1 00:00:02,520 --> 00:00:09,320 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Let's keep this conversation 2 00:00:09,400 --> 00:00:13,240 Speaker 1: going now with Selim Ramji. He is the CEO of Vanguard. Selim, 3 00:00:13,280 --> 00:00:15,640 Speaker 1: it's great to have you with us on our relaunch day. 4 00:00:15,720 --> 00:00:18,080 Speaker 1: Let's start with some news out of you this morning 5 00:00:18,120 --> 00:00:21,640 Speaker 1: that Vanguard unleashing another round of fee cuts. It'll take 6 00:00:21,680 --> 00:00:25,360 Speaker 1: your average asset weighted fee down to six basis points 7 00:00:25,680 --> 00:00:28,440 Speaker 1: from seven basis choints. I'm going to ask you the 8 00:00:28,520 --> 00:00:30,240 Speaker 1: question that I always do, and that is what the 9 00:00:30,280 --> 00:00:34,320 Speaker 1: decision tree looks like between continuing to lower fees versus 10 00:00:34,440 --> 00:00:36,839 Speaker 1: investing some of that money back into the business. 11 00:00:39,000 --> 00:00:40,839 Speaker 2: Well, first of all, it's great to be here, and 12 00:00:40,840 --> 00:00:43,519 Speaker 2: so thank you all for having me. Yeah, it was. 13 00:00:44,240 --> 00:00:47,600 Speaker 2: It was a very unoriginal act from Vanguard because it's 14 00:00:47,640 --> 00:00:50,880 Speaker 2: the by our account, it was the two two hundredth 15 00:00:50,960 --> 00:00:54,120 Speaker 2: time in which we've announced fee cuts since our founding, 16 00:00:54,760 --> 00:00:58,200 Speaker 2: and because of our client ownership structure, Katie, as you know, 17 00:00:59,480 --> 00:01:02,720 Speaker 2: we don't have many outside stockholders or any internal owners, 18 00:01:03,240 --> 00:01:06,440 Speaker 2: and so whenever we generate a surplus like we did 19 00:01:06,480 --> 00:01:10,000 Speaker 2: last year, we're able to do a couple of things. First, 20 00:01:10,080 --> 00:01:14,000 Speaker 2: we're able to invest back into important technologies and important 21 00:01:14,000 --> 00:01:16,679 Speaker 2: things for the long term health of the company. And 22 00:01:16,720 --> 00:01:18,399 Speaker 2: I could talk a little bit more about how we 23 00:01:18,440 --> 00:01:22,480 Speaker 2: did that as well as we're able to give clients 24 00:01:22,560 --> 00:01:25,640 Speaker 2: back a better deal through reduced fees, and that's exactly 25 00:01:25,640 --> 00:01:29,800 Speaker 2: what we announced this morning. But last year's extraordinary growth 26 00:01:29,800 --> 00:01:32,600 Speaker 2: in the markets allowed us to do both, Selim. 27 00:01:32,760 --> 00:01:35,000 Speaker 3: So obviously a lot of the fee cuts were on 28 00:01:35,040 --> 00:01:37,720 Speaker 3: the passive funds and they are, as we say, dirt cheap. 29 00:01:39,120 --> 00:01:41,880 Speaker 3: You guys have been launching nothing but active funds though 30 00:01:41,880 --> 00:01:44,000 Speaker 3: for the past couple of years, and I got to ask, 31 00:01:44,080 --> 00:01:47,080 Speaker 3: you know you are pushing active. You know you're the founder. 32 00:01:47,200 --> 00:01:50,960 Speaker 3: Jack Bogel was pretty savage towards active. How are you 33 00:01:51,040 --> 00:01:54,880 Speaker 3: trying to sell active being known as the passive etfshore. 34 00:01:56,960 --> 00:01:58,800 Speaker 4: Well, there are a couple of things in there. Eric. 35 00:01:58,880 --> 00:02:03,960 Speaker 2: First of all, you know, Bogel's cost matter hypothesis really 36 00:02:04,000 --> 00:02:07,240 Speaker 2: put into the central kind of focus for us that 37 00:02:07,360 --> 00:02:11,040 Speaker 2: it's costs that matter. We run active funds, we run 38 00:02:11,080 --> 00:02:15,079 Speaker 2: index funds, and Bogel launched more active funds during his 39 00:02:15,160 --> 00:02:18,960 Speaker 2: tenure than all of his successors combined. But what we 40 00:02:19,000 --> 00:02:22,360 Speaker 2: really see opportunity in is to be able to help 41 00:02:22,440 --> 00:02:26,359 Speaker 2: investors keep more of what they earn. So we certainly 42 00:02:26,360 --> 00:02:29,880 Speaker 2: see opportunities of that in index and you saw that 43 00:02:30,160 --> 00:02:33,720 Speaker 2: in a large portion of the cost reductions we announced 44 00:02:33,720 --> 00:02:37,120 Speaker 2: today but also last year. But if I can just underscore, 45 00:02:37,320 --> 00:02:41,640 Speaker 2: costs matter in active management as well, and so if 46 00:02:41,680 --> 00:02:44,040 Speaker 2: you just take an example of our fixed income or 47 00:02:44,080 --> 00:02:47,400 Speaker 2: our active fixed income, you know we charge eleven basis 48 00:02:47,440 --> 00:02:51,080 Speaker 2: points for our active fixed income. Eighty eight percent of 49 00:02:51,120 --> 00:02:54,720 Speaker 2: our active fixed income outperforms its peers over a ten 50 00:02:54,800 --> 00:02:55,360 Speaker 2: year period. 51 00:02:55,800 --> 00:02:57,079 Speaker 4: And that's not a coincidence. 52 00:02:57,480 --> 00:02:59,720 Speaker 2: What it means is that because we have a lower 53 00:02:59,760 --> 00:03:03,160 Speaker 2: fee hurdle to overcome, it allows our investors to be 54 00:03:03,280 --> 00:03:06,000 Speaker 2: much more disciplined about the investments that they're making, the 55 00:03:06,120 --> 00:03:09,120 Speaker 2: risks that they're taking, whether it's around credit, whether it's 56 00:03:09,160 --> 00:03:09,840 Speaker 2: around rates. 57 00:03:10,320 --> 00:03:11,919 Speaker 4: And that's how our teams are. 58 00:03:11,760 --> 00:03:14,079 Speaker 2: Able to put up kind of numbers like eighty eight 59 00:03:14,080 --> 00:03:17,560 Speaker 2: percent of performing over a ten year period. And so 60 00:03:17,600 --> 00:03:20,800 Speaker 2: we think the underlying piece is really that costs matter. 61 00:03:21,680 --> 00:03:22,959 Speaker 2: There are a lot of people that come on this 62 00:03:23,040 --> 00:03:25,960 Speaker 2: show that talk about performance, but if you look at 63 00:03:26,040 --> 00:03:29,160 Speaker 2: one of the biggest predictors of long term performance in 64 00:03:29,320 --> 00:03:33,080 Speaker 2: active management as well as an index management, it really 65 00:03:33,120 --> 00:03:35,920 Speaker 2: is about the cost you charge, and bo Will had 66 00:03:35,960 --> 00:03:39,320 Speaker 2: a great line which I'll repeat, which is that in investing, 67 00:03:40,080 --> 00:03:42,640 Speaker 2: you know, you get what you don't pay for. And 68 00:03:42,680 --> 00:03:44,720 Speaker 2: that's been true and active, and that's been true an Index, 69 00:03:44,880 --> 00:03:47,560 Speaker 2: and it's something that we believe really quite firmly or 70 00:03:47,560 --> 00:03:48,160 Speaker 2: at Vanguard. 71 00:03:48,560 --> 00:03:53,200 Speaker 5: So cost matter, but service matters as well. And Jeff Tomasso, 72 00:03:53,320 --> 00:03:56,280 Speaker 5: who is editor of the independent Vanguard Advisor, has written 73 00:03:56,320 --> 00:04:00,840 Speaker 5: that sure, and many Vanguard investors would happily take the 74 00:04:01,720 --> 00:04:04,280 Speaker 5: fee reduction that you have just announced today, but they'd 75 00:04:04,280 --> 00:04:07,200 Speaker 5: also happily let Vanguard keep that extra basis point if 76 00:04:07,240 --> 00:04:11,720 Speaker 5: it meant better technology and better service, specifically technology and 77 00:04:12,080 --> 00:04:18,400 Speaker 5: the ability to transact easily, smoothly, flawlessly on the brokerage platform. 78 00:04:18,600 --> 00:04:19,600 Speaker 5: How do you respond to that? 79 00:04:21,560 --> 00:04:24,760 Speaker 2: Yeah, I think the good thing about last year's positive 80 00:04:24,760 --> 00:04:27,320 Speaker 2: resultant for clients is that we've been able to invest 81 00:04:27,400 --> 00:04:32,120 Speaker 2: behind both. So alongside the fee reductions, we're also increasing 82 00:04:32,120 --> 00:04:34,960 Speaker 2: our investments back in our client and our client service 83 00:04:35,000 --> 00:04:38,200 Speaker 2: by more than half. Last year, JD Powers rated as 84 00:04:38,279 --> 00:04:42,800 Speaker 2: number one iny client satisfaction this year. We have a 85 00:04:42,839 --> 00:04:46,359 Speaker 2: new website and digital design plan that we're going to 86 00:04:46,360 --> 00:04:49,039 Speaker 2: be launching later this year, and we have a whole 87 00:04:49,120 --> 00:04:52,080 Speaker 2: series of initiatives underway in terms of the applications of 88 00:04:52,160 --> 00:04:56,039 Speaker 2: artificial intelligence to help make our client experience even better, 89 00:04:56,160 --> 00:04:59,320 Speaker 2: even more personalized. So, Scarlett, and answer to your question, 90 00:04:59,600 --> 00:05:02,240 Speaker 2: we're able to do both. We're able to make significant 91 00:05:02,480 --> 00:05:05,880 Speaker 2: investments back in our client experience, back in our technology, 92 00:05:06,560 --> 00:05:09,520 Speaker 2: and we're able to make sure that from a fee perspective, 93 00:05:09,880 --> 00:05:12,440 Speaker 2: clients are also getting a really fair deal, whether it's 94 00:05:12,480 --> 00:05:14,680 Speaker 2: an active management or an index management. 95 00:05:15,279 --> 00:05:17,680 Speaker 1: And on the point about technology, I mean, it's a 96 00:05:17,680 --> 00:05:20,000 Speaker 1: good reminder that you don't just put out funds, you 97 00:05:20,000 --> 00:05:22,480 Speaker 1: also have a brokerage platform as well. And with that 98 00:05:22,600 --> 00:05:24,599 Speaker 1: in Mindselm, I do want to ask you about a 99 00:05:24,680 --> 00:05:28,560 Speaker 1: Bloomberg News scoop from last week that the US federal 100 00:05:28,600 --> 00:05:32,920 Speaker 1: government is considering handing Robinhood a key role in overseeing 101 00:05:33,360 --> 00:05:36,960 Speaker 1: the new Trump accounts that it's creating for children. According 102 00:05:37,000 --> 00:05:41,279 Speaker 1: to Bloomberg's reporting, some of the country's largest brokerages, including 103 00:05:41,279 --> 00:05:44,800 Speaker 1: Fidelity and including yourself, you haven't so far been on 104 00:05:44,839 --> 00:05:47,640 Speaker 1: the lists of candidates considered, So I'd like to ask 105 00:05:47,720 --> 00:05:50,599 Speaker 1: you have you been in contact with the Trump administration 106 00:05:50,720 --> 00:05:53,919 Speaker 1: about potentially the brokerage handling some of those Trump accounts. 107 00:05:55,839 --> 00:05:57,720 Speaker 2: Well, I'm not going to get into the details of 108 00:05:57,800 --> 00:06:00,880 Speaker 2: our discussions with the federal government. I will say the 109 00:06:00,960 --> 00:06:03,599 Speaker 2: concept behind the Trump accounts, I think is a fabulous 110 00:06:03,680 --> 00:06:06,599 Speaker 2: concept because what it does is that it helps people 111 00:06:06,720 --> 00:06:09,679 Speaker 2: invest early, in this case, right from when they're born. 112 00:06:10,320 --> 00:06:12,480 Speaker 2: It does it in a low cost way because the 113 00:06:12,480 --> 00:06:16,000 Speaker 2: fees are capped to a low cost level, and the 114 00:06:16,080 --> 00:06:20,120 Speaker 2: underlying ethos is a diversified, broad based set of indices. 115 00:06:20,600 --> 00:06:22,760 Speaker 2: And as we look at the best ways in which 116 00:06:22,760 --> 00:06:26,440 Speaker 2: to create long term wealth for Americans, this has really 117 00:06:26,440 --> 00:06:28,960 Speaker 2: been something that Vanguard's been talking about for a very 118 00:06:29,000 --> 00:06:34,640 Speaker 2: long time. Keep cost low, stay diversified, and invest for 119 00:06:34,680 --> 00:06:37,240 Speaker 2: the long term. And so I think this is another 120 00:06:37,279 --> 00:06:43,320 Speaker 2: innovation in being able to help with that, and we're 121 00:06:43,440 --> 00:06:45,240 Speaker 2: supporting that in any way that we can. But I 122 00:06:45,240 --> 00:06:47,840 Speaker 2: think that the underlying ethos is a very positive one. 123 00:06:48,400 --> 00:06:51,640 Speaker 3: Selim, I want to talk about international So Vanguard dominates 124 00:06:51,640 --> 00:06:54,360 Speaker 3: in the US. You're twenty eight percent of all fund 125 00:06:54,400 --> 00:06:57,040 Speaker 3: assets here, double the old high water mark. You want 126 00:06:57,040 --> 00:06:58,960 Speaker 3: to expand internationally. You said you want to go from 127 00:06:59,000 --> 00:07:03,000 Speaker 3: seventeen million clients to forty million in five years. I 128 00:07:03,040 --> 00:07:06,839 Speaker 3: have found internationals way harder because people generally don't worry 129 00:07:06,880 --> 00:07:08,720 Speaker 3: about retirement as much as they do here, so they're 130 00:07:08,760 --> 00:07:11,400 Speaker 3: not as good as shopping for funds. And you don't 131 00:07:11,400 --> 00:07:14,120 Speaker 3: have fee based advisors. It's more brokers and distribution. How 132 00:07:14,160 --> 00:07:15,600 Speaker 3: do you overcome those two issues. 133 00:07:17,520 --> 00:07:21,000 Speaker 2: Well, you know, international is, in the scheme of it, 134 00:07:21,080 --> 00:07:24,360 Speaker 2: a relatively small part of Vanguard, but it's an incredibly 135 00:07:24,400 --> 00:07:27,960 Speaker 2: fast growing part. And we're principally based in markets like 136 00:07:28,000 --> 00:07:31,800 Speaker 2: the UK, like Canada, like Australia, And what we found 137 00:07:31,880 --> 00:07:36,520 Speaker 2: there is that most investors just find investing too complicated, 138 00:07:36,600 --> 00:07:39,760 Speaker 2: they find it too costly, and there aren't kind of 139 00:07:39,760 --> 00:07:42,000 Speaker 2: platforms like there are here in the United States to 140 00:07:42,840 --> 00:07:45,640 Speaker 2: enable them to access it. So in many cases, what 141 00:07:45,680 --> 00:07:49,240 Speaker 2: we're helping investors in those markets do is be able 142 00:07:49,280 --> 00:07:53,400 Speaker 2: to move from being savers, often in bank deposits, to 143 00:07:53,440 --> 00:07:55,920 Speaker 2: be able to be investors for the first time. And 144 00:07:55,960 --> 00:07:59,160 Speaker 2: that mantra of keeping costs slow, of keeping it simple, 145 00:08:00,040 --> 00:08:02,720 Speaker 2: and of making it easy for people to access seems 146 00:08:02,760 --> 00:08:06,200 Speaker 2: like it's working. And there's a growing population in many 147 00:08:06,240 --> 00:08:10,120 Speaker 2: of those markets of fee based advisors independent fee based advisors, 148 00:08:10,880 --> 00:08:13,640 Speaker 2: where Vanguard investors are doing quite well in terms of 149 00:08:14,320 --> 00:08:17,080 Speaker 2: teaming up with them to be able to help them 150 00:08:17,080 --> 00:08:21,280 Speaker 2: build kind of even better, even more diversified long term portfolios. 151 00:08:21,920 --> 00:08:24,560 Speaker 5: Selim, I want to end with getting your thoughts on 152 00:08:24,880 --> 00:08:29,720 Speaker 5: the new FED chair nominee Kevin Walsh. With Vanguard the 153 00:08:29,760 --> 00:08:33,440 Speaker 5: single biggest shareholder and so many US listed companies, what 154 00:08:33,559 --> 00:08:36,600 Speaker 5: is your reaction to mister Walsh as to the potential 155 00:08:36,679 --> 00:08:37,199 Speaker 5: new FED chair. 156 00:08:39,240 --> 00:08:42,560 Speaker 2: Yeah, Look, I think the most important thing is the 157 00:08:42,559 --> 00:08:46,480 Speaker 2: FED continues to stay focused on its dual mission. I know, Kevin, 158 00:08:46,520 --> 00:08:49,560 Speaker 2: I think is a great choice, But the broader piece 159 00:08:49,880 --> 00:08:52,920 Speaker 2: is really about making sure kind of the Federal Reserve 160 00:08:53,000 --> 00:08:56,720 Speaker 2: has done what it's done, I think, so effectively for generations. 161 00:08:57,760 --> 00:08:58,320 Speaker 4: Of people. 162 00:08:58,679 --> 00:09:01,880 Speaker 2: So I think that's going to continue, and I think 163 00:09:01,880 --> 00:09:04,679 Speaker 2: it's going to serve investor as well for the long term. 164 00:09:04,960 --> 00:09:06,960 Speaker 1: All right, Selim, that's a good place to leave it. 165 00:09:07,040 --> 00:09:09,400 Speaker 1: Really appreciate your time today. Big day for you with 166 00:09:09,440 --> 00:09:11,840 Speaker 1: the fee cuts, big day for us with the relaunch, 167 00:09:11,920 --> 00:09:16,400 Speaker 1: So really appreciate it. That is Vanguard's CEO strategy. Thank you.