00:27:08,919
Speaker 1: It wasn't he just acting as an advisor by providing

527
00:27:09,480 --> 00:27:12,280
Speaker 1: that portfolio and telling people, yeah, I went to buy

528
00:27:12,320 --> 00:27:13,960
Speaker 1: it and how long to hold it for? Yeah? I

529
00:27:14,000 --> 00:27:17,200
Speaker 1: mean that's uh. He was an advisor. He didn't like advice.

530
00:27:17,240 --> 00:27:20,639
Speaker 1: He didn't like selling his funny story, true story, Barry.

531
00:27:20,840 --> 00:27:23,880
Speaker 1: I know Jack very very well. Uh, you know, worked

532
00:27:23,920 --> 00:27:26,040
Speaker 1: with him a long time. Actually spent some time one

533
00:27:26,080 --> 00:27:28,159
Speaker 1: summer with him and his family where we happened to

534
00:27:28,160 --> 00:27:30,680
Speaker 1: be um vacationing up at Lake Placid in my family,

535
00:27:30,720 --> 00:27:31,959
Speaker 1: and I went and visit him and spent a day

536
00:27:31,960 --> 00:27:35,159
Speaker 1: on the boats, know them really really well. And I

537
00:27:35,200 --> 00:27:37,479
Speaker 1: got on a plane to go to Boston and there

538
00:27:37,560 --> 00:27:40,440
Speaker 1: was Jack um and coach of course, and my seat

539
00:27:40,480 --> 00:27:45,239
Speaker 1: was right now he's uh he was, yeah, he got

540
00:27:45,240 --> 00:27:47,159
Speaker 1: a little smaller as he aged, but um, yeah, so

541
00:27:47,240 --> 00:27:49,000
Speaker 1: he's he's sitting there and he would never fly anything

542
00:27:49,040 --> 00:27:51,600
Speaker 1: but but coach and um. But my seat was right

543
00:27:51,640 --> 00:27:54,200
Speaker 1: next to his. And I hadn't really hung out with

544
00:27:54,320 --> 00:27:56,200
Speaker 1: Jack a whole lot. He was, you know, off doing

545
00:27:56,240 --> 00:28:00,000
Speaker 1: the research and and um, you know, testifying a Congress

546
00:28:00,000 --> 00:28:02,280
Speaker 1: and doing other things, not not involved in the company

547
00:28:02,320 --> 00:28:05,040
Speaker 1: at all. Hey, Thomps, you know, glad, God, we're sitting

548
00:28:05,040 --> 00:28:06,480
Speaker 1: next to each other. So what do you do in

549
00:28:06,520 --> 00:28:11,040
Speaker 1: these days? So Jack hates ETFs, doesn't like advisors, and

550
00:28:11,119 --> 00:28:12,920
Speaker 1: he hates sales. And I had to tell him that

551
00:28:13,000 --> 00:28:15,240
Speaker 1: I was the head of sales, selling et S to

552
00:28:15,280 --> 00:28:18,399
Speaker 1: financial advisors and Barry, I'm not kidding. He folded his

553
00:28:18,520 --> 00:28:19,920
Speaker 1: arms and looked straight ahead and didn't talk to me

554
00:28:19,960 --> 00:28:23,560
Speaker 1: the rest of the flight. On true story, Absolutely true story.

555
00:28:24,359 --> 00:28:26,359
Speaker 1: So yeah, we've come a long way since then. I mean,

556
00:28:26,640 --> 00:28:30,320
Speaker 1: you know, I think Jack's distaste for ETFs is he

557
00:28:30,400 --> 00:28:33,960
Speaker 1: worried them that they would be used incorrectly. That it's

558
00:28:33,960 --> 00:28:38,120
Speaker 1: a fair pretty clear that those fears were mostly unfounded.

559
00:28:38,360 --> 00:28:41,280
Speaker 1: They are mostly unfounded. And you know, you think about

560
00:28:41,360 --> 00:28:44,760
Speaker 1: what e t fs. It made indexing so much more accessible.

561
00:28:44,960 --> 00:28:48,280
Speaker 1: You know, financial advisors could now, um, you know, really

562
00:28:48,360 --> 00:28:50,280
Speaker 1: use indexing in a big way through e t F

563
00:28:50,400 --> 00:28:53,080
Speaker 1: s um. It just became so much more accessible to

564
00:28:53,120 --> 00:28:55,320
Speaker 1: public and helped indexing, which we know is a good

565
00:28:55,360 --> 00:28:58,680
Speaker 1: thing for investors grow and grow and grow. So Gus Sauder,

566
00:28:58,680 --> 00:29:00,640
Speaker 1: who was our chief investment offer time, was a big

567
00:29:00,680 --> 00:29:04,160
Speaker 1: dishoner of et f s and felt that that they

568
00:29:04,200 --> 00:29:05,960
Speaker 1: may be disruptive and be the new way the index

569
00:29:06,000 --> 00:29:08,400
Speaker 1: and I think he was uh spot on there, and

570
00:29:08,560 --> 00:29:10,240
Speaker 1: so we leaned into them, and Jack didn't love it,

571
00:29:10,320 --> 00:29:12,600
Speaker 1: but you know, we did it, and we're happy we

572
00:29:12,640 --> 00:29:17,240
Speaker 1: did it. Providing advice if you think about driving investor outcomes,

573
00:29:17,320 --> 00:29:19,320
Speaker 1: we have great, low cost product. What else can you

574
00:29:19,400 --> 00:29:22,840
Speaker 1: do to help investors um get better outcomes? And it's

575
00:29:22,920 --> 00:29:24,880
Speaker 1: financial advice, So we have our own financial advice, but

576
00:29:24,920 --> 00:29:28,840
Speaker 1: also importantly working with my clients. Working with those financial

577
00:29:28,840 --> 00:29:31,400
Speaker 1: advisers to help them do better for their clients really

578
00:29:31,440 --> 00:29:34,760
Speaker 1: important to the mission. So I would say some of

579
00:29:34,800 --> 00:29:37,200
Speaker 1: the execution has changed it a little bit, but the

580
00:29:37,280 --> 00:29:42,640
Speaker 1: mission is absolutely there. Low cost, broadly diversified, driving great outcomes,

581
00:29:42,680 --> 00:29:45,840
Speaker 1: helping investors get the best chance for investment success. So

582
00:29:46,000 --> 00:29:49,520
Speaker 1: there's a crazy stat that I've never been able to validate.

583
00:29:49,760 --> 00:29:53,520
Speaker 1: You're probably the right person to ask. I read somewhere

584
00:29:53,640 --> 00:29:58,760
Speaker 1: that something like nine percent of certified financial planners in

585
00:29:58,880 --> 00:30:01,960
Speaker 1: the state of Pence, Vania work for Vanguard. Is that

586
00:30:02,120 --> 00:30:05,600
Speaker 1: remotely true? I can't. I can't verify that, but I

587
00:30:05,640 --> 00:30:08,960
Speaker 1: would guess it's probably pretty close. Really, Yeah, that's just

588
00:30:09,240 --> 00:30:12,719
Speaker 1: that's just astonishing. So let's talk a little bit um

589
00:30:13,040 --> 00:30:17,440
Speaker 1: about the Vanguard Effect. My friend Eric Valcunas, who is

590
00:30:17,640 --> 00:30:22,360
Speaker 1: a Bloomberg intelligence analyst, wrote a column a couple of

591
00:30:22,480 --> 00:30:25,840
Speaker 1: years ago called the Vanguard Effect and eventually turned that

592
00:30:25,920 --> 00:30:29,440
Speaker 1: into a book, The Bogel Effect, where he points out

593
00:30:29,680 --> 00:30:33,520
Speaker 1: not only has Vanguard driven down costs for their own clients.

594
00:30:33,600 --> 00:30:35,680
Speaker 1: If that was the end of the story, all right,

595
00:30:35,720 --> 00:30:38,760
Speaker 1: it would be an interesting little tale. But what's happened

596
00:30:38,880 --> 00:30:42,840
Speaker 1: is through market forces and competition, everybody else in the

597
00:30:42,920 --> 00:30:47,800
Speaker 1: financial services has been forced to follow suit. And Beltunist

598
00:30:47,840 --> 00:30:50,960
Speaker 1: calculates it's hundreds of billions soon to be a trillion

599
00:30:51,040 --> 00:30:54,720
Speaker 1: dollars in costs savings. Tell us a little bit about

600
00:30:54,840 --> 00:30:58,640
Speaker 1: the Vanguard effect. Yeah, I think it's true. I agree

601
00:30:58,680 --> 00:31:01,719
Speaker 1: with Eric that you know, Vanguard are are set up

602
00:31:01,800 --> 00:31:06,000
Speaker 1: structurally to drive costs lower. Became very competitive. Investors wanted

603
00:31:06,040 --> 00:31:10,000
Speaker 1: low cost, came to Vanguard and droves. Competitors had to

604
00:31:10,080 --> 00:31:13,680
Speaker 1: respond or or not grow, and so they cut price,

605
00:31:14,320 --> 00:31:17,120
Speaker 1: which we all know that compounds over long periods of

606
00:31:17,160 --> 00:31:20,120
Speaker 1: time and it's a good thing for investors. And we

607
00:31:20,200 --> 00:31:21,720
Speaker 1: saw that as we started to really grow in the

608
00:31:21,840 --> 00:31:24,240
Speaker 1: US that took effect in a big way. But I'll

609
00:31:24,240 --> 00:31:26,320
Speaker 1: tell you that the first time I heard the headline

610
00:31:26,320 --> 00:31:28,080
Speaker 1: the Vanguard effect is I went to London in two

611
00:31:28,200 --> 00:31:31,760
Speaker 1: thousand eight. We launched our first set of funds in

612
00:31:31,800 --> 00:31:34,520
Speaker 1: the UK in June of two thousand nine, and right

613
00:31:34,600 --> 00:31:36,640
Speaker 1: before that, a couple of our competitors before as we're

614
00:31:36,640 --> 00:31:39,240
Speaker 1: actually officially out, they cut their price and there was

615
00:31:39,240 --> 00:31:41,200
Speaker 1: an article in the ft and it it talked about

616
00:31:41,200 --> 00:31:44,080
Speaker 1: the Vanguard effect. We didn't even launch yet, we weren't

617
00:31:44,080 --> 00:31:45,720
Speaker 1: even grown. We didn't know if we're gonna be successful,

618
00:31:45,880 --> 00:31:48,360
Speaker 1: just the thread of moving into a space. So so

619
00:31:48,480 --> 00:31:52,520
Speaker 1: how does Vanguard think about competitors A Do you even

620
00:31:52,680 --> 00:31:55,520
Speaker 1: think about competitors or do you just focus on doing

621
00:31:56,120 --> 00:31:58,440
Speaker 1: your own thing? At a certain point, you have to

622
00:31:58,520 --> 00:32:01,680
Speaker 1: be aware of what's going on places like State Street

623
00:32:01,760 --> 00:32:05,400
Speaker 1: or Black Rock or Wisdom Tree. Yeah. Look, we're certainly

624
00:32:05,400 --> 00:32:08,600
Speaker 1: aware of the competition. But we've always said do what's

625
00:32:08,720 --> 00:32:13,080
Speaker 1: right and customers will will follow. And so for us,

626
00:32:13,160 --> 00:32:14,800
Speaker 1: it's very very easy to do what's right. We just

627
00:32:14,840 --> 00:32:17,760
Speaker 1: don't have any conflicts of interest in any decision making

628
00:32:18,000 --> 00:32:21,120
Speaker 1: we have. It's all about the end investors, so you

629
00:32:21,200 --> 00:32:23,400
Speaker 1: only offer them quality products. You don't go to fads

630
00:32:23,480 --> 00:32:26,400
Speaker 1: so they don't get burned. You communicate very clearly and

631
00:32:26,560 --> 00:32:29,360
Speaker 1: candidly about the risks. You know, you talk about return,

632
00:32:29,440 --> 00:32:32,160
Speaker 1: but talk about the risks as well to manage expectations.

633
00:32:32,640 --> 00:32:34,160
Speaker 1: And when you do what's right, you get a lot

634
00:32:34,280 --> 00:32:37,320
Speaker 1: of trust built up and you grow. So should I

635
00:32:37,440 --> 00:32:40,120
Speaker 1: not hold my breath waiting for the Vanguard crypto e

636
00:32:40,240 --> 00:32:42,720
Speaker 1: t F? Is that, Uh, it's unlikely we'll have a

637
00:32:42,760 --> 00:32:45,800
Speaker 1: crypto et F Barry. Um, you know, the way we

638
00:32:45,880 --> 00:32:48,640
Speaker 1: look at crypto is it doesn't really have an intrinsic value.

639
00:32:48,800 --> 00:32:51,080
Speaker 1: It's more of a supplied demand thing. So that feels

640
00:32:51,120 --> 00:32:56,520
Speaker 1: more like speculation than Yeah, but an investible asset. But

641
00:32:56,800 --> 00:33:00,640
Speaker 1: the technology behind crypto is pretty interesting and there's some great,

642
00:33:00,840 --> 00:33:02,920
Speaker 1: great use cases for that, and we think that's the

643
00:33:03,000 --> 00:33:06,160
Speaker 1: future in many aspects of financial services market. Really interesting.

644
00:33:06,200 --> 00:33:08,640
Speaker 1: All right, so we mentioned belt Tunas's book. Let's talk

645
00:33:08,640 --> 00:33:14,120
Speaker 1: about Robin Wiggleworth's book Trillions. You know, we we all

646
00:33:14,280 --> 00:33:18,120
Speaker 1: sometimes feel like the area we work in our space. Oh,

647
00:33:18,240 --> 00:33:20,800
Speaker 1: I know the history that I'm really knowledgeable about that,

648
00:33:21,200 --> 00:33:24,360
Speaker 1: But as I read that, I was genuinely shocked as

649
00:33:24,480 --> 00:33:28,280
Speaker 1: to the history of both the industry and what took

650
00:33:28,320 --> 00:33:31,480
Speaker 1: place in passive investing in indexing. Tell us a little

651
00:33:31,480 --> 00:33:35,200
Speaker 1: bit about how trillions resonated over at Vanguard. Yeah it was.

652
00:33:35,520 --> 00:33:38,320
Speaker 1: I thought it was really well written. Um, you know,

653
00:33:38,600 --> 00:33:41,440
Speaker 1: I lived part of that revolution, if you will, of indexing.

654
00:33:42,040 --> 00:33:44,080
Speaker 1: But there are certainly things that I learned from that book,

655
00:33:44,480 --> 00:33:47,040
Speaker 1: some of the other characters that were involved, some of

656
00:33:47,080 --> 00:33:50,000
Speaker 1: the really early days and the characters around that as well,

657
00:33:50,520 --> 00:33:52,840
Speaker 1: So it resonated really well. It was interesting for me

658
00:33:53,000 --> 00:33:56,600
Speaker 1: because I helped start our et F business UM back

659
00:33:56,680 --> 00:33:58,720
Speaker 1: in the early two thousand's and a lot of those

660
00:33:58,960 --> 00:34:02,479
Speaker 1: folks UM I knew, and we're trying to get these

661
00:34:02,560 --> 00:34:05,600
Speaker 1: things going and and it was a really interesting time.

662
00:34:05,800 --> 00:34:07,239
Speaker 1: Once again, you kind of felt like you were doing

663
00:34:07,320 --> 00:34:10,200
Speaker 1: something disruptive and really exciting. But I thought it was

664
00:34:10,200 --> 00:34:12,719
Speaker 1: a fascinating history. I would recommend that book to to

665
00:34:12,760 --> 00:34:14,839
Speaker 1: anybody that's interested investing at all. I think it's got

666
00:34:14,880 --> 00:34:18,280
Speaker 1: a great history of of something that was super disruptive,

667
00:34:18,320 --> 00:34:19,880
Speaker 1: but maybe a little more of a slower burn than

668
00:34:20,000 --> 00:34:22,520
Speaker 1: than people might think. Yeah, no, absolutely, it was definitely

669
00:34:22,560 --> 00:34:25,600
Speaker 1: a slow burn and then exploded UM. And I think

670
00:34:25,680 --> 00:34:30,080
Speaker 1: to some degree, I think the inherent advantages of ETFs

671
00:34:30,640 --> 00:34:33,759
Speaker 1: over mutual funds are are part of that. I know

672
00:34:33,920 --> 00:34:36,120
Speaker 1: some people like the ability to just buy when they

673
00:34:36,160 --> 00:34:38,360
Speaker 1: want to buy and not have to wait till the

674
00:34:38,520 --> 00:34:41,800
Speaker 1: end of the day and get mutual fund pricing. But

675
00:34:41,960 --> 00:34:45,040
Speaker 1: to me, the single biggest advantage of ETF seems to

676
00:34:45,160 --> 00:34:49,319
Speaker 1: be enormous tax benefit of not paying for somebody else

677
00:34:49,880 --> 00:34:54,359
Speaker 1: who's selling. Um. Explain, first off, if mutual funds were

678
00:34:54,440 --> 00:34:57,000
Speaker 1: introduced today, would they even be approved if it was

679
00:34:57,040 --> 00:35:00,200
Speaker 1: a new product. Wait, this is much worse than he yes,

680
00:35:00,280 --> 00:35:02,640
Speaker 1: why why would we want to approve that? How do

681
00:35:02,760 --> 00:35:06,399
Speaker 1: you think about the differences between the two products. Yeah, look,

682
00:35:06,440 --> 00:35:09,359
Speaker 1: I think mutual funds are still a very good product. Um.

683
00:35:09,800 --> 00:35:11,759
Speaker 1: You know, they may not go away in the too

684
00:35:11,800 --> 00:35:15,640
Speaker 1: short of term. Um, it's a really good product. I

685
00:35:15,719 --> 00:35:18,640
Speaker 1: think there's some benefits to mutual funds. Um. If you

686
00:35:18,680 --> 00:35:20,799
Speaker 1: think about four one K plans, they really go Yeah

687
00:35:21,680 --> 00:35:23,880
Speaker 1: you read in my mind they certainly work well and

688
00:35:24,120 --> 00:35:28,400
Speaker 1: in a quality any qualified retirement you don't need an

689
00:35:28,440 --> 00:35:30,480
Speaker 1: e t S you don't, um, you know you you

690
00:35:30,600 --> 00:35:34,000
Speaker 1: only need to strike an N A V once a day. Um,

691
00:35:34,440 --> 00:35:36,880
Speaker 1: So there's that aspect of it. Index mutual funds are

692
00:35:36,880 --> 00:35:39,280
Speaker 1: pretty tax efficient as well, not quite as tax efficient

693
00:35:39,680 --> 00:35:42,440
Speaker 1: for most as the e t F. You still have

694
00:35:42,600 --> 00:35:46,600
Speaker 1: that changeover and I recall when something like Tesla was added,

695
00:35:46,640 --> 00:35:49,239
Speaker 1: it had a big disruptive impact. So if that's some

696
00:35:49,360 --> 00:35:52,919
Speaker 1: mutual funds that's not in a qualified account, there could

697
00:35:52,920 --> 00:35:56,600
Speaker 1: be ramifications versus the straight up ets. That's right. That

698
00:35:56,800 --> 00:35:58,400
Speaker 1: that that's absolutely right. And then if you go to

699
00:35:58,440 --> 00:36:02,680
Speaker 1: active strategies. Uh, you know ETFs right now, most of

700
00:36:02,719 --> 00:36:06,920
Speaker 1: the growth is in transparent ETFs. UM, non transparent are

701
00:36:06,960 --> 00:36:09,919
Speaker 1: starting to come along. Um, that's only for equity funds

702
00:36:10,080 --> 00:36:13,000
Speaker 1: right now. Equity assets, not fixed income. So to the

703
00:36:13,040 --> 00:36:15,319
Speaker 1: extent you've got an active manager that feels that they're

704
00:36:15,360 --> 00:36:18,560
Speaker 1: not very comfortable disclosing holdings on a daily basis, they're

705
00:36:18,560 --> 00:36:20,080
Speaker 1: gonna want to keep that in mutual fun until the

706
00:36:20,120 --> 00:36:23,200
Speaker 1: technology advances there. Uh, there's also barried there's a lot

707
00:36:23,200 --> 00:36:25,000
Speaker 1: of embedded gains in some of these mutual funds, so

708
00:36:25,520 --> 00:36:27,760
Speaker 1: you don't necessarily want to jump ship. You might shift

709
00:36:27,840 --> 00:36:31,000
Speaker 1: to e t f s, but selling out your old

710
00:36:31,200 --> 00:36:33,160
Speaker 1: low cost basis holdings doesn't make a lot of sense.

711
00:36:33,200 --> 00:36:34,920
Speaker 1: So maybe that's some of the reasons as well. It

712
00:36:34,960 --> 00:36:37,600
Speaker 1: makes a lot of sense. Let's talk about another product.

713
00:36:37,760 --> 00:36:40,920
Speaker 1: Can we use the word product? Um custom indexing, You

714
00:36:41,000 --> 00:36:46,000
Speaker 1: guys also are direct indexing. You call it personalized indexing. UM.

715
00:36:46,320 --> 00:36:49,360
Speaker 1: I was skeptical about this ten years ago. Over the

716
00:36:49,400 --> 00:36:53,440
Speaker 1: past few years, I've um come to embrace it. Tell

717
00:36:53,560 --> 00:36:56,920
Speaker 1: us a little bit about why Vanguard does direct indexing

718
00:36:57,040 --> 00:37:01,040
Speaker 1: and what makes your product unique to Vanguard. UM. So,

719
00:37:01,320 --> 00:37:05,920
Speaker 1: first of all, just quick education, UM, personalized indexing, custom indexing,

720
00:37:05,960 --> 00:37:08,560
Speaker 1: direct indexing, they're all the same thing. UM. It's a

721
00:37:08,600 --> 00:37:11,279
Speaker 1: little different structure than your your E t F. And

722
00:37:11,520 --> 00:37:13,200
Speaker 1: by the way, e t f are super tax efficient

723
00:37:13,320 --> 00:37:15,440
Speaker 1: and great in many ways. But the e t F

724
00:37:15,560 --> 00:37:17,360
Speaker 1: you buy, you buy v t I. You own a

725
00:37:17,400 --> 00:37:20,120
Speaker 1: share of v t I, not the underlying holdings. In

726
00:37:20,239 --> 00:37:23,520
Speaker 1: direct indexing or personalized indexing, you actually hold the basket

727
00:37:23,560 --> 00:37:28,719
Speaker 1: of underlying securities individually. So all five what is VT

728
00:37:28,840 --> 00:37:31,799
Speaker 1: I two thousands something something like that. It's it's it's

729
00:37:31,840 --> 00:37:36,840
Speaker 1: a lots of page through. For sure, you own the

730
00:37:36,920 --> 00:37:40,840
Speaker 1: underlying securities, and it's basically a separate account, but very scalable,

731
00:37:40,840 --> 00:37:42,160
Speaker 1: and I'll talk about that in a second. And what

732
00:37:42,320 --> 00:37:45,239
Speaker 1: you can do with individual securities. It allows you to

733
00:37:45,320 --> 00:37:49,560
Speaker 1: do to two things pretty well. One be very tax efficient.

734
00:37:50,480 --> 00:37:53,200
Speaker 1: So since you're holding five hundred security instead of one,

735
00:37:53,760 --> 00:37:57,040
Speaker 1: you can look at losses and individual securities, harvest those

736
00:37:57,120 --> 00:38:01,280
Speaker 1: losses and you can allocate them to go against future gains.

737
00:38:01,280 --> 00:38:03,640
Speaker 1: So it's very tax tax efficient. And that's probably the

738
00:38:03,680 --> 00:38:07,120
Speaker 1: biggest use case with so tax that that tax efficiency

739
00:38:07,160 --> 00:38:08,600
Speaker 1: and that adds quite a bit alpha. You know, go

740
00:38:08,680 --> 00:38:11,120
Speaker 1: back to adviser's alpha. Doing that, well, you can add

741
00:38:11,320 --> 00:38:13,760
Speaker 1: a substantial amount of alpha to what sort of numbers

742
00:38:13,800 --> 00:38:17,120
Speaker 1: are you looking at? Because I know was just an

743
00:38:17,200 --> 00:38:22,400
Speaker 1: outrageously unusual year. You know, Um, it can be pretty substantial.

744
00:38:22,400 --> 00:38:26,279
Speaker 1: I mean it could be a couple of percent at times. Um. So, uh,

745
00:38:26,360 --> 00:38:28,800
Speaker 1: it's very very valuable. Now it doesn't it's not for

746
00:38:28,880 --> 00:38:31,520
Speaker 1: everybody obviously, you know, your average investor may not benefit

747
00:38:31,560 --> 00:38:33,400
Speaker 1: as much and then they're a tax efficient et F

748
00:38:33,560 --> 00:38:35,120
Speaker 1: might be the way to go. So it's a great

749
00:38:35,200 --> 00:38:38,759
Speaker 1: use case. Another use case is investors being able to

750
00:38:38,760 --> 00:38:42,760
Speaker 1: express views on the market, meaning their personal values along

751
00:38:42,800 --> 00:38:45,400
Speaker 1: the lines of E s G, but without buying an

752
00:38:45,440 --> 00:38:48,000
Speaker 1: E s G fund. You can really customize that. That's right,

753
00:38:48,080 --> 00:38:50,480
Speaker 1: So you could say, hey, I you know that one

754
00:38:50,520 --> 00:38:52,920
Speaker 1: of the challenge with E s G products is everybody's

755
00:38:52,920 --> 00:38:56,120
Speaker 1: got different definition of what E s G is, So hey,

756
00:38:56,200 --> 00:38:58,800
Speaker 1: I want to exclude X, Y or Z, but I

757
00:38:58,800 --> 00:39:00,960
Speaker 1: don't want to exclude a being. See you can do

758
00:39:01,120 --> 00:39:03,280
Speaker 1: that in this structure, and you can. We've had clients

759
00:39:03,320 --> 00:39:05,680
Speaker 1: who say we don't want cigarettes or vice stocks. We've

760
00:39:05,719 --> 00:39:08,200
Speaker 1: had other people say no, no, I'm fine with an index.

761
00:39:08,280 --> 00:39:11,560
Speaker 1: I just don't want any gunstocks um And we've had

762
00:39:11,560 --> 00:39:13,719
Speaker 1: other people say, hey, I don't want anybody associated with

763
00:39:13,840 --> 00:39:17,200
Speaker 1: abortion providers. It's not a left or right thing. It's

764
00:39:17,719 --> 00:39:20,440
Speaker 1: you pick what your values are and you can express

765
00:39:20,520 --> 00:39:24,680
Speaker 1: that in your portfolio. It doesn't differ appreciably from the

766
00:39:24,719 --> 00:39:28,640
Speaker 1: index other than that narrow um group. The exception being

767
00:39:28,680 --> 00:39:30,800
Speaker 1: if you say, hey, I don't want any energy, any oil,

768
00:39:30,880 --> 00:39:34,600
Speaker 1: any carbon, Well that'll differ dramatically, But most of the

769
00:39:34,640 --> 00:39:37,120
Speaker 1: other tweaks seem to be around the edges. That's right.

770
00:39:37,200 --> 00:39:39,640
Speaker 1: If you with what you do with direct index things,

771
00:39:39,680 --> 00:39:42,120
Speaker 1: you optimize around something. So if you exclude five stocks,

772
00:39:42,160 --> 00:39:45,399
Speaker 1: you optimize and overweight the others and minimize tracking air

773
00:39:45,920 --> 00:39:48,400
Speaker 1: versus the index. So you're right, it's tends not to

774
00:39:48,440 --> 00:39:50,919
Speaker 1: be too much unless you exclude something like energy, which

775
00:39:50,960 --> 00:39:53,800
Speaker 1: would be a big chunk. Huh really really quite intriguing.

776
00:39:54,239 --> 00:39:57,719
Speaker 1: Jack Bogel once said, the first signed Vanguard's mission has

777
00:39:57,800 --> 00:40:01,000
Speaker 1: created a better world for the investor will be when

778
00:40:01,040 --> 00:40:04,920
Speaker 1: our market share begins to erode. Has that not happened yet?

779
00:40:04,960 --> 00:40:07,080
Speaker 1: You guys don't seem to be losing market share now.

780
00:40:07,760 --> 00:40:12,000
Speaker 1: In fact, we're gaining market share and just about all businesses. Um,

781
00:40:12,400 --> 00:40:14,160
Speaker 1: there's a lot of opportunities still out there. I mean

782
00:40:14,600 --> 00:40:17,680
Speaker 1: in my business, we've got maybe a share something like that.

783
00:40:17,920 --> 00:40:20,680
Speaker 1: Lots to go there, even on the on the retail side,

784
00:40:20,800 --> 00:40:23,280
Speaker 1: tons to go there. You think about the advice market

785
00:40:23,680 --> 00:40:26,160
Speaker 1: and the retirement market, and then international chiefs, there's there's

786
00:40:26,160 --> 00:40:28,719
Speaker 1: a tremendous amount of opportunity there. So we still have

787
00:40:28,800 --> 00:40:30,840
Speaker 1: to bring the mission to many millions more people. So

788
00:40:30,920 --> 00:40:33,000
Speaker 1: if you're still taking share, at what point do you

789
00:40:33,080 --> 00:40:35,840
Speaker 1: become the biggest investing firm in the world. I don't know.

790
00:40:35,960 --> 00:40:38,480
Speaker 1: I've read some articles recently that are making projections on that.

791
00:40:38,600 --> 00:40:41,560
Speaker 1: But again I've got Jack Bogel's voice in my head

792
00:40:41,600 --> 00:40:45,239
Speaker 1: from saying that growth doesn't matter, just do what's right

793
00:40:45,280 --> 00:40:47,319
Speaker 1: for investors. So we don't think about that too much.

794
00:40:47,520 --> 00:40:49,960
Speaker 1: So so I promised we would talk about the state

795
00:40:50,120 --> 00:40:54,680
Speaker 1: of the world today. Two has been, UM, just a

796
00:40:54,840 --> 00:40:58,840
Speaker 1: very challenging environment. I don't think we've seen both stocks

797
00:40:58,920 --> 00:41:02,320
Speaker 1: and bonds down double jet since you want something like that,

798
00:41:02,760 --> 00:41:06,200
Speaker 1: So that's forty plus years. What's it like working with

799
00:41:06,320 --> 00:41:11,000
Speaker 1: asset managers during a stressful time like this. Yeah, it's um,

800
00:41:11,760 --> 00:41:15,080
Speaker 1: you know, assets are down and you get paid off

801
00:41:15,160 --> 00:41:17,319
Speaker 1: assets in this business, which tends to be a good

802
00:41:17,360 --> 00:41:19,640
Speaker 1: thing because stocks and bonds tend to go up over time.

803
00:41:19,719 --> 00:41:22,640
Speaker 1: But um, yeah, so it's it's a bit stressful. Clients

804
00:41:22,680 --> 00:41:25,440
Speaker 1: are stressed. You spend a lot of time talking to

805
00:41:25,480 --> 00:41:28,400
Speaker 1: your clients, trying to bring perspective, the long term perspective,

806
00:41:28,440 --> 00:41:30,279
Speaker 1: not to pend that advisor's outfit. Even if you're not

807
00:41:30,320 --> 00:41:32,000
Speaker 1: an advisor, you're talking to somebody on the phone. You're

808
00:41:32,000 --> 00:41:34,600
Speaker 1: trying to say, hey, calm down, put this in perspective

809
00:41:34,600 --> 00:41:36,680
Speaker 1: to him off the ledge. You talk them off the ledge.

810
00:41:36,800 --> 00:41:39,920
Speaker 1: And uh, my clients, the advisors are really earning their

811
00:41:39,960 --> 00:41:42,720
Speaker 1: fees right now and and um providing a tremendous amount

812
00:41:42,719 --> 00:41:45,240
Speaker 1: of value. Uh So there's a lot of phone volume,

813
00:41:45,280 --> 00:41:49,480
Speaker 1: a lot of digital volume. So we're very very very busy. Um.

814
00:41:50,440 --> 00:41:52,879
Speaker 1: And you know it's all about common people down. We'll

815
00:41:52,920 --> 00:41:55,120
Speaker 1: get through this. You look at the long term. Um,

816
00:41:56,200 --> 00:41:58,320
Speaker 1: things tend to work out. We you know, are investing

817
00:41:58,360 --> 00:42:01,800
Speaker 1: philosophy is first of all, get objective, put a plan together,

818
00:42:02,000 --> 00:42:04,080
Speaker 1: make sure it's a low cost plan. And the other

819
00:42:04,120 --> 00:42:07,320
Speaker 1: thing is be discipline right, stick to your plan. Just

820
00:42:07,480 --> 00:42:09,440
Speaker 1: get rid of the noise. This is big noise. This

821
00:42:09,560 --> 00:42:11,600
Speaker 1: isn't just some little blit. This big noise, but you know,

822
00:42:11,880 --> 00:42:13,960
Speaker 1: get rid of the noise and be disciplined. Most times

823
00:42:14,280 --> 00:42:16,839
Speaker 1: that's around rebalancing. This time, stocks and bonds are both

824
00:42:16,880 --> 00:42:18,719
Speaker 1: going down, so you're not rebouncing so much. But you know,

825
00:42:19,239 --> 00:42:22,920
Speaker 1: marchy was a great opportunity to rebalance and add some values.

826
00:42:22,920 --> 00:42:25,000
Speaker 1: So it's really sticking to that long term approach and

827
00:42:25,000 --> 00:42:27,440
Speaker 1: that discipline is what we really recommend. So you sit

828
00:42:27,600 --> 00:42:30,600
Speaker 1: in a unique perch. You're not only watching what's going

829
00:42:30,640 --> 00:42:33,520
Speaker 1: on at vanguard from the inside, but you're looking out

830
00:42:33,680 --> 00:42:36,799
Speaker 1: at the world of advisors. And as we've seen over

831
00:42:36,800 --> 00:42:40,759
Speaker 1: the past twenty years, fiduciary fee based advisors have been

832
00:42:40,920 --> 00:42:46,279
Speaker 1: capturing share at the expense of transactional brokerage UM. From

833
00:42:46,360 --> 00:42:49,160
Speaker 1: your perch, tell us what you see of the world

834
00:42:49,239 --> 00:42:52,719
Speaker 1: of finance looking out over the next decade. How are

835
00:42:52,760 --> 00:42:56,120
Speaker 1: things going to continue, what's going to change? What do

836
00:42:56,200 --> 00:42:58,360
Speaker 1: you think about when you think about the future of finance.

837
00:42:58,520 --> 00:43:01,880
Speaker 1: I think financial services UM for a long time had

838
00:43:01,920 --> 00:43:04,480
Speaker 1: been a bit stodgy right, So you know, you focused

839
00:43:04,520 --> 00:43:08,319
Speaker 1: on returns and um, you provide a good returns, You've

840
00:43:08,320 --> 00:43:11,279
Speaker 1: got some flows, and you might do some advertising a brand,

841
00:43:11,360 --> 00:43:15,440
Speaker 1: but client expectations have increased incredibly, so they're not comparing

842
00:43:15,920 --> 00:43:19,960
Speaker 1: Vanguard to Fidelity anymore. They're comparing Vanguard to my experience

843
00:43:20,000 --> 00:43:24,080
Speaker 1: with Uber and so you know, I think, um, you

844
00:43:24,200 --> 00:43:26,040
Speaker 1: have to have great products, you have to be innovative there,

845
00:43:26,120 --> 00:43:28,880
Speaker 1: you have to keep fees low. But the client experience

846
00:43:28,960 --> 00:43:32,320
Speaker 1: is it's happening now, but I think that's a huge

847
00:43:32,400 --> 00:43:36,320
Speaker 1: next frontier for financial services really now in the client experience,

848
00:43:36,400 --> 00:43:38,560
Speaker 1: like some of the other industries have done, and we're

849
00:43:38,600 --> 00:43:40,320
Speaker 1: on a journey there. We're getting better with it, but

850
00:43:40,400 --> 00:43:42,960
Speaker 1: there's a lot of opportunity there. I think advice is

851
00:43:43,920 --> 00:43:47,200
Speaker 1: going to continue to grow. UM, do it yourself is

852
00:43:47,440 --> 00:43:50,600
Speaker 1: a lot tougher than Jack Bobio said it was. There's

853
00:43:50,600 --> 00:43:53,080
Speaker 1: a lot to it, and again we think most investors

854
00:43:53,120 --> 00:43:55,360
Speaker 1: are better served by some sort of advice. So we

855
00:43:55,600 --> 00:43:58,239
Speaker 1: see the growth and that we see the the intersection

856
00:43:58,320 --> 00:44:03,000
Speaker 1: of advice and investments and technology to bring mass customization.

857
00:44:03,080 --> 00:44:04,759
Speaker 1: And if you think about what we just talked about,

858
00:44:04,760 --> 00:44:09,040
Speaker 1: direct indexing and personalized indexing. That's customization. The technology allows

859
00:44:09,040 --> 00:44:11,040
Speaker 1: you to do that and mass now and scale that,

860
00:44:11,440 --> 00:44:14,360
Speaker 1: so that mass customization is gonna be really important. I know,

861
00:44:14,440 --> 00:44:16,360
Speaker 1: only have you for a limited amount of time. So

862
00:44:16,480 --> 00:44:19,359
Speaker 1: let me jump to my favorite questions that we ask

863
00:44:19,440 --> 00:44:22,719
Speaker 1: all of our guests, starting with, you have a bunch

864
00:44:22,760 --> 00:44:25,000
Speaker 1: of kids. What were you doing to keep them busy

865
00:44:25,440 --> 00:44:27,920
Speaker 1: during the pandemic? Tell us what you were watching on

866
00:44:28,000 --> 00:44:32,759
Speaker 1: either Netflix or Amazon. Yeah, so, um, all my kids

867
00:44:32,840 --> 00:44:35,520
Speaker 1: were either in we're in college during during the pandemic.

868
00:44:35,560 --> 00:44:37,840
Speaker 1: I got two out. Now were they at school? They

869
00:44:39,480 --> 00:44:42,399
Speaker 1: did come home, so my wife and I were empty

870
00:44:42,480 --> 00:44:45,160
Speaker 1: nesters for a few months celebrating that. And then also

871
00:44:46,560 --> 00:44:48,920
Speaker 1: so us and the two dogs, and you know, just

872
00:44:49,160 --> 00:44:51,600
Speaker 1: life was very very chill, and then you know, pandemic

873
00:44:51,719 --> 00:44:54,720
Speaker 1: hits and you know I'm doing I'm like a commando

874
00:44:54,800 --> 00:44:56,759
Speaker 1: coming to get my son out of Manhattan and bring

875
00:44:56,880 --> 00:44:58,560
Speaker 1: them home. And um, so they all came home and

876
00:44:58,560 --> 00:45:00,839
Speaker 1: it was fabulous. You know, actually look at a little

877
00:45:00,840 --> 00:45:03,799
Speaker 1: bit of a gift because they were gone and they

878
00:45:03,840 --> 00:45:05,239
Speaker 1: came back for a few months. So we did a

879
00:45:05,280 --> 00:45:08,520
Speaker 1: lot of cooking. Uh, they started a garden. My one

880
00:45:08,600 --> 00:45:11,680
Speaker 1: daughter bought some chickens, some crazy things like that. Did

881
00:45:11,719 --> 00:45:14,040
Speaker 1: a lot of streaming. Um, I don't remember what we

882
00:45:14,120 --> 00:45:16,520
Speaker 1: were watching at the time, silly things like The Tiger King.

883
00:45:16,560 --> 00:45:18,640
Speaker 1: Don't know if you saw that on Netflix, A crazy show,

884
00:45:19,400 --> 00:45:22,759
Speaker 1: UM documentary. I did a lot of streaming together. Played

885
00:45:22,760 --> 00:45:24,800
Speaker 1: a lot of games too, like went back old school

886
00:45:24,840 --> 00:45:28,520
Speaker 1: and you know, cards and backgammon and things like that.

887
00:45:28,600 --> 00:45:31,320
Speaker 1: So it was really really good quality family time that

888
00:45:31,400 --> 00:45:33,799
Speaker 1: sounds like fun. Tell us about some of your early

889
00:45:33,840 --> 00:45:38,279
Speaker 1: mentors who helped shape your career. Yeah. When I first

890
00:45:38,320 --> 00:45:40,160
Speaker 1: came to Van Guard eighty eight, I was in a

891
00:45:40,239 --> 00:45:45,080
Speaker 1: business where we were providing administrative and accounting services for

892
00:45:45,160 --> 00:45:47,360
Speaker 1: actually competitors and the guy that ran the division was

893
00:45:47,360 --> 00:45:50,960
Speaker 1: this guy called Bill of a Starts and um, we

894
00:45:51,120 --> 00:45:53,239
Speaker 1: we hit it off really well from my first day there.

895
00:45:53,320 --> 00:45:55,600
Speaker 1: And he was a great mentor. You know, I'm twenty two,

896
00:45:56,080 --> 00:45:58,200
Speaker 1: not right out of school but out of school year

897
00:45:58,239 --> 00:46:02,080
Speaker 1: and he really uh help me develop some confidence, believed

898
00:46:02,120 --> 00:46:03,840
Speaker 1: in me, talked about how you know, really helped me

899
00:46:04,160 --> 00:46:06,000
Speaker 1: build relationships, taught me how to write well, to be

900
00:46:06,080 --> 00:46:08,239
Speaker 1: honest with you. So a really good early mentor. And

901
00:46:08,320 --> 00:46:10,759
Speaker 1: then Bill McNab and I first intersected. I think it

902
00:46:10,840 --> 00:46:15,080
Speaker 1: was around actually applied for a job in his group

903
00:46:15,120 --> 00:46:17,160
Speaker 1: and didn't get it, but we we connected through that

904
00:46:17,320 --> 00:46:20,520
Speaker 1: and and my entire career. Bill was a great mentor

905
00:46:20,640 --> 00:46:23,120
Speaker 1: for me. UM and you know, gave me a lot

906
00:46:23,160 --> 00:46:25,400
Speaker 1: of opportunities to to grow and develop. So I really

907
00:46:25,440 --> 00:46:27,160
Speaker 1: appreciate that. There was also a guy when I worked

908
00:46:27,160 --> 00:46:30,960
Speaker 1: in our fixed income group. UM. He passed away unfortunately

909
00:46:31,120 --> 00:46:33,799
Speaker 1: a number of years ago, but Mike Proplaski and UM,

910
00:46:34,400 --> 00:46:36,600
Speaker 1: he taught me about the fixed income market and how

911
00:46:36,640 --> 00:46:38,800
Speaker 1: to be an analyst and how to manage portfolios. And

912
00:46:38,960 --> 00:46:40,759
Speaker 1: you know, that was tremendous. And then taking that to

913
00:46:40,800 --> 00:46:43,440
Speaker 1: all my other positions. Having that investment, that hands on

914
00:46:43,520 --> 00:46:46,400
Speaker 1: investment knowledge was just gold for me the rest of

915
00:46:46,440 --> 00:46:47,759
Speaker 1: my career. So that's a that's a few of the

916
00:46:47,840 --> 00:46:51,480
Speaker 1: early early days, the folks who mentored me. I've heard

917
00:46:51,560 --> 00:46:54,719
Speaker 1: the name for sure. UM let's talk about books. What

918
00:46:54,800 --> 00:46:56,359
Speaker 1: are some of your favorites and what are you reading

919
00:46:56,480 --> 00:47:00,600
Speaker 1: right now. It's a little embarrassing, but I if you

920
00:47:00,640 --> 00:47:02,439
Speaker 1: think about the theme of a couple of these books,

921
00:47:02,440 --> 00:47:04,680
Speaker 1: A couple of my favorites. I love Bonfire The Vanities, UM,

922
00:47:04,960 --> 00:47:10,319
Speaker 1: you know it Uh, I wouldn't say that's that's highly regarded. Yeah,

923
00:47:10,840 --> 00:47:12,600
Speaker 1: it was cool because it was, you know, kind of

924
00:47:12,960 --> 00:47:15,520
Speaker 1: a story about New York in you know, the late

925
00:47:15,600 --> 00:47:18,799
Speaker 1: eight Wall Street and then kind of doing something wrong

926
00:47:18,920 --> 00:47:20,880
Speaker 1: and losing everything. So it always scared me, you know,

927
00:47:21,719 --> 00:47:24,400
Speaker 1: scared me straight if you will. Um. And then you know,

928
00:47:24,480 --> 00:47:26,080
Speaker 1: around the same time, maybe a couple years later, it

929
00:47:26,120 --> 00:47:28,600
Speaker 1: was Liars Poker, which I just found fascinating. Michael Lewis

930
00:47:28,680 --> 00:47:32,520
Speaker 1: book just had its thirtieth anniversary and reissue recently, and

931
00:47:32,760 --> 00:47:34,560
Speaker 1: I gotta tell you it holds up pretty well. The

932
00:47:34,640 --> 00:47:36,719
Speaker 1: great the great part about that book is he wrote

933
00:47:36,719 --> 00:47:38,640
Speaker 1: it to talk people out of going to Wall Street,

934
00:47:38,640 --> 00:47:40,640
Speaker 1: and I think it inspired millions to do it. Um.

935
00:47:41,040 --> 00:47:43,600
Speaker 1: You know, so uh to my old you know favorite books.

936
00:47:43,640 --> 00:47:45,560
Speaker 1: Right now, I'm reading a book. Did you grew up

937
00:47:45,600 --> 00:47:48,479
Speaker 1: in the Trying State area? Do you remember crazy Eddie? Sure?

938
00:47:48,520 --> 00:47:51,240
Speaker 1: Of course Eddie had antar and what were his prices?

939
00:47:51,480 --> 00:47:53,880
Speaker 1: They were insane? That's right, they were. Um. There's a

940
00:47:53,880 --> 00:47:55,840
Speaker 1: book right now called Retail Gangster. I don't know if

941
00:47:55,920 --> 00:47:57,680
Speaker 1: it's new. Book just just came out in the last

942
00:47:57,719 --> 00:48:00,799
Speaker 1: couple of months, and it is the story of Eddie

943
00:48:00,800 --> 00:48:03,160
Speaker 1: Anton and yeah, I'm about a third of the way

944
00:48:03,200 --> 00:48:05,400
Speaker 1: through it, and it's fascinating. He was a character at

945
00:48:05,440 --> 00:48:08,320
Speaker 1: a criminal but really retailer. That wasn't his brother in

946
00:48:08,440 --> 00:48:11,279
Speaker 1: law who wrote it, who was the accountant who went

947
00:48:11,360 --> 00:48:14,920
Speaker 1: to jail and the one who turned but he is

948
00:48:15,120 --> 00:48:17,719
Speaker 1: prominently featured in the Yeah, he's a fascinating guy, don't

949
00:48:17,920 --> 00:48:19,240
Speaker 1: He didn't write it, but I don't. I don't remember

950
00:48:19,239 --> 00:48:21,359
Speaker 1: who the author is, but it's a it's been good

951
00:48:21,440 --> 00:48:23,840
Speaker 1: so far. When when I was in college, I worked

952
00:48:23,880 --> 00:48:27,040
Speaker 1: at the local Lathayette if you're a New York region,

953
00:48:27,160 --> 00:48:29,160
Speaker 1: so you remember, laughing he had a million years ago

954
00:48:29,880 --> 00:48:34,040
Speaker 1: and they had this um. Crazy Eddies had this wonderful

955
00:48:34,719 --> 00:48:37,640
Speaker 1: um scam they would do when they were out of

956
00:48:37,760 --> 00:48:40,319
Speaker 1: stock on something. They would cut the price in half

957
00:48:40,760 --> 00:48:42,480
Speaker 1: and then once it came back into stock, it went

958
00:48:42,520 --> 00:48:45,160
Speaker 1: back to regular price. So you're selling it for two

959
00:48:45,239 --> 00:48:49,080
Speaker 1: hundred bucks. Crazy Eddie has it for So you call

960
00:48:49,160 --> 00:48:51,160
Speaker 1: up Crazy Eddie, Hey, I want to buy three of

961
00:48:51,239 --> 00:48:54,120
Speaker 1: these were out of stock. You should go get the

962
00:48:54,160 --> 00:48:56,680
Speaker 1: crazy Eddies. They don't have it. When when it's in stock,

963
00:48:56,719 --> 00:48:58,920
Speaker 1: it's two hundred one, it's out of stock. People wouldn't

964
00:48:58,920 --> 00:49:01,799
Speaker 1: believe you. I would think it's insane. Their prices are

965
00:49:02,000 --> 00:49:05,600
Speaker 1: literally insane. The people used to think the guy on

966
00:49:05,719 --> 00:49:08,080
Speaker 1: the commercial and it was Crazy Eddie and that was

967
00:49:08,200 --> 00:49:10,040
Speaker 1: just an actor, just an actor. And you know what

968
00:49:10,120 --> 00:49:12,480
Speaker 1: I did when I when I I read about the book,

969
00:49:12,520 --> 00:49:14,839
Speaker 1: I think in the journal or in Bloomberg or something

970
00:49:14,880 --> 00:49:16,320
Speaker 1: like that, and it was like, oh, this is interesting.

971
00:49:16,440 --> 00:49:18,440
Speaker 1: So I got and then I went on YouTube and

972
00:49:18,800 --> 00:49:20,399
Speaker 1: looked at a bunch of the old commercials and brought

973
00:49:20,440 --> 00:49:23,640
Speaker 1: back childhood message. That guy, you know, he was, he

974
00:49:23,760 --> 00:49:25,560
Speaker 1: was something he would have the Santa Claus had on

975
00:49:25,760 --> 00:49:29,200
Speaker 1: during the Christmas That's right. I forgot about that. They

976
00:49:29,239 --> 00:49:33,239
Speaker 1: were ubiquitous, both both the ads and and Crazy Eddie.

977
00:49:33,239 --> 00:49:35,479
Speaker 1: At one point in time. They were like a couple

978
00:49:35,560 --> 00:49:39,759
Speaker 1: of dozen UM stores. And uh, they blew up spectacular

979
00:49:40,160 --> 00:49:44,560
Speaker 1: they did. They did quite quite interesting. Um. So our

980
00:49:44,640 --> 00:49:48,120
Speaker 1: last two questions starting with what sort of advice would

981
00:49:48,160 --> 00:49:51,440
Speaker 1: you give to a recent college grad who was interested

982
00:49:51,520 --> 00:49:55,800
Speaker 1: in a career in either investments, et F mutual funds

983
00:49:56,000 --> 00:49:59,759
Speaker 1: financial advice? What would you tell a recent college grad? Well,

984
00:50:00,000 --> 00:50:02,000
Speaker 1: I have a couple of recent college grads, my twins

985
00:50:02,040 --> 00:50:04,560
Speaker 1: graduated about a year ago. And what I told them

986
00:50:04,760 --> 00:50:08,520
Speaker 1: was um, and it's not necessarily specific to finance, but um,

987
00:50:08,680 --> 00:50:12,200
Speaker 1: it certainly applies. And that is pick a company, not

988
00:50:12,320 --> 00:50:15,239
Speaker 1: a job. And what I meant by that is find

989
00:50:15,280 --> 00:50:18,320
Speaker 1: a company that aligns with your values. Um, and you know,

990
00:50:18,440 --> 00:50:21,479
Speaker 1: do something that you're interested in there. Don't worry about

991
00:50:21,480 --> 00:50:23,800
Speaker 1: your job, your first job, your second job, whatever. But

992
00:50:24,080 --> 00:50:26,759
Speaker 1: if you align with a company, could be there forever,

993
00:50:26,840 --> 00:50:28,560
Speaker 1: you can have a career there. And obviously I'm biased

994
00:50:28,719 --> 00:50:31,080
Speaker 1: in a Vanguard thirty four years I stumbled onto Vanguard

995
00:50:31,120 --> 00:50:32,960
Speaker 1: and happen to find a company that aligns with my values.

996
00:50:33,000 --> 00:50:35,719
Speaker 1: I got lucky. They grew tremendously, But I think it's

997
00:50:35,760 --> 00:50:39,320
Speaker 1: really important. Yeah, money is nice, um, But being happy

998
00:50:39,440 --> 00:50:42,560
Speaker 1: or work, being satisfied and having an organization that aligns

999
00:50:42,600 --> 00:50:44,280
Speaker 1: with what you care about, I think is more important

1000
00:50:44,320 --> 00:50:46,520
Speaker 1: than anything. And you have a lot more longevity and

1001
00:50:46,560 --> 00:50:48,640
Speaker 1: happiness in your career if you do that. And our

1002
00:50:48,719 --> 00:50:51,279
Speaker 1: final question, what do you know about the world of

1003
00:50:51,400 --> 00:50:55,320
Speaker 1: investing today that you wish you knew back in or

1004
00:50:55,360 --> 00:50:58,560
Speaker 1: so when you were first getting started. Yeah, a couple

1005
00:50:58,560 --> 00:51:00,920
Speaker 1: of things. And either just Jack bo principles, and of

1006
00:51:01,000 --> 00:51:02,880
Speaker 1: course I listened to them, but I may have I

1007
00:51:02,960 --> 00:51:05,040
Speaker 1: may have strayed a little bit um here and there.

1008
00:51:05,120 --> 00:51:07,760
Speaker 1: But first of all, it's really hard to consistently pick winners.

1009
00:51:08,600 --> 00:51:11,480
Speaker 1: Um hence the appeal of indexing. But yeah, you might

1010
00:51:11,520 --> 00:51:12,920
Speaker 1: get a winner, you might get a few winners, but

1011
00:51:13,000 --> 00:51:15,360
Speaker 1: it's it's hard to do that over time. And and

1012
00:51:15,600 --> 00:51:18,319
Speaker 1: sort of as a corollary to that is stay away

1013
00:51:18,360 --> 00:51:21,440
Speaker 1: from fads. I I did get caught up personally in

1014
00:51:21,480 --> 00:51:23,360
Speaker 1: the dot com era a little bit. And you know,

1015
00:51:23,440 --> 00:51:25,800
Speaker 1: I had my long term four one K investments and

1016
00:51:25,880 --> 00:51:29,960
Speaker 1: all probably diversified vanguard funds, but I had a brokerage accountant.

1017
00:51:30,360 --> 00:51:32,680
Speaker 1: I made some mistakes on companies like Vertical Net I

1018
00:51:32,760 --> 00:51:37,920
Speaker 1: was gonna, you know, And so be careful to fads

1019
00:51:38,000 --> 00:51:40,799
Speaker 1: and um give them my my children age and their

1020
00:51:40,920 --> 00:51:44,480
Speaker 1: interest in investing, you know, growing up in an investing house. Uh.

1021
00:51:44,600 --> 00:51:47,360
Speaker 1: They told me I was old and stodgy, you know,

1022
00:51:47,719 --> 00:51:50,040
Speaker 1: not being excited about crypto or some of the meme stocks.

1023
00:51:50,080 --> 00:51:52,120
Speaker 1: Are your kids apes? Are they n f T fans

1024
00:51:52,320 --> 00:51:55,480
Speaker 1: or no? They they're they all well compliance. They all

1025
00:51:55,520 --> 00:51:58,640
Speaker 1: have to invest in vanguards, so they're they're broadly diversified

1026
00:51:58,640 --> 00:52:00,319
Speaker 1: and low cost funds. As you would image but they're

1027
00:52:00,320 --> 00:52:02,000
Speaker 1: really interesting and of course all their friends are. It

1028
00:52:02,080 --> 00:52:04,239
Speaker 1: made so much money on this and then till the

1029
00:52:04,800 --> 00:52:08,280
Speaker 1: until they didn't, So um, stay away from the trends.

1030
00:52:08,400 --> 00:52:10,920
Speaker 1: Just focus on a long term have some discipline. The

1031
00:52:11,000 --> 00:52:12,640
Speaker 1: other thing is I was fortunate to get this advice.

1032
00:52:12,640 --> 00:52:16,040
Speaker 1: I showed up my first DAID Vanguard, did my onboarding.

1033
00:52:16,080 --> 00:52:17,799
Speaker 1: They said, oh, we got this four wind K plan.

1034
00:52:17,920 --> 00:52:19,600
Speaker 1: I'm like, I'm not really sure what that is. Like, oh,

1035
00:52:19,760 --> 00:52:21,840
Speaker 1: just max out your contribution. That's what everybody does, and

1036
00:52:21,880 --> 00:52:24,000
Speaker 1: we'll match up to ten or eleven percent whatever it is.

1037
00:52:24,360 --> 00:52:27,719
Speaker 1: And I just did it and it's thirty four years ago.

1038
00:52:27,920 --> 00:52:30,439
Speaker 1: It adds up for sure. So one of the last

1039
00:52:30,480 --> 00:52:33,600
Speaker 1: wee with that match and growing taxes right, growing tax

1040
00:52:33,680 --> 00:52:35,880
Speaker 1: offer and so hey, just you know, time is on

1041
00:52:36,000 --> 00:52:38,719
Speaker 1: your side with investing, So start young, even if it's

1042
00:52:38,719 --> 00:52:40,759
Speaker 1: a little bit, and it adds up over time. I

1043
00:52:40,880 --> 00:52:43,640
Speaker 1: am genuinely shocked when we sit down with the potential

1044
00:52:43,719 --> 00:52:46,160
Speaker 1: clients and and one of the things that comes up

1045
00:52:46,280 --> 00:52:50,400
Speaker 1: is why are you throwing away free money if your

1046
00:52:50,440 --> 00:52:52,879
Speaker 1: firm is going to match up to you know, four

1047
00:52:52,960 --> 00:52:55,560
Speaker 1: or five six percent is pretty standard these days. If

1048
00:52:55,560 --> 00:52:57,759
Speaker 1: the firm is going to give you five percent of

1049
00:52:57,920 --> 00:53:01,399
Speaker 1: your salary to put into your four own Why would

1050
00:53:01,440 --> 00:53:03,600
Speaker 1: you say no to that? It's for I understand that

1051
00:53:03,680 --> 00:53:06,440
Speaker 1: there are bubbles we all want, but it's not like

1052
00:53:07,000 --> 00:53:09,719
Speaker 1: you know, they don't even feel it. Yeah, it's it's

1053
00:53:09,840 --> 00:53:12,920
Speaker 1: not like it's that big a chunk. It's rash and

1054
00:53:13,600 --> 00:53:17,040
Speaker 1: free money. And yet you know, whenever people talk about

1055
00:53:17,160 --> 00:53:20,279
Speaker 1: rational investors, why do people say no to free money?

1056
00:53:20,360 --> 00:53:22,520
Speaker 1: That seems to be somewhat rash? Absolutely right. So my

1057
00:53:22,640 --> 00:53:24,719
Speaker 1: my daughter tried to say no. Then she she's in

1058
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Speaker 1: New York and say it's really expensive. I said, I'll

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00:53:27,320 --> 00:53:29,200
Speaker 1: match it. So you put it in the company and

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00:53:29,640 --> 00:53:31,279
Speaker 1: I'll match it. And so we did that for a

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00:53:31,360 --> 00:53:33,239
Speaker 1: year and wander off and she realized that she could

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00:53:33,239 --> 00:53:36,680
Speaker 1: do it. So that's fantastic. Hey, Tom, thank you for

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Speaker 1: being so generous with your time. We have been speaking

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Speaker 1: with Tom Rampula. He is the managing director of Vanguard's

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00:53:44,680 --> 00:53:49,120
Speaker 1: Financial Advisor Services division. If you enjoy this conversation, we'll

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00:53:49,239 --> 00:53:52,080
Speaker 1: be sure to check out any of the previous I

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Speaker 1: don't know, four hundred and thirty we've had over the

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Speaker 1: past eight years. You can find those at iTunes, Spotify,

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Speaker 1: and now, YouTube, or wherever you get your podcast from.

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Speaker 1: We love your comments, feedback and suggestions. You can write

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Speaker 1: to us at m IB podcast at Bloomberg dot net. UH.

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Speaker 1: Sign up from my daily reading list at ridlts dot com.

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00:54:15,080 --> 00:54:18,719
Speaker 1: Follow me on Twitter at rid Halts. I would be

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Speaker 1: remiss if I did not think the crack staff that

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00:54:21,719 --> 00:54:26,839
Speaker 1: helps these conversations get put together each and every week. Uh.

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00:54:26,960 --> 00:54:30,759
Speaker 1: Starting with my producer is Paris Walds. My head of

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00:54:30,840 --> 00:54:36,640
Speaker 1: research is Sean Russo. Sebastian Escobar is our audio engineer.

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Speaker 1: Attica val Bron is my project manager. I'm Barry rid Halts.

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Speaker 1: You've been listening to Masters in Business on Bloomberg Radio