WEBVTT - Vanguard Group CEO Salim Ramji Talks Becoming Company CEO

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>We want to bring in the CEO of Vanguard, Selim Ramji.

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<v Speaker 2>He took the helm just under one month ago on

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<v Speaker 2>July eighth, actually launch day of this show, Seleem.

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<v Speaker 1>It's great to see you in person.

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<v Speaker 3>It's great to be here.

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<v Speaker 1>So I don't know if.

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<v Speaker 2>You know this, but there's a huge sell off underway

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<v Speaker 2>right now in market.

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<v Speaker 3>I thought this was going to be a quiet day

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<v Speaker 3>in August when I first agreed to do this.

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<v Speaker 2>You and we well, well, I want to get to

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<v Speaker 2>your big picture of view for Vanguard, but we have

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<v Speaker 2>to start, of course with the news of the day,

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<v Speaker 2>and that's that Schwab Fidelity.

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<v Speaker 1>Seems like the whole industry is.

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<v Speaker 2>Dealing with outages right now on their trading platforms.

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<v Speaker 1>Are you having any troubles over at Vanguard.

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<v Speaker 3>Yeah, it's best we can tell. It's an industry wide

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<v Speaker 3>kind of slow set of issues. For us at Vanguard,

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<v Speaker 3>we were impacted by some of the slowness that's happening

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<v Speaker 3>all across the industry as a result of higher volumes

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<v Speaker 3>all across the industry. Our kind of success rate for

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<v Speaker 3>weblogins and the like is kind of ninety eight point

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<v Speaker 3>nine percent, So it's fine. It's not as much as

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<v Speaker 3>we want it in the normal course of the day,

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<v Speaker 3>but at least as of five minutes ago, things we're

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<v Speaker 3>kind of getting back to normal, if you will. We

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<v Speaker 3>benefit in some ways as Vanguard because we don't have

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<v Speaker 3>a large active trader population. By design, we're about long

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<v Speaker 3>term investing and we're about staying in the market rather

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<v Speaker 3>than timing the market. But at the same time, we're

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<v Speaker 3>always looking at what the industry kind of issues are

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<v Speaker 3>and how they impact our clients, and the team has

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<v Speaker 3>been on it, particularly with the higher volumes that we expected.

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<v Speaker 2>I was going to say, you know, it's a big

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<v Speaker 2>day when your buy and hold Vanguard investors are trying

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<v Speaker 2>to log in and see what their investments are doing.

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<v Speaker 2>But we'll continue to look for updates on that situation.

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<v Speaker 2>But let's talk a little bit about you. Let's talk

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<v Speaker 2>about Vanguard because you've made waves. Is the first outside

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<v Speaker 2>CEO hire since Jack Gologal, of course founded the company

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<v Speaker 2>in the nineteen seventies.

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<v Speaker 1>What's on the top of your to do list?

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<v Speaker 3>So there really are three things, Katie, and it's been

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<v Speaker 3>great to really get started, which I did just as

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<v Speaker 3>the three of you got started on your new show

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<v Speaker 3>back on July eighth. And the first piece is really

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<v Speaker 3>just listening and understanding what's foremost on the minds of

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<v Speaker 3>our clients. And so I've been spending a lot of

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<v Speaker 3>time both here today over the past few weeks, meeting

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<v Speaker 3>with some of our large retirement services clients are large

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<v Speaker 3>wealth management clients, but also just listening in on the

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<v Speaker 3>phones and listening in with our advisors as they're dealing

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<v Speaker 3>with the kind of advice and all the day to

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<v Speaker 3>day issues for individual investors as well. And so it's

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<v Speaker 3>really just first and foremost making sure that we're taken

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<v Speaker 3>care of and serving our clients well for today. And

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<v Speaker 3>I think that the second piece is really about getting

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<v Speaker 3>to know all the crew. I've been spending a lot

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<v Speaker 3>of time at my new home in Malvern, but also

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<v Speaker 3>in Charlotte and Scottsdale in a couple of weeks in

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<v Speaker 3>London to really get to know our crew all over

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<v Speaker 3>the world and really understand the culture from the inside.

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<v Speaker 3>You know. I've admired the culture from the outside and

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<v Speaker 3>all of the Bogels writings and works, but really being

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<v Speaker 3>able to see it and see how our crew members

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<v Speaker 3>really believe in the mission and believe in the purpose

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<v Speaker 3>and understand what's important to them is also kind of

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<v Speaker 3>high on the list. And I would say the third

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<v Speaker 3>thing is really with a view to the future, what

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<v Speaker 3>are the changing needs and expectations of our clients, Whether

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<v Speaker 3>it's around things like retirement income, or people investing for

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<v Speaker 3>the first time, or getting access to a broader range

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<v Speaker 3>of low cost investments even well beyond in next these

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<v Speaker 3>are all things that I think our clients are asking for.

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<v Speaker 3>I think that they're things that we can deliver.

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<v Speaker 1>I guess, but it's about the future.

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<v Speaker 4>I guess the future is why they hired an outsider, right,

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<v Speaker 4>because they could have hired an insider to just keep

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<v Speaker 4>the culture the way it is and not change anything.

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<v Speaker 4>I interviewed your predecessor, Tim Buckley in Frankfort a few

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<v Speaker 4>years ago when he was making a big push to

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<v Speaker 4>grow the ETF business in Europe. Vanguard could really grow

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<v Speaker 4>more in Europe. You are also making a push to

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<v Speaker 4>grow in your personal advisory service right, institutional and family

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<v Speaker 4>office wealth. What do you want to change? What are

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<v Speaker 4>the new things that you can bring to Vanguard?

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<v Speaker 3>Yeah, I would say, Matt to your point, it's really

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<v Speaker 3>been about two things. Certainly, some of it is around

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<v Speaker 3>what are the new ways to serve clients or the

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<v Speaker 3>new opportunities to deliver value to clients, and I hope

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<v Speaker 3>and expect some of my external kind of experiences would

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<v Speaker 3>help with that. But I will also say the majority

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<v Speaker 3>of my interviews with the board, even coming into this role,

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<v Speaker 3>we're all about culture and the cultural fit, because I

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<v Speaker 3>think the first and most important thing is not just

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<v Speaker 3>having a leader, but having a leadership team that really

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<v Speaker 3>kind of advances the mission and the purpose that Google

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<v Speaker 3>set out twenty nine years ago. And so it's those

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<v Speaker 3>two things. But to answer your question around the future,

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<v Speaker 3>look some of it learning and understanding. I think there's

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<v Speaker 3>more to do outside the United States in terms of

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<v Speaker 3>the opportunities in Europe, but I'm going to be spending

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<v Speaker 3>some time there later this month in getting a firsthand

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<v Speaker 3>view around that. I also think when you look at

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<v Speaker 3>issues like retirement income for boomers particularly who have accumulated

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<v Speaker 3>really well with us over the years but now need

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<v Speaker 3>income and draw down solutions, that's a really big deal.

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<v Speaker 3>And even first time investors in getting people who might

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<v Speaker 3>be investing in their late twenties or early thirties, and

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<v Speaker 3>would really be drawn to the type of proposition that

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<v Speaker 3>we have, but maybe haven't heard of us in the

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<v Speaker 3>way that I might have heard of Vanguard in my

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<v Speaker 3>late twenties early thirties. And so those are a few

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<v Speaker 3>of the things, but a lot of it is really

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<v Speaker 3>just listening and understanding where the opportunities are and what

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<v Speaker 3>fits with Vanguard's culture and what fits with our.

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<v Speaker 5>Ethos as well, wondering if this part of the market fits.

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<v Speaker 5>If you think about the explosion you've seen in private assets,

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<v Speaker 5>you've seen Vanguard really be a myth when it comes

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<v Speaker 5>to a big, liquid indexed market. How much do you

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<v Speaker 5>feel that you need to encompass some of that change

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<v Speaker 5>that's been happening in the market. Just very recently, your

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<v Speaker 5>alma mater made two major acquisitions when it came to

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<v Speaker 5>the private markets, do you feel that you need to

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<v Speaker 5>have a bigger foothold as well?

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<v Speaker 1>Well?

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<v Speaker 3>You know, it's interesting Vanguard from its origins also had

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<v Speaker 3>active management, kind of going back to even the founding

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<v Speaker 3>of the firm, And if you look at our client's

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<v Speaker 3>assets today, about twenty percent of them are an actively

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<v Speaker 3>managed fund. Sometimes it's through active managed subadvisors like we

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<v Speaker 3>typically do inequities. Sometimes it's in our active fixed income

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<v Speaker 3>capability that Sarah Devereaux and our CIO does kind of

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<v Speaker 3>within Vanguard and the thing that unifies both of these,

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<v Speaker 3>because Vanguard sometimes is thought of as an index versus active,

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<v Speaker 3>I don't think that's the truth. What we're really about

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<v Speaker 3>is low cost investing, and low cost investing applies an

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<v Speaker 3>index to apply as inactive, and I would like it,

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<v Speaker 3>over time to also apply in private assets. To your point,

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<v Speaker 3>we'd struck a partnership a couple of years ago in

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<v Speaker 3>private equity really just to test this theory about can

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<v Speaker 3>you bring lower cost investing to private assets, and it

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<v Speaker 3>seems like there's some demand there. But if you really

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<v Speaker 3>look across the universe and what we're about, we're about

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<v Speaker 3>bringing lower cost, kind of simpler forms of investing to

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<v Speaker 3>individual investors. We've shown we're doing that in index, We've

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<v Speaker 3>shown where we're doing that inactive, and I think to

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<v Speaker 3>your point, there's a broader universe in which we can

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<v Speaker 3>apply that, where we can add value to our clients,

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<v Speaker 3>and where we can partner with firms that do some

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<v Speaker 3>of the things that we don't It's.

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<v Speaker 2>Interesting listening to this conversation because you've made clear that

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<v Speaker 2>culture is what you're really concerned with, that's at the

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<v Speaker 2>top of the priority list, that you really want to

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<v Speaker 2>stick to Jack Bogul's mission. But it seems like when

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<v Speaker 2>you look to the future some of those things could

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<v Speaker 2>come into tension, private equity being one of them, crypto

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<v Speaker 2>being one of them. You think about how to stay

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<v Speaker 2>relevant and grow an audience among younger investors. I mean,

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<v Speaker 2>do you see attention there? How do you thread that

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<v Speaker 2>needle of sticking to your knitting but also remaining relevant

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<v Speaker 2>and creating relevance among a younger subset.

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<v Speaker 3>We have a term that have come to learn in

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<v Speaker 3>Vanguard of does it load? Which is really and what

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<v Speaker 3>it really means is does the investment offering that we

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<v Speaker 3>may come up with does it help on the efficient frontier?

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<v Speaker 3>Does it really fit in the context of a broader portfolio. Now,

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<v Speaker 3>we may be conservative from time to time in our

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<v Speaker 3>view on that, but we're very deliberate, We're very methodical,

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<v Speaker 3>and we're always looking at first and foremost does it

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<v Speaker 3>fit in a client's portfolio and is there distinctive and

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<v Speaker 3>unique at capabilities that we as Vanguard can provide either

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<v Speaker 3>on our own or through partnerships like we've done with

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<v Speaker 3>sub advisors for many, many decades, and so we're always

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<v Speaker 3>looking at that through a portfolio lens, and I think

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<v Speaker 3>for some things like private markets, which would become a

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<v Speaker 3>much more important part of an overall portfolio, and you

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<v Speaker 3>can see it in institutional clients kind of all over

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<v Speaker 3>the world. But the key to whether it loads is

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<v Speaker 3>can we offer something that's very specific to Vanguard, which

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<v Speaker 3>means lower cost, which means it fits with a portfolio,

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<v Speaker 3>which means simplicity. And I think there's a great deal

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<v Speaker 3>of innovation that we can do kind of in that

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<v Speaker 3>regard as well, but it's got to be true to

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<v Speaker 3>who we are. It's got to be true to our

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<v Speaker 3>own principles, whether as investors or whether in terms of clients.

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<v Speaker 2>Let's talk about customer service, because you think about one

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<v Speaker 2>of the issues that seems to be keep coming up

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<v Speaker 2>for Vanguard, it seems to be quality around customer service.

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<v Speaker 2>You've said that that's a priority, but I'm hoping that

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<v Speaker 2>you can get a little bit more specific about how

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<v Speaker 2>you plan on improving it, whether that's increased investments, are

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<v Speaker 2>you hiring more, what's the actual plan to improve it.

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<v Speaker 3>So I've been spending a lot of time, Katie in

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<v Speaker 3>the past four weeks just really listening to clients and

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<v Speaker 3>understanding from them firsthand what they love about Vanguard and

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<v Speaker 3>what they want us to improve about Vanguard. And this

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<v Speaker 3>is not just kind of large wealth managers, are large

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<v Speaker 3>kind of workplace clients, but also individual investors and joining

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<v Speaker 3>our advisors on the phones and really understanding kind of

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<v Speaker 3>each of that. So the first piece is make sure

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<v Speaker 3>I've got all the facts and really hearing firsthand from

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<v Speaker 3>our clients about both aspects of them. And there's a

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<v Speaker 3>huge amount of loyalty affection for Vanguard, and so that

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<v Speaker 3>in moments where we let a client down, clients take

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<v Speaker 3>it very personally, so do I, so do all of us.

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<v Speaker 3>I think the encouraging thing, as I've come to learn,

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<v Speaker 3>is that about starting about three years ago, we'd made

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<v Speaker 3>some very significant investments in modernizing our technology to make

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<v Speaker 3>things more cloud based, to make things much much more resilient.

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<v Speaker 3>And I benefit from a lot of those infrastructure investments

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<v Speaker 3>that have been made over the past few years.

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<v Speaker 1>So are you planning on doubling down on that so

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<v Speaker 1>to speak?

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<v Speaker 3>We're going to continue to invest behind giving our clients

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<v Speaker 3>the experience they expect and deserve from us. And so

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<v Speaker 3>I'm understanding exactly what the investments that we've made. Many

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<v Speaker 3>of these are behind the scenes and things which are

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<v Speaker 3>important enablers. I said all of last week with our

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<v Speaker 3>personal Investors team to understand all the changes that are

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<v Speaker 3>now underway and all the ones that are planned for

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<v Speaker 3>the future. But that's an important priority for me to

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<v Speaker 3>understand for us to continue to invest in in part

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<v Speaker 3>because of the great deal of loyalty and trust that

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<v Speaker 3>our clients have, and in part because of the expectations

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<v Speaker 3>they have for us to continue to deliver to them

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<v Speaker 3>not just low cost investing, but low cost investing with

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<v Speaker 3>high quality and a high level of experience. And we

0:11:44.600 --> 0:11:47.720
<v Speaker 3>think because of technology and because of some of the

0:11:47.760 --> 0:11:50.440
<v Speaker 3>investments that we have been making, we can do all

0:11:50.440 --> 0:11:50.920
<v Speaker 3>of those things.

0:11:51.000 --> 0:11:53.200
<v Speaker 5>Jilly, you know, of course you've been a pioneer in

0:11:53.240 --> 0:11:56.040
<v Speaker 5>low cost investing. But there is a sense here that

0:11:56.160 --> 0:11:59.560
<v Speaker 5>perhaps some of the industry feet pressures have gone far enough.

0:11:59.600 --> 0:12:02.000
<v Speaker 5>Bloom our intelligence has suggested that maybe you could hold

0:12:02.000 --> 0:12:04.200
<v Speaker 5>the line here and use some of that extra fee

0:12:04.200 --> 0:12:06.400
<v Speaker 5>and come to reinvest in customer service.

0:12:06.760 --> 0:12:07.720
<v Speaker 1>Is that an option for you?

0:12:08.559 --> 0:12:12.640
<v Speaker 3>We are always looking at ways in terms of being

0:12:12.640 --> 0:12:16.440
<v Speaker 3>able to invest back in client experience. And as I said,

0:12:16.520 --> 0:12:19.520
<v Speaker 3>some of the technology investments were made and well predate

0:12:19.559 --> 0:12:25.080
<v Speaker 3>me in technology, and we will continue to invest behind

0:12:25.240 --> 0:12:27.600
<v Speaker 3>things that get our client experience to where our clients

0:12:27.679 --> 0:12:31.720
<v Speaker 3>expect them. And one of the beauties I think the

0:12:31.760 --> 0:12:34.720
<v Speaker 3>real genius of the original model that Bogel had set

0:12:34.800 --> 0:12:38.320
<v Speaker 3>up is that our clients are our owners, and so

0:12:38.400 --> 0:12:42.199
<v Speaker 3>we are singularly focused on one constituency, which is our clients.

0:12:42.720 --> 0:12:45.760
<v Speaker 3>And so after important reinvestments that we make back in

0:12:45.800 --> 0:12:49.400
<v Speaker 3>our technology and in our client experience, we can also

0:12:49.480 --> 0:12:53.800
<v Speaker 3>continue to invest behind the mission of low cost investing.

0:12:54.600 --> 0:12:57.199
<v Speaker 3>And as we talked about earlier Shanelli, I sort of

0:12:57.240 --> 0:13:01.000
<v Speaker 3>view this across the spectrum. I view it indexation, I

0:13:01.080 --> 0:13:04.280
<v Speaker 3>view it in active management. If we can extend that

0:13:04.360 --> 0:13:09.680
<v Speaker 3>to areas like private assets, often through partnerships, great because

0:13:09.679 --> 0:13:12.040
<v Speaker 3>I do think even though the mission has kind of

0:13:12.040 --> 0:13:14.920
<v Speaker 3>been going on for forty nine years, there still is

0:13:14.920 --> 0:13:18.160
<v Speaker 3>a lot of opportunity to bring lower cost, more accessible

0:13:18.200 --> 0:13:21.320
<v Speaker 3>investments to millions and millions of people. And that's what

0:13:21.360 --> 0:13:24.520
<v Speaker 3>our business model allows us to do and actually necessitates

0:13:24.520 --> 0:13:26.520
<v Speaker 3>that we do do so we have less.

0:13:26.320 --> 0:13:27.800
<v Speaker 2>Than a minute left with you, And it sounds like

0:13:27.840 --> 0:13:30.040
<v Speaker 2>again there's a lot on the priority list. But I'm wondering,

0:13:30.080 --> 0:13:32.280
<v Speaker 2>when you look out into the future, could you ever

0:13:32.320 --> 0:13:33.720
<v Speaker 2>see taking Vanguard public?

0:13:34.320 --> 0:13:37.920
<v Speaker 3>No, no, no, I would never do it. I don't

0:13:38.040 --> 0:13:41.160
<v Speaker 3>think it's possible. Jack as well as I said the

0:13:41.200 --> 0:13:43.839
<v Speaker 3>original model, And I think one of the geniuses of

0:13:43.880 --> 0:13:46.520
<v Speaker 3>the model, and the reason why the culture and the

0:13:46.559 --> 0:13:49.600
<v Speaker 3>ethos are so real at Vanguard is because of this

0:13:49.679 --> 0:13:52.240
<v Speaker 3>model that we are singularly focused on our clients, because

0:13:52.240 --> 0:13:54.000
<v Speaker 3>our clients are O runners, We have no doubt in

0:13:54.000 --> 0:13:57.439
<v Speaker 3>our minds who we work for. And I think it's

0:13:57.480 --> 0:14:01.600
<v Speaker 3>a great, beautiful, reinforcing kind of mechanism. It still has

0:14:01.640 --> 0:14:04.160
<v Speaker 3>a huge way to go in terms of helping first

0:14:04.200 --> 0:14:08.480
<v Speaker 3>time investors, helping people who want to retire understand how

0:14:08.480 --> 0:14:13.160
<v Speaker 3>they draw down. Uh, and so like yeah, that I

0:14:13.160 --> 0:14:15.800
<v Speaker 3>think is one of the great kind of original genius.

0:14:15.800 --> 0:14:18.360
<v Speaker 4>Would an't I PO be? Wouldn't I PO be counter

0:14:18.480 --> 0:14:19.400
<v Speaker 4>to what Bogel started?

0:14:19.440 --> 0:14:20.080
<v Speaker 1>The front.

0:14:23.280 --> 0:14:25.920
<v Speaker 3>And it would be it would both do those things,

0:14:26.120 --> 0:14:30.280
<v Speaker 3>And I think it's genius. What was originally what was

0:14:30.320 --> 0:14:33.240
<v Speaker 3>originally set out, and so like, yeah, why would you

0:14:33.320 --> 0:14:37.360
<v Speaker 3>change that, particularly because it's a there's a space for

0:14:37.480 --> 0:14:41.200
<v Speaker 3>a firm that clients trust and that knows that we're

0:14:41.280 --> 0:14:44.920
<v Speaker 3>always on their side. We're always kind of reinvesting, whether

0:14:44.960 --> 0:14:48.600
<v Speaker 3>it's in fee reductions, technology improvements on their behalf.

0:14:48.680 --> 0:14:51.080
<v Speaker 4>And want to ask you, as as an outsider coming in,

0:14:51.120 --> 0:14:52.800
<v Speaker 4>do you feel any pressure to do that? As anyone

0:14:52.800 --> 0:14:54.760
<v Speaker 4>said you should I po zero yer.

0:14:55.200 --> 0:14:56.480
<v Speaker 1>All right, that's a good place to leave.

0:14:56.480 --> 0:14:58.680
<v Speaker 2>It's slim. It is great to see you. Really appreciate

0:14:58.720 --> 0:15:01.000
<v Speaker 2>you making the time for weeks into the job. That

0:15:01.080 --> 0:15:03.720
<v Speaker 2>of course is Sali Ramji. He is the CEO of

0:15:03.840 --> 0:15:04.280
<v Speaker 2>Vanguard