WEBVTT - Thomas Rampulla on Vanguard's Mission 0:00:02.000 --> 0:00:06.760 This is Mesters in Business with very Results on Bloomberg 0:00:06.840 --> 0:00:10.640 Radio this weekend. On the podcast, I have an extra 0:00:10.680 --> 0:00:13.600 special guest, Tom ram Poula has been with the Vanguard 0:00:13.600 --> 0:00:17.720 Group since He has worked with every CEO, starting with 0:00:17.840 --> 0:00:20.400 Jack Bogel all the way up to the curren CEO, 0:00:20.840 --> 0:00:26.720 Tim Buckley, and has essentially helped to establish the Financial 0:00:26.760 --> 0:00:31.080 Advisors Group, essentially the group at Vanguard that works with 0:00:31.400 --> 0:00:34.560 r A s and broker dealers and other UH financial 0:00:34.560 --> 0:00:40.239 professionals who provide portfolios, advice, financial plans UH to the 0:00:40.280 --> 0:00:44.680 investing public. He has a unique perch from with which 0:00:45.080 --> 0:00:49.560 to view the financial services industry, both from within Vanguard 0:00:49.680 --> 0:00:53.680 as well as looking out over the financial landscape and 0:00:53.760 --> 0:00:57.480 seeing what's going on with such trends as mutual funds, 0:00:57.520 --> 0:01:01.120 E t f s, direct indexing, the rise of passive, 0:01:01.560 --> 0:01:05.320 the rise not just a Vanguard, but the dominance of 0:01:05.400 --> 0:01:10.880 Vanguard and the associated Vanguard effect, the pressure on fees 0:01:11.200 --> 0:01:16.160 that have helped make investing so affordable. We we discuss 0:01:16.200 --> 0:01:19.240 all these things, as well as why there has never 0:01:19.319 --> 0:01:21.440 been a better tell him to be a retail investor 0:01:21.880 --> 0:01:25.479 than right now, right here in this era. I found 0:01:25.520 --> 0:01:28.800 the conversation to be absolutely fascinating and I think you 0:01:28.880 --> 0:01:32.560 will also, So, with no further ado, my conversation with 0:01:32.600 --> 0:01:39.960 the Vanguard groups Tom Rampulla. I'm Barry rit Halts. You're 0:01:40.040 --> 0:01:43.560 listening to Masters in Business on Bloomberg Radio. My special 0:01:43.560 --> 0:01:46.720 guest this week is Tom Rampulla. He is the managing 0:01:46.760 --> 0:01:51.560 director of Vanguard's Financial Advisor Services Division, where he began 0:01:51.640 --> 0:01:56.360 back in two thousand and two. That group provides investments, services, education, 0:01:56.520 --> 0:02:00.440 and research to more than a thousand financial ad lisory 0:02:00.520 --> 0:02:05.080 firms representing more than three trillion dollars in assets. Tom 0:02:05.200 --> 0:02:10.600 joined Vanguard back in Tom Rampula, Welcome to Bloomberg. Thanks, Barry, 0:02:10.639 --> 0:02:12.840 it's great to be here. Yeah, it's good to have you. So. 0:02:12.840 --> 0:02:15.720 So I've worked my way through, uh, just about the 0:02:15.720 --> 0:02:19.120 whole c suite at Vanguard, and I'm glad we finally 0:02:19.120 --> 0:02:21.799 got to you. Um, tell us a little about about 0:02:21.840 --> 0:02:23.840 your plans coming out of college. How did you ends 0:02:23.880 --> 0:02:26.000 up at Vanguard? Yeah, I believe it or not, Barry, 0:02:26.040 --> 0:02:27.520 I wanted to go to Wall Street coming out of 0:02:27.520 --> 0:02:31.160 school and came up to New York and, uh, wall 0:02:31.200 --> 0:02:33.520 Street didn't work out for a variety of reasons, but 0:02:33.760 --> 0:02:35.959 I ended up working sort of an adjacent industry and 0:02:36.000 --> 0:02:39.040 the portfolio management software business, and it really wasn't where 0:02:39.040 --> 0:02:41.880 my passion was. So decided to make the move from 0:02:41.880 --> 0:02:44.640 New York to Philadelphia. And I had a friend that 0:02:44.680 --> 0:02:47.920 worked at Vanguard. I honestly knew nothing about Vanguard. In fact, 0:02:47.919 --> 0:02:50.840 that was at of Philadelphia career Fair when I first graduated, 0:02:50.880 --> 0:02:52.639 and there was a Vanguard table there and somebody said, 0:02:52.639 --> 0:02:55.320 you want to go interview a Vanguard. I looked and 0:02:55.360 --> 0:02:57.079 I was like, no, I don't think so. And they said, 0:02:57.120 --> 0:02:58.840 what do they do. I think that's a supermarket or 0:02:58.840 --> 0:03:01.480 something that. So that's how clueless was. But um, it 0:03:01.560 --> 0:03:04.680 was really lucky. I had this friend started Vanguard in 0:03:04.840 --> 0:03:09.160 March of quickly realized it was a pretty special place. Um, 0:03:09.200 --> 0:03:11.480 you know, it's a It's a place where it's really 0:03:11.520 --> 0:03:14.120 incredibly mission driven, It's got such a sense of purpose, 0:03:14.120 --> 0:03:16.080 were owned by our clients, all these things that actually 0:03:16.120 --> 0:03:19.079 took me a while to realize working there. But yeah, 0:03:19.120 --> 0:03:21.480 it was a little bit of a by chance. Wasn't 0:03:21.520 --> 0:03:23.840 really looking for Vanguard, but somehow I found it and 0:03:23.960 --> 0:03:27.480 got really really lucky. So so going back to Philadelphia 0:03:27.840 --> 0:03:29.960 is not a big change to you you went. I 0:03:30.000 --> 0:03:33.280 went to Bloomsburg University, which is a midside school in 0:03:33.280 --> 0:03:35.840 central Pennsylvania, and then Drexel, which is right in the 0:03:35.840 --> 0:03:38.240 middle of Philly. Went to Drexel part time while I 0:03:38.280 --> 0:03:41.160 was at Vanguard. Um did that commute down to Philadelphia 0:03:41.200 --> 0:03:42.960 from the suburbs, you know, three times a week for 0:03:42.960 --> 0:03:44.640 a number of years, which isn't too bad if you 0:03:44.680 --> 0:03:47.480 go in the opposite the direction of traffic. Right, I 0:03:47.480 --> 0:03:49.920 don't know about that. Not a lot of great mass 0:03:49.920 --> 0:03:52.920 transit from Malverne to Film, from Malvern to Philly. Actually 0:03:52.960 --> 0:03:54.440 you could, you can. You can take the train, but 0:03:54.640 --> 0:03:55.960 at that time it was a long time ago. I 0:03:55.960 --> 0:03:58.920 think I graduated ninety three. Um, it was more convenient 0:03:58.960 --> 0:04:01.640 to drive. So so you mentioned of Vanguard was a 0:04:01.680 --> 0:04:04.800 special place when you joined it. It's clearly a different 0:04:04.840 --> 0:04:08.080 place today than it was in the eighties and nineties. Uh, 0:04:08.200 --> 0:04:09.760 tell us a little bit about what it was like 0:04:09.960 --> 0:04:14.200 working there, you know, pretty much before Vanguard became the 0:04:14.200 --> 0:04:17.080 beheamoth we know it as today. Yeah, it was a startup. 0:04:17.360 --> 0:04:19.080 It felt like a startup. I mean, it wasn't. It 0:04:19.120 --> 0:04:22.440 wasn't quite a startup. Probably we probably had seven employees 0:04:22.480 --> 0:04:24.599 at the time, but only about thirty billion in assets 0:04:24.680 --> 0:04:27.320 under management, and we were trying to figure things out 0:04:27.360 --> 0:04:30.120 and grow. Nobody really cared about indexing, and if they 0:04:30.120 --> 0:04:33.279 did care about it, usually pretty negative thoughts about indexing. 0:04:33.320 --> 0:04:36.920 You know, we were called un American and you are communist. Yeah, 0:04:36.960 --> 0:04:39.040 that's right, we were Communists. Why settled for average? All 0:04:39.080 --> 0:04:41.600 those things? But you know, Jack Bogel was at the 0:04:41.640 --> 0:04:43.880 home when I started. I was fortunate enough to work 0:04:43.880 --> 0:04:46.640 with him for about eight years, and you know, he 0:04:46.760 --> 0:04:49.880 was so passionate about our mission. Um. You know, he 0:04:49.920 --> 0:04:52.960 would we have partnership picnic every summer and he would 0:04:52.960 --> 0:04:54.719 get up and speak and it would fire you up 0:04:54.760 --> 0:04:56.200 for the rest of the year. The guy was incredibly 0:04:56.200 --> 0:04:58.600 inspirational and you really felt like you were you were 0:04:58.640 --> 0:05:01.560 taken on the ablishment and doing something special. So it 0:05:01.600 --> 0:05:06.440 was really really fun start up, very collaborative, felt like 0:05:06.440 --> 0:05:09.720 a family. Um. And you know, it took a while 0:05:09.839 --> 0:05:11.520 to start growing, to be honest with you, I mean, 0:05:12.360 --> 0:05:16.720 we really didn't start growing probably in mid nineties, you know, 0:05:16.800 --> 0:05:18.320 started to get a little bit of attention. Then Now 0:05:18.360 --> 0:05:20.960 in the nineties everybody was growing, stocks were going high, 0:05:21.080 --> 0:05:23.200 or you're the middle of an eighteen year or so 0:05:23.800 --> 0:05:27.680 giant thousand percent bowl market. What was Vanguard doing in 0:05:27.680 --> 0:05:30.839 the mid nineties that finally began to gain traction? Was it? 0:05:30.880 --> 0:05:35.040 Was it the underlying philosophy started to find some some 0:05:35.120 --> 0:05:38.159 adherents or was it just the rising tide lifted all? 0:05:38.279 --> 0:05:40.599 But I think I think a couple of things, Barry. 0:05:40.640 --> 0:05:43.400 First of all, we had some real zealots, you know, 0:05:43.400 --> 0:05:46.960 the Bogel heads of today, which you probably familiar with. Um, 0:05:47.080 --> 0:05:51.520 they stumbled onto Vanguard. We didn't do advertising, we didn't sell. 0:05:51.640 --> 0:05:53.440 We were actually Jack Bogle wouldn't let us say the 0:05:53.440 --> 0:05:56.760 word sell or product or advertising. UM. He actually had 0:05:56.760 --> 0:05:58.400 to put a dollar in a jar near his office 0:05:58.440 --> 0:06:01.719 if you did UM. But you know, we had something special, 0:06:01.720 --> 0:06:04.920 and I think people realize that people may not even 0:06:05.320 --> 0:06:07.800 really understood that they owned the company, you know, by 0:06:07.920 --> 0:06:09.960 investing in the funds on the company. But you've got 0:06:09.960 --> 0:06:14.320 this core base of of people that really identified with Vanguard, 0:06:14.360 --> 0:06:16.320 felt like they're part of the club, and great word 0:06:16.320 --> 0:06:19.320 of mouth, so that was helpful. We had some great 0:06:19.320 --> 0:06:21.760 performance from some of our active funds early days, winds 0:06:21.839 --> 0:06:26.680 Or Fund, John Neff's superstar fund manager that helped UM. 0:06:26.720 --> 0:06:29.440 You know, really talking about indexing, Jack taking that on, 0:06:29.560 --> 0:06:34.280 taking the industry on. People started to get disappointed in performance. 0:06:34.760 --> 0:06:37.039 You had star managers in the early nineties. That sort 0:06:37.040 --> 0:06:38.960 of the shine came off the star a little bit, 0:06:39.480 --> 0:06:42.599 so indexing had a little bit more of appeal cost, 0:06:43.000 --> 0:06:45.159 you know, when you really camera home to what you 0:06:45.200 --> 0:06:47.520 can control as an investor. Cost. It finally started to 0:06:47.520 --> 0:06:49.200 catch on with people like, hey, I can get low 0:06:49.240 --> 0:06:52.000 cost through indexing and get the market return, which, by 0:06:52.000 --> 0:06:55.479 the way, over time is pretty darn good returns. And 0:06:55.480 --> 0:06:57.839 and around the same time you started to see the 0:06:58.000 --> 0:07:03.120 rise of some UH academics saying, a the market sufficient 0:07:03.320 --> 0:07:06.120 very few if anybody can beat it, and those who can, 0:07:06.200 --> 0:07:08.320 you don't know. It's persistent, if it was luck, if 0:07:08.320 --> 0:07:12.000 it was whatever. And there was a lot of UM 0:07:12.440 --> 0:07:17.240 academic defense of the idea of the advantages passive that's right, Yeah, 0:07:17.280 --> 0:07:21.440 I mean Bert mackiel, Sure, that's right. Random walked down 0:07:21.440 --> 0:07:24.680 while she was a Vanguard board member for many years. 0:07:24.800 --> 0:07:27.760 Charlie Ellis another one, um you know, the Losers game 0:07:28.920 --> 0:07:31.360 his book there. So there was a lot of academic 0:07:31.360 --> 0:07:33.800 research around and it started to become practical. People started 0:07:33.800 --> 0:07:36.120 to release see it and feel it and that that 0:07:36.200 --> 0:07:38.360 started to give us a little bit of wind in 0:07:38.400 --> 0:07:41.880 our sales. So back in the forget late eighties, even 0:07:41.880 --> 0:07:45.200 in the early nineties, when you start to attract more capital, 0:07:45.240 --> 0:07:48.360 did you ever imagine, hey, in twenty years, twenty five 0:07:48.440 --> 0:07:52.960 years will be you know, six seven, eight trillion dollars. Uh? No, 0:07:53.160 --> 0:07:54.680 not at all. It was it was a tough go 0:07:54.800 --> 0:07:58.320 early early on UM and Jack was adamant about, Hey, 0:07:58.400 --> 0:08:00.560 cash flow and market share is an outcome. We have 0:08:00.640 --> 0:08:03.080 to just do what's focused on, doing what's right for investors. 0:08:03.080 --> 0:08:05.720 Don't worry about growth, you know. He really hammered that 0:08:05.800 --> 0:08:08.400 home to us. So we didn't really think big like that. 0:08:09.080 --> 0:08:10.840 We're just trying to do the right thing. So yeah, 0:08:10.840 --> 0:08:13.800 I'd say absolutely not. Had no idea how big we'd be. 0:08:14.000 --> 0:08:16.960 When did it become clear that this was going to 0:08:17.040 --> 0:08:20.640 be a multi trillion dollar I'm not I'm not sure 0:08:20.680 --> 0:08:22.679 if there was ever a moment where I said, wow, 0:08:22.760 --> 0:08:25.400 this is you know, we're big. Um. I do think 0:08:25.400 --> 0:08:29.200 after the Global financial crisis we really start to get momentum. 0:08:29.280 --> 0:08:34.319 Our funds held up well. We served during the everybody 0:08:34.400 --> 0:08:37.160 saw outflows except Vanguard. That's right. We picked up share 0:08:37.160 --> 0:08:40.560 there um, and I do think that that trusted brand. 0:08:40.559 --> 0:08:42.959 People started to understand that they own the company, and 0:08:43.040 --> 0:08:45.600 you know that the benefits of that structure are enormous 0:08:45.640 --> 0:08:48.480 and many. Um. And so coming out of the financial 0:08:48.760 --> 0:08:50.920 into the financial crisis, now the financial crisis, we really 0:08:50.960 --> 0:08:52.960 start to take off. I was in London at the 0:08:52.960 --> 0:08:55.680 time and you could see, Wow, things are really starting 0:08:55.679 --> 0:08:58.640 to happen here. You mentioned London. You served as head 0:08:58.640 --> 0:09:02.200 of Vanguard's UK and European operations. Tell us a little 0:09:02.200 --> 0:09:05.120 bit about that experience. It was a fabulous experience that 0:09:05.240 --> 0:09:08.640 was coming off helping start our financial advisor business, the 0:09:08.840 --> 0:09:11.559 business i lead today. I did that for about six 0:09:11.640 --> 0:09:13.400 or seven years, and then Bill McNab, the CEO at 0:09:13.400 --> 0:09:15.080 the time, asked me if i'd go and start a 0:09:15.120 --> 0:09:18.200 similar business in in the UK and run the European operation. 0:09:18.280 --> 0:09:20.440 So packed up my wife and my four kids and 0:09:20.559 --> 0:09:23.520 went to London and it was an unbelievable experience. It 0:09:23.640 --> 0:09:25.840 felt like the the old days at Vanguard. You know, 0:09:25.920 --> 0:09:28.840 you were coming in starting up. I was employee number 0:09:28.840 --> 0:09:31.920 one in London. Um, we're taken on high cost funds, 0:09:32.400 --> 0:09:35.920 active managers sort of the industry trying to bring transparency 0:09:36.400 --> 0:09:38.280 and low cost of the industry, and it was just 0:09:39.000 --> 0:09:41.439 really fun to build that business and we had a 0:09:41.480 --> 0:09:43.360 great team there. What was that always supposed to be 0:09:43.720 --> 0:09:46.520 a finite amount of time or did something specific bring 0:09:46.520 --> 0:09:48.280 you back to the U S now it was I 0:09:48.320 --> 0:09:50.720 was told three d years to five years and ended 0:09:50.760 --> 0:09:52.640 up being there seven years and probably would have stayed 0:09:52.679 --> 0:09:55.800 even longer, but I got the opportunity. Bill McNab again, 0:09:55.840 --> 0:09:58.480 who I know, you know, was CEO and asked me 0:09:58.520 --> 0:10:00.800 if i'd come back and joined senior f and lead 0:10:00.840 --> 0:10:03.439 the f A S business, which was a lot bigger 0:10:03.440 --> 0:10:06.520 than when I left in two thousand eight, and I 0:10:06.559 --> 0:10:08.760 was thrilled to be able to do that. That's fantastic. 0:10:09.240 --> 0:10:12.800 So let's talk a little bit about the Advisor Services division. 0:10:13.200 --> 0:10:15.960 What exactly does it do and what sort of clients, 0:10:16.440 --> 0:10:18.920 uh and customers are you working with? Yeah, well, first 0:10:18.920 --> 0:10:22.040 of all, we work with financial advisors of all types 0:10:22.080 --> 0:10:25.439 in the industry, UM, non vanguard financial advisors, so you've 0:10:25.440 --> 0:10:29.160 got broken dealers, independent regter investment advisors are a S 0:10:29.200 --> 0:10:32.720 and bank wealth advisors and uh, you know, we have 0:10:33.000 --> 0:10:35.800 a team that serves those advisors and the home offices 0:10:35.840 --> 0:10:39.760 of those advisors talking about vanguards product and educating about product. 0:10:40.120 --> 0:10:42.840 We also do a lot of education around advice and 0:10:43.280 --> 0:10:46.000 behavioral finance and coaching and all these things to help 0:10:46.040 --> 0:10:49.160 advisors drive great outcomes for their clients. Well, we'll talk 0:10:49.200 --> 0:10:52.160 a little bit about advisors alpha in a bid. But 0:10:52.280 --> 0:10:55.480 you mentioned broker dealers. I did not realize they were 0:10:55.559 --> 0:10:58.920 part of this group because I recall back in the 0:10:59.000 --> 0:11:02.840 day they used to arg for shelf space like supermarkets 0:11:02.840 --> 0:11:06.920 do for serials. How does Vanguard operate and not advertise, 0:11:07.040 --> 0:11:11.000 not pay shelf space. Yeah, we still don't do that. 0:11:11.080 --> 0:11:13.720 We like the transparency of an explicit fee. But I 0:11:13.760 --> 0:11:16.400 think the move to fee based advice in the broker 0:11:16.440 --> 0:11:20.240 dealer community really helped drive that. So advisor charges for 0:11:20.280 --> 0:11:23.160 the advice that they provide the clients, and that pays 0:11:23.200 --> 0:11:26.560 pays the bills and so um, we don't we don't 0:11:26.559 --> 0:11:29.360 do the payment for distribution. Now it's pretty limited to 0:11:29.600 --> 0:11:32.240 et f s with our broken dealer relationships, not exclusively, 0:11:32.840 --> 0:11:35.200 so that the model around ETFs is a little different. 0:11:35.200 --> 0:11:38.600 There isn't that same payment for service with the metro funds. 0:11:38.600 --> 0:11:41.760 That's right, Barry. Really interesting and and let's talk a 0:11:41.800 --> 0:11:44.800 little bit about the research and education that you provide. 0:11:45.400 --> 0:11:48.160 Is this aimed at the advisor community, is it aimed 0:11:48.200 --> 0:11:51.640 at the investor of public within your group? Who's your focus? 0:11:51.720 --> 0:11:54.600 It's both, Um, you know, we do the typical stuff 0:11:54.640 --> 0:11:59.560 market economic outlooks and research their product research, but importantly 0:12:00.080 --> 0:12:03.240 being advisors work with their clients, coaching them through tough 0:12:03.240 --> 0:12:07.480 times like this. Um, So we we do have uh 0:12:07.640 --> 0:12:09.920 materials and research target at the advisor, but we also 0:12:09.960 --> 0:12:11.880 helped them out and target their end client. You know, 0:12:11.960 --> 0:12:15.120 Vanguards deals with tens of millions of individual investors and 0:12:15.120 --> 0:12:17.320 we know how to speak to them very clearly and 0:12:17.440 --> 0:12:21.400 very candidly and very openly. So we leverage that expertise 0:12:21.720 --> 0:12:24.600 and we help advisors speak to their clients about you 0:12:24.679 --> 0:12:27.160 name it, market savings, all all the things that they 0:12:27.160 --> 0:12:29.480 talked about. So so I think it was fran Kinnary 0:12:29.679 --> 0:12:32.600 a Vanguard came up with the concept of advisors Alpha. 0:12:33.160 --> 0:12:35.959 Tell us a little bit about that, Yeah, advisor's alpha. Um, 0:12:36.280 --> 0:12:39.520 we all know and believe very strongly today that advisors 0:12:39.679 --> 0:12:41.760 help clients and in fact, the Vanguard, which is a 0:12:41.760 --> 0:12:44.360 big shift from many years ago. We think most investors 0:12:44.360 --> 0:12:47.880 would be well served with using a financial advisor, and 0:12:47.880 --> 0:12:50.320 they bring a lot of value. Right, So there's the hey, 0:12:50.520 --> 0:12:52.960 I'll i'll work with you and we'll develop goals and 0:12:52.960 --> 0:12:56.280 a plan how to get there. They'll they'll construct a portfolio, 0:12:57.040 --> 0:12:59.800 they'll do tax planning, right so the harvest losses to 0:13:00.000 --> 0:13:03.360 offset future gains. They'll do a state planning, other complex 0:13:03.400 --> 0:13:05.880 financial planning. And so what Fran and his team did 0:13:05.920 --> 0:13:08.880 they did research and said how how much alpha does 0:13:08.920 --> 0:13:12.160 an advisor add through the services they provide? And you 0:13:12.160 --> 0:13:14.400 know it's hard, it's hard to pin that down exactly, Barry, 0:13:14.520 --> 0:13:16.920 but we've come up with about three basis three basis 0:13:16.920 --> 0:13:19.600 points or three percentage points of alpha working with an advisor. 0:13:19.920 --> 0:13:21.640 And if you think about that, you know, you pay 0:13:21.679 --> 0:13:25.080 an advisor fifty basis points a hundred basement whatever they're 0:13:25.080 --> 0:13:29.840 providing on average annually. So really good value there. And 0:13:29.880 --> 0:13:31.320 a lot of that comes from, believe it or not, 0:13:31.400 --> 0:13:34.079 the behavioral coaching. To say the very least, that there 0:13:34.160 --> 0:13:37.240 was a study done not too long ago that showed 0:13:37.360 --> 0:13:40.560 when people panic out of the market, something like of 0:13:40.600 --> 0:13:43.839 them never returned back to equities. That that leaves a 0:13:43.920 --> 0:13:47.520 mark when it comes time to mark. Uh, you add 0:13:47.520 --> 0:13:50.360 in tax lost harvesting, and just helping with having a 0:13:50.360 --> 0:13:53.920 financial plan. I'm I'm a believer. Hey, that's that's my 0:13:54.080 --> 0:13:57.000 day job. But I'm always curious to hear how you 0:13:57.040 --> 0:13:59.960 guys came up with that phrase, which is so funny 0:14:00.040 --> 0:14:02.200 because when I think of Vanguard, I think of beta. 0:14:02.240 --> 0:14:05.840 I don't think of alpha. Developing a way to obtain 0:14:05.880 --> 0:14:09.520 alpha seems sort of contrary. That's right, you can obtain 0:14:09.559 --> 0:14:12.480 alpha even even if you use all beta as underlying investments. 0:14:12.480 --> 0:14:15.360 The real value is the behavioral coaching and the tax management. Again, 0:14:15.360 --> 0:14:19.760 the more complex value add around financial planning. So you 0:14:19.800 --> 0:14:25.800 mentioned um transparency and low fees. Price obviously has a 0:14:25.800 --> 0:14:31.000 big impact on long term returns. How can Vanguard keep 0:14:31.600 --> 0:14:33.760 lowering its fees? At what point do you just run 0:14:33.760 --> 0:14:38.560 out of runway? Yeah, our fee cuts are not a 0:14:38.600 --> 0:14:42.040 pricing marketing strategy, Barry, It's it's a function of the 0:14:42.040 --> 0:14:45.880 corporate structure of Vanguard. So we're really a mutual mutual 0:14:45.920 --> 0:14:47.960 fund company. What I mean by that is, if you're 0:14:47.960 --> 0:14:50.400 an investor in one of our funds, you own a 0:14:50.400 --> 0:14:53.400 little pro rata piece of Vanguard. And if you think 0:14:53.440 --> 0:14:58.400 about that from a leadership perspective, of management perspective, You 0:14:58.480 --> 0:15:01.320 focus on one constituent, you the investor, and that's it. 0:15:01.480 --> 0:15:03.920 Don't have to worry about my shareholders on Wall Street. 0:15:03.960 --> 0:15:06.120 I don't have to worry about some family or family 0:15:06.160 --> 0:15:09.400 office that owns me. It's all about you. So as 0:15:09.440 --> 0:15:12.480 we grow become more efficient, we get scale. We sort 0:15:12.520 --> 0:15:14.960 of make a profit, and we take that profit and 0:15:14.960 --> 0:15:17.560 we do two things with it. One, we invest in 0:15:17.600 --> 0:15:20.280 the business to better serve you, right so better digital 0:15:20.280 --> 0:15:23.320 experience if your retail investor, more services for advisors. We 0:15:23.360 --> 0:15:26.640 also take that profit and drive down expense ratios. And 0:15:26.680 --> 0:15:29.560 really that's what we're all about, delivering value back to 0:15:29.600 --> 0:15:32.680 those investors in our funds who own the company. And 0:15:32.720 --> 0:15:35.600 as we grow and grow, that scale helps us drive 0:15:35.640 --> 0:15:37.680 down the expense ratios. So so when I think of 0:15:37.760 --> 0:15:41.960 owning a financial I think of three things. Uh. First, 0:15:42.320 --> 0:15:45.880 I control I get to vote my shares in a proxy. Second, 0:15:46.200 --> 0:15:48.680 if there's a dividend distribution, I capture some of that 0:15:48.720 --> 0:15:51.440 in Third, if it's ever sold, I participate in the 0:15:51.440 --> 0:15:54.960 equity when it's a mutual. Those things will kind of 0:15:55.520 --> 0:15:58.040 roll into one. They do. Yeah, we I mean, we 0:15:58.080 --> 0:16:00.120 could pay you a dividend, but it's actually more tax 0:16:00.160 --> 0:16:03.160 efficient if we lower your fees. Huh. So that that's 0:16:03.200 --> 0:16:07.240 really that's really quite fascinating. Um, we talked about research 0:16:07.280 --> 0:16:11.280 and education. Let's let's talk a little bit about portfolio analytics, 0:16:11.320 --> 0:16:14.080 financial planning tools. I didn't know you guys have a 0:16:14.120 --> 0:16:18.160 healthcare calculator. Tell us about some of the software and 0:16:18.280 --> 0:16:23.360 other analytical tools you guys have made available. Yeah, so, UM. 0:16:23.400 --> 0:16:25.640 I think one of the unique things about Vanguard is 0:16:25.640 --> 0:16:27.200 we serve a lot of different markets, right, So, we 0:16:27.200 --> 0:16:30.320 serve financial advisors, we serve retail investors, and we actually 0:16:30.320 --> 0:16:33.120 have an advice business of our own, and through that 0:16:33.240 --> 0:16:36.480 advice business, we've developed a lot of capabilities, whether it's 0:16:36.520 --> 0:16:40.160 the Thought Leadership Advisors ALPHA that we talked about before, 0:16:40.440 --> 0:16:43.400 or some technology capabilities for our advisors to use. And 0:16:43.440 --> 0:16:45.760 what we've done is taken some of those capabilities and 0:16:45.800 --> 0:16:48.040 deliver them to the f a S clients, the Financial 0:16:48.040 --> 0:16:51.120 Advisor Services client to help them drive better outcomes for 0:16:51.160 --> 0:16:54.400 their their clients. So healthcare cost Estimator is a really 0:16:54.400 --> 0:16:56.920 great example. We partnered with a firm in this space 0:16:56.920 --> 0:17:00.320 and developed a module to help with healthcare cost and 0:17:00.360 --> 0:17:04.520 determining healthcare costs in retirement, and we offer that module 0:17:04.600 --> 0:17:06.480 and a lot of materials around it and client and 0:17:06.600 --> 0:17:09.440 client materials to advisers to help them talk about healthcare 0:17:09.720 --> 0:17:12.240 with their clients. It's it's typically the largest expense people have. 0:17:12.280 --> 0:17:14.000 They have trouble getting their head around it, and it's 0:17:14.000 --> 0:17:16.960 a really valuable tool. It's just an example of you know, 0:17:17.040 --> 0:17:19.840 one of the things we do quite quite interesting. So 0:17:19.880 --> 0:17:22.200 one of the other giants in the space is black Rock. 0:17:22.440 --> 0:17:25.880 They have a risk management technology. How do you guys 0:17:25.960 --> 0:17:29.840 think about risk management? What does that mean to advisors 0:17:30.000 --> 0:17:32.199 who are trying to serve their clients in a somewhat 0:17:32.280 --> 0:17:35.880 volatile environment. Yeah, we have a really good risk management 0:17:35.920 --> 0:17:38.800 tool as well. Uh, it's it's through our Portfolio and 0:17:38.840 --> 0:17:42.240 Analytics and consulting service and uh, you know, you run 0:17:42.240 --> 0:17:43.800 a portfolio through it and will give you all your 0:17:43.880 --> 0:17:46.760 risk exposures. We can consult with you on Hey, you 0:17:46.800 --> 0:17:48.840 might be overexposed here under exposed. Did you know that? 0:17:48.920 --> 0:17:50.399 Oh you didn't? You want to do something about it? 0:17:50.400 --> 0:17:52.000 We can help you with that. So we provide a 0:17:52.000 --> 0:17:57.639 similar service to our clients. They deem it really really valuable. Um, 0:17:57.680 --> 0:18:01.359 it's interesting. I get every day, I get net promoter 0:18:01.440 --> 0:18:05.800 scores from clients and and this service in particular, I 0:18:05.840 --> 0:18:07.840 can't remember a time when it hasn't been like a 0:18:07.920 --> 0:18:09.280 nine out of ten or a ten out of ten. 0:18:09.359 --> 0:18:11.919 They see it as incredibly valuable. And one thing they 0:18:11.960 --> 0:18:15.880 cite verbatim all the time is objectivity. You know, hey, 0:18:15.880 --> 0:18:17.720 it really feels like Vanguard's trying to help me out, 0:18:17.760 --> 0:18:20.800 not trying to necessarily sell me a product. And so 0:18:21.040 --> 0:18:23.240 we distributed through that through thousands of advised We have 0:18:23.359 --> 0:18:27.000 thousands of those engagements a year. Quite quite interesting. So 0:18:27.040 --> 0:18:29.560 there's a quote I really love UM, and I want 0:18:29.600 --> 0:18:32.160 to get your feedback on it. There has never been 0:18:32.200 --> 0:18:35.359 a better time to be a retail investor than right now. 0:18:35.680 --> 0:18:39.440 True false true? Why is that? Why is now so 0:18:39.480 --> 0:18:42.359 great to be I'm an optimistic guy, Barry, but but seriously, 0:18:42.600 --> 0:18:45.000 I think, UM, if you think about the markets and 0:18:45.040 --> 0:18:47.720 market structure, you know, you think about this, you can 0:18:47.760 --> 0:18:50.439 get exposure to the entire stock market and ETF for 0:18:50.720 --> 0:18:53.119 two and a half three basis points. That's pretty Penny's 0:18:53.240 --> 0:18:58.679 pen Henny's UM. Think about trading. I'm buying into It's free, right, 0:18:59.119 --> 0:19:02.080 advice more accessible now than ever I can decide to 0:19:02.080 --> 0:19:04.320 do it digitally. I can go hybrid and have digital 0:19:04.320 --> 0:19:06.199 and an advisor with me, or I can you know, 0:19:06.200 --> 0:19:08.119 see my advisor down the street and go in person. 0:19:08.480 --> 0:19:11.440 So there's so many services there. There's so many tools 0:19:11.480 --> 0:19:14.480 for investors, or so many tools for advisors to help investors. 0:19:14.680 --> 0:19:17.879 I think it's a fabulous time. Yeah, no, I totally agree. 0:19:17.920 --> 0:19:20.679 And I wasn't referring to what's going on in the market. 0:19:20.720 --> 0:19:23.719 I just mean generally, if you have a long term perspective, 0:19:24.320 --> 0:19:27.040 it's cheap, it's easy, it's transparent. You know, you go 0:19:27.160 --> 0:19:30.760 back to the early days of Jack Bogel, and we'll 0:19:30.760 --> 0:19:34.080 talk about that in a little bit about how hard 0:19:34.119 --> 0:19:37.560 it was to simply try and come up with an 0:19:37.560 --> 0:19:41.560 execution for here's the whole market or here's the SMP five. 0:19:42.320 --> 0:19:45.959 You couldn't do that fifty years ago. It was practically impossible. 0:19:46.119 --> 0:19:48.560 That's right. It was. It was tough. The technology wasn't there, 0:19:48.560 --> 0:19:51.000 The cost, the frictional costs were high. You know, in 0:19:51.119 --> 0:19:55.040 trading UM it's really um come in favor of retail 0:19:55.080 --> 0:19:59.760 investors quite quite interesting. So when you began at Vanguard, 0:20:01.280 --> 0:20:05.800 Jack Bogel was a CEO. Jack Brennan followed him Bill McNabb, 0:20:05.880 --> 0:20:09.760 now it's Tim Buckley that that's kind of a a 0:20:09.920 --> 0:20:13.560 list of CEOs tell us about the way the CEOs 0:20:13.600 --> 0:20:16.879 you work with impact how the firm operates. Yeah, I 0:20:16.960 --> 0:20:19.960 was fortunate to work with all four CEOs of Vanguard. 0:20:20.000 --> 0:20:22.320 I worked with Jack Bogel for about eight years before 0:20:22.400 --> 0:20:25.920 he retired, and you know, Jack was the visionary, the 0:20:26.480 --> 0:20:29.520 guy that would get everybody motivated that we're doing something special. 0:20:29.640 --> 0:20:32.320 We were small at the time. Uh, people thought we 0:20:32.359 --> 0:20:34.800 were a little quirky. We're out in Pennsylvania, you know, 0:20:35.080 --> 0:20:37.560 far away from Wall Street. But he was such a 0:20:37.640 --> 0:20:41.600 motivator and instilled this sense of purpose. You know, you're 0:20:41.640 --> 0:20:44.480 you're part of something bigger than yourself, which was really exciting. 0:20:44.560 --> 0:20:47.080 And you know, Jack his words, he he could give 0:20:47.080 --> 0:20:49.359