1 00:00:02,000 --> 00:00:07,120 Speaker 1: This is Masters in Business with very Results on Bloomberg Radio. 2 00:00:08,560 --> 00:00:13,039 Speaker 1: I am super excited about this week's Masters in Business 3 00:00:13,360 --> 00:00:18,320 Speaker 1: Live with Vanguard Group CEO Tim Buckley. If you recall 4 00:00:18,480 --> 00:00:22,520 Speaker 1: pre pandemic, we had started doing these live events. The 5 00:00:22,560 --> 00:00:25,959 Speaker 1: first one was with Ray Dalio, and then we didn't 6 00:00:25,960 --> 00:00:29,920 Speaker 1: one with Howard Marks, and then everything closed down and 7 00:00:29,960 --> 00:00:33,040 Speaker 1: we kind of put it on hiatus. Well they're back. 8 00:00:33,120 --> 00:00:36,440 Speaker 1: Masters in Business Live is back, and this one with 9 00:00:36,640 --> 00:00:41,560 Speaker 1: the CEO of the Vanguard Group was really quite wonderful. 10 00:00:41,680 --> 00:00:44,920 Speaker 1: It was at the big E T F Exchange conference 11 00:00:45,440 --> 00:00:49,159 Speaker 1: in Miami that was held last weekend. I got to 12 00:00:49,240 --> 00:00:53,279 Speaker 1: sit with Tim for about an hour uh and ran 13 00:00:53,360 --> 00:00:56,200 Speaker 1: through about forty five minutes worth of questions, and we 14 00:00:56,240 --> 00:00:59,880 Speaker 1: took some questions from the audience. If you remember about 15 00:01:00,120 --> 00:01:02,920 Speaker 1: five years ago when it was announced that he was 16 00:01:02,920 --> 00:01:07,880 Speaker 1: going to be CEO, we did ten questions with Tim Buckley, 17 00:01:07,920 --> 00:01:11,720 Speaker 1: and I'll link to that in the description of the podcast. 18 00:01:12,360 --> 00:01:16,400 Speaker 1: This completes my set. I have now interviewed all four 19 00:01:16,640 --> 00:01:21,000 Speaker 1: Vanguard CEOs from Masters in Business Jack Bogel, Jack Brennan, 20 00:01:21,040 --> 00:01:26,000 Speaker 1: Bill McNab and now Tim Buckley. Really quite a fascinating conversation. 21 00:01:26,040 --> 00:01:30,800 Speaker 1: A Tour to Force with no further ado. My Masters 22 00:01:30,800 --> 00:01:37,240 Speaker 1: in Business Live discussion with the Vanguard Group CEO Tim Buckley. 23 00:01:37,520 --> 00:01:40,160 Speaker 1: So let's talk a little bit about what we have 24 00:01:40,240 --> 00:01:44,240 Speaker 1: going on right now. You've been a Vanguard for over 25 00:01:44,440 --> 00:01:50,360 Speaker 1: thirty years, you've been CEO for five years. How's it going. 26 00:01:51,880 --> 00:01:55,160 Speaker 1: It's been a uh, it's been a learning time and 27 00:01:55,240 --> 00:01:58,320 Speaker 1: it's been a growth time, is what I would what 28 00:01:58,360 --> 00:02:02,600 Speaker 1: I would say, very it's been, you know, an incredible opportunity. 29 00:02:02,840 --> 00:02:07,160 Speaker 1: If you think about what Vanguard's all about. UM, we 30 00:02:07,200 --> 00:02:09,280 Speaker 1: sit there each and every day figuring out how do 31 00:02:09,320 --> 00:02:13,000 Speaker 1: we help people retire, better, put their kids through college, um, 32 00:02:13,040 --> 00:02:16,240 Speaker 1: afford that dream home. And they've been a I think 33 00:02:16,280 --> 00:02:18,840 Speaker 1: everyone in the audience agree, it's been a it's been 34 00:02:18,880 --> 00:02:22,680 Speaker 1: a tough few years for investors and that's the time 35 00:02:22,720 --> 00:02:24,960 Speaker 1: to rally, and certainly for us, that has been a 36 00:02:25,000 --> 00:02:27,280 Speaker 1: time to show up and answer the bell for our clients. 37 00:02:27,320 --> 00:02:30,280 Speaker 1: And so it's it's been a rewarding time. It might 38 00:02:30,360 --> 00:02:32,560 Speaker 1: seem odd to say that, but a really rewarding time. 39 00:02:33,000 --> 00:02:36,800 Speaker 1: So let's talk a little bit about your unusual career path. 40 00:02:37,400 --> 00:02:42,359 Speaker 1: You come out of Harvard undergraduate and you essentially get 41 00:02:42,440 --> 00:02:45,760 Speaker 1: a job as like a gopher for Jack Bogel. You're 42 00:02:45,800 --> 00:02:50,640 Speaker 1: his Yeah, well it's they it was Lackey to the Lackey. Um, 43 00:02:50,680 --> 00:02:53,360 Speaker 1: it's really that he had already working for Jack, working 44 00:02:53,480 --> 00:02:56,000 Speaker 1: for Jack's guy. Well, I was suppose you're working for him, 45 00:02:56,000 --> 00:02:57,800 Speaker 1: but I really was working for Jim Norris, who was 46 00:02:57,880 --> 00:03:00,680 Speaker 1: his his assistant. We worked together for Jack Bogel, I 47 00:03:00,680 --> 00:03:03,480 Speaker 1: reported to Jack Bogel. Um. I found out later I 48 00:03:03,520 --> 00:03:07,600 Speaker 1: had the title of chairman's intern. And uh, I found 49 00:03:07,639 --> 00:03:09,600 Speaker 1: out I had that title because they weren't sure I 50 00:03:09,600 --> 00:03:11,320 Speaker 1: was going to make it through the summer. So I 51 00:03:11,639 --> 00:03:13,840 Speaker 1: come out of undergrad as chairman's intern. I thought that 52 00:03:13,880 --> 00:03:16,520 Speaker 1: was my title for good. After the summer they changed. 53 00:03:16,600 --> 00:03:18,520 Speaker 1: I found out, well that you made it. Oh, you 54 00:03:18,560 --> 00:03:20,680 Speaker 1: have a job. You have a job. I didn't know 55 00:03:20,720 --> 00:03:22,680 Speaker 1: what was going to happen if the intern part didn't 56 00:03:22,760 --> 00:03:27,240 Speaker 1: work out. Um, but it's a uh finding finding Vanguard. 57 00:03:27,280 --> 00:03:30,840 Speaker 1: I was. I was lucky to find Vanguard. Um. Why well, 58 00:03:31,840 --> 00:03:34,040 Speaker 1: coming out of school and I look, I have a 59 00:03:34,240 --> 00:03:36,640 Speaker 1: My oldest is a is a junior in school now, 60 00:03:36,720 --> 00:03:38,680 Speaker 1: so I'm sure he'll face this. But I was the 61 00:03:39,000 --> 00:03:41,120 Speaker 1: typical senior and I was a little lost coming out 62 00:03:41,160 --> 00:03:44,880 Speaker 1: of school. Um, I'm the son of a heart surgeon, 63 00:03:45,680 --> 00:03:47,720 Speaker 1: and uh I grew up with someone who had a 64 00:03:47,760 --> 00:03:49,880 Speaker 1: ton of purpose in his life. I mean, very like 65 00:03:50,360 --> 00:03:52,520 Speaker 1: saving lives on a daily basis. That gives you a 66 00:03:52,520 --> 00:03:56,760 Speaker 1: little bit of purpose. And I was lost, and he Um, 67 00:03:56,840 --> 00:03:59,640 Speaker 1: I wasn't gonna go into medicine. Look, I didn't have 68 00:04:00,160 --> 00:04:02,920 Speaker 1: the steady hands for it. And uh I didn't have 69 00:04:02,960 --> 00:04:05,960 Speaker 1: the stomach for hospitals. And I love business. I love 70 00:04:06,000 --> 00:04:07,840 Speaker 1: the market, so I want to go that we better struggling, 71 00:04:07,840 --> 00:04:10,680 Speaker 1: I was. I was trying to find a place with 72 00:04:10,720 --> 00:04:14,240 Speaker 1: the same type of purpose and and I was thinking, 73 00:04:14,240 --> 00:04:16,000 Speaker 1: maybe I need to go back into medicine. My father 74 00:04:16,040 --> 00:04:19,320 Speaker 1: said to me at that time, save lives or help 75 00:04:19,360 --> 00:04:22,520 Speaker 1: people live better lives. Anything else in your wasting your time? 76 00:04:23,760 --> 00:04:26,760 Speaker 1: And no, no, but he said, you don't need to 77 00:04:26,800 --> 00:04:28,880 Speaker 1: go into medicine for that. And then he actually suggests 78 00:04:28,880 --> 00:04:31,839 Speaker 1: I go talk to this company, Vanguard. Really, that was 79 00:04:31,880 --> 00:04:34,320 Speaker 1: your father suggest He said, hey, reach out to Vanguard, 80 00:04:34,360 --> 00:04:37,000 Speaker 1: and and uh I was fortunate to come down and 81 00:04:37,120 --> 00:04:41,200 Speaker 1: interview with Vanguard, and look, I love at first night. 82 00:04:41,320 --> 00:04:43,359 Speaker 1: I mean, it was a company owned by its climate 83 00:04:43,400 --> 00:04:46,960 Speaker 1: clients with a clear purpose, um, to really give them 84 00:04:47,000 --> 00:04:49,680 Speaker 1: a fair shake and and provide them with a better future. 85 00:04:49,720 --> 00:04:53,280 Speaker 1: And thirty two, late thirty two years later, here we sit. 86 00:04:53,680 --> 00:04:56,880 Speaker 1: What was it like working for Jack Bogel right out 87 00:04:56,880 --> 00:05:00,159 Speaker 1: of school? I mean that had to be a little well, you' lee, 88 00:05:00,560 --> 00:05:03,400 Speaker 1: Vanguard wasn't the Vanguard we know today thirty years ago, 89 00:05:04,000 --> 00:05:06,760 Speaker 1: but it had to be a little intimidating. Well maybe 90 00:05:06,760 --> 00:05:08,440 Speaker 1: I should have said I was both lost and a 91 00:05:08,520 --> 00:05:11,640 Speaker 1: little clueless. I mean, remember this is you're coming out 92 00:05:11,640 --> 00:05:14,720 Speaker 1: of the super Internet. I mean, Vanguard's really no one 93 00:05:14,720 --> 00:05:17,640 Speaker 1: knows who Vanguard is. Um, so my friends they thought 94 00:05:17,720 --> 00:05:21,839 Speaker 1: Vanguard was an airline um, which the second yeah, a 95 00:05:21,880 --> 00:05:25,760 Speaker 1: second guess would have been a healthcare company. Um. And 96 00:05:26,160 --> 00:05:27,720 Speaker 1: you know I used to have to describe it as 97 00:05:27,880 --> 00:05:31,440 Speaker 1: as uh the Pennsylvania version of our Boston competitor. So 98 00:05:31,640 --> 00:05:37,720 Speaker 1: um and uh so people didn't know Vanguard wasn't the 99 00:05:37,839 --> 00:05:39,880 Speaker 1: firm it is today. And then Jack Bogel, like he 100 00:05:40,080 --> 00:05:43,480 Speaker 1: wasn't the household name. So I didn't show up intimidated. Um. 101 00:05:43,520 --> 00:05:46,479 Speaker 1: I showed up curious. And you know what he's uh, 102 00:05:46,560 --> 00:05:49,120 Speaker 1: I asked a ton of questions and he's a guy 103 00:05:49,200 --> 00:05:52,680 Speaker 1: that look wanted to teach a lot, and if you 104 00:05:52,680 --> 00:05:56,560 Speaker 1: were willing to listen, you'd learn a lot. So Bill 105 00:05:56,640 --> 00:06:01,359 Speaker 1: McNab was the CEO during the Finance ancial crisis, and 106 00:06:01,440 --> 00:06:03,800 Speaker 1: when I spoke with him, he talked about how that 107 00:06:04,320 --> 00:06:09,159 Speaker 1: created both challenges and opportunities for Vanguard. You're the CEO 108 00:06:09,440 --> 00:06:14,200 Speaker 1: during the pandemic, COVID lockdown. What sort of challenge couple 109 00:06:14,240 --> 00:06:18,480 Speaker 1: of bear markets? We right, let's see uh inflation at 110 00:06:18,480 --> 00:06:21,640 Speaker 1: a forty year high, tightest labor tas labor market of 111 00:06:21,680 --> 00:06:24,800 Speaker 1: our lifetimes. But yeah, other than that's been easy, easy times. 112 00:06:24,880 --> 00:06:28,919 Speaker 1: So so what sort of challenges and opportunities have the 113 00:06:28,960 --> 00:06:32,080 Speaker 1: past five years presented? Yeah, I think there's one of 114 00:06:32,360 --> 00:06:34,919 Speaker 1: a huge, a huge lesson for us, and it's brought 115 00:06:34,920 --> 00:06:38,600 Speaker 1: out in our our leadership team, the great leaders You've 116 00:06:38,640 --> 00:06:42,360 Speaker 1: got to embrace your reality. You can't be an optimist 117 00:06:42,560 --> 00:06:45,320 Speaker 1: or a pestimist. You just have to embrace the facts 118 00:06:45,320 --> 00:06:48,799 Speaker 1: in front of you, brutal as they may be. And 119 00:06:48,920 --> 00:06:51,160 Speaker 1: that's what we learned throughout this and you have to 120 00:06:51,800 --> 00:06:55,520 Speaker 1: plot the best path forward. And maybe if you human humor, 121 00:06:55,560 --> 00:06:57,440 Speaker 1: maybe we'll go back to kind of the first time 122 00:06:57,680 --> 00:06:59,760 Speaker 1: we talked, and you go back to that time, because 123 00:07:00,120 --> 00:07:03,480 Speaker 1: Banguard had been gone through a decade of incredible success, 124 00:07:04,040 --> 00:07:07,120 Speaker 1: great growth, and look, our fund performance had been top 125 00:07:07,200 --> 00:07:09,920 Speaker 1: notch if you went back to that time, and there 126 00:07:10,000 --> 00:07:13,480 Speaker 1: our net promoter scores were really high, UM cash flow 127 00:07:14,080 --> 00:07:17,960 Speaker 1: outpacing the industry. So all signs were great. We had 128 00:07:17,960 --> 00:07:20,600 Speaker 1: a wonderful opportunity in front of us. We looked at UM, 129 00:07:22,080 --> 00:07:24,880 Speaker 1: we looked at a client success and we saw it 130 00:07:24,920 --> 00:07:27,400 Speaker 1: as hey, it was defined by the funds they hold it, 131 00:07:27,480 --> 00:07:29,880 Speaker 1: but also by the advice they got on those funds. 132 00:07:30,840 --> 00:07:33,800 Speaker 1: And for forty years, like we've been hammering, hammering away 133 00:07:33,840 --> 00:07:35,720 Speaker 1: at the fund side that we had lowered the costs 134 00:07:35,760 --> 00:07:40,040 Speaker 1: of investing and we had improved the quality of those 135 00:07:40,080 --> 00:07:42,080 Speaker 1: funds and you know, dary I say, we made a 136 00:07:42,240 --> 00:07:45,240 Speaker 1: change in the industry. Well, we started to think that 137 00:07:45,320 --> 00:07:47,080 Speaker 1: maybe we could actually do that on the advice side, 138 00:07:47,080 --> 00:07:48,800 Speaker 1: maybe we could be the vanguard of advice. Because we 139 00:07:48,840 --> 00:07:52,160 Speaker 1: had this this PAS group that Personal Advisor Services that 140 00:07:52,240 --> 00:07:55,440 Speaker 1: had some early success. So we set and said, okay, 141 00:07:55,840 --> 00:07:58,360 Speaker 1: like couldy build another engine of value engine one being 142 00:07:58,520 --> 00:08:01,680 Speaker 1: funds and engine to being advice. And if we could 143 00:08:01,720 --> 00:08:05,240 Speaker 1: do that, that would be wonderful. So right before doing that. 144 00:08:05,400 --> 00:08:07,800 Speaker 1: Right after we talked, we looked at h we have 145 00:08:08,040 --> 00:08:11,200 Speaker 1: like looking at our competitive position, do it constantly and 146 00:08:11,440 --> 00:08:14,600 Speaker 1: we call it, hey, let's embrace the brutal facts. We 147 00:08:14,720 --> 00:08:18,840 Speaker 1: looked at the foundation of our position and it wasn't 148 00:08:18,840 --> 00:08:22,480 Speaker 1: as good as we thought of us. In fact, we're 149 00:08:22,520 --> 00:08:25,040 Speaker 1: low cost leader, but at that time we weren't. If 150 00:08:25,040 --> 00:08:27,720 Speaker 1: you looked at our e t F assets UM at 151 00:08:27,760 --> 00:08:29,960 Speaker 1: that time, less than half of them were actually would 152 00:08:29,960 --> 00:08:32,800 Speaker 1: have been considered lowest cost in the industry. Our NPS 153 00:08:32,960 --> 00:08:36,040 Speaker 1: scores are high, but they were declining UM because of 154 00:08:36,080 --> 00:08:40,640 Speaker 1: an antiquated digital experience. We were losing market share in 155 00:08:40,640 --> 00:08:43,600 Speaker 1: the critical retirement, the four one K business UM. Internationally, 156 00:08:43,640 --> 00:08:47,800 Speaker 1: we were spread too thin. We're serving clients that institutional clients, 157 00:08:47,840 --> 00:08:49,880 Speaker 1: and that weren't core to who we are. We're all 158 00:08:49,880 --> 00:08:52,960 Speaker 1: about the individual investor. So looked at those said well, 159 00:08:52,960 --> 00:08:54,640 Speaker 1: we've got to address those and we want to build 160 00:08:54,679 --> 00:08:59,280 Speaker 1: this new engine of value with advice. Great awesome. That 161 00:08:59,320 --> 00:09:03,520 Speaker 1: seemed like enough off and then COVID hit. We had 162 00:09:03,559 --> 00:09:06,240 Speaker 1: a choice to make at that point, and the choice 163 00:09:06,440 --> 00:09:10,880 Speaker 1: was do we just delay everything and play defense, or 164 00:09:11,360 --> 00:09:13,959 Speaker 1: do we just add a pandemic to our list of 165 00:09:14,000 --> 00:09:17,199 Speaker 1: brutal facts. We chose the ladder and said this is 166 00:09:17,280 --> 00:09:19,000 Speaker 1: we have no idea how long this is going to 167 00:09:19,080 --> 00:09:21,679 Speaker 1: go on, but we owe it to our clients to 168 00:09:22,320 --> 00:09:24,679 Speaker 1: emerge from it stronger and better than when we went in. 169 00:09:25,240 --> 00:09:28,120 Speaker 1: And we had we prioritize all our strategic plans. We 170 00:09:28,360 --> 00:09:30,160 Speaker 1: had to figure out how to get them done while 171 00:09:30,200 --> 00:09:33,839 Speaker 1: people were remote forces to make some tough choices and 172 00:09:34,200 --> 00:09:37,120 Speaker 1: in that time and some big investments, whether we're building 173 00:09:37,160 --> 00:09:40,439 Speaker 1: out our advice capabilities and building virtual teams to do it, 174 00:09:41,320 --> 00:09:45,439 Speaker 1: were you know, tough choices. In our retirement business, we 175 00:09:45,520 --> 00:09:48,440 Speaker 1: had to rebuild it soup to nuts and we partnered 176 00:09:48,480 --> 00:09:51,880 Speaker 1: with Emphasis, but that meant went and worked for Emphasis, 177 00:09:51,960 --> 00:09:55,120 Speaker 1: but it meant we could triple the resources um that 178 00:09:55,280 --> 00:09:59,120 Speaker 1: we had, you know, focused on our retirement business. We 179 00:09:59,240 --> 00:10:02,599 Speaker 1: looked in our our personal investor, our direct business and 180 00:10:02,640 --> 00:10:04,839 Speaker 1: said we have to organize it differently, and we have 181 00:10:04,920 --> 00:10:10,199 Speaker 1: to modernize that digital experience. And a tough decision overseas 182 00:10:11,120 --> 00:10:14,120 Speaker 1: basically pulled back from ation. It was all institutional clients 183 00:10:14,400 --> 00:10:17,560 Speaker 1: and we gave back up hundred billion in assets, which 184 00:10:17,880 --> 00:10:22,599 Speaker 1: most people think it's crazy, Billow. They were all institutional 185 00:10:22,679 --> 00:10:25,880 Speaker 1: separate accounts. That's that's not what we do here and 186 00:10:26,840 --> 00:10:29,760 Speaker 1: gave it back to them, and that's not not where 187 00:10:29,840 --> 00:10:32,640 Speaker 1: will excel. And it's just not what makes us take 188 00:10:32,720 --> 00:10:34,920 Speaker 1: a little bit tangent here, Like we were managing money 189 00:10:34,960 --> 00:10:37,480 Speaker 1: for people for basis point and a half and then 190 00:10:37,520 --> 00:10:41,160 Speaker 1: they were going ahead and charging seventy basis points. That's 191 00:10:41,160 --> 00:10:43,120 Speaker 1: not why we get out of bed, right. We want 192 00:10:43,160 --> 00:10:45,960 Speaker 1: to see that an investor have a better return as 193 00:10:46,000 --> 00:10:49,000 Speaker 1: a result. So maybe those tough choices and and uh, 194 00:10:49,400 --> 00:10:51,280 Speaker 1: you know, five years later, we're sitting a lot better off. 195 00:10:51,640 --> 00:10:55,760 Speaker 1: Whatever you identified as a structural fault line. How far 196 00:10:55,840 --> 00:10:58,679 Speaker 1: along do you feel you are on the process of hey, 197 00:10:58,800 --> 00:11:00,840 Speaker 1: we want to we're here, we want to end up there? 198 00:11:02,000 --> 00:11:04,080 Speaker 1: Are you halfway there? Most of the way there? How 199 00:11:04,200 --> 00:11:06,400 Speaker 1: how do you think? And we talked about just getting started, 200 00:11:06,559 --> 00:11:08,040 Speaker 1: but you know, it's one of those things that as 201 00:11:08,040 --> 00:11:09,559 Speaker 1: a leader you don't think about like, well, here's the 202 00:11:09,559 --> 00:11:11,840 Speaker 1: finish line and then I'm done. It's how far can 203 00:11:11,880 --> 00:11:14,439 Speaker 1: you push it and get the next team ready to 204 00:11:14,559 --> 00:11:18,240 Speaker 1: take over and continue that journey? Um. But for us, 205 00:11:18,360 --> 00:11:20,640 Speaker 1: you know, we we measure our success in different ways. 206 00:11:20,679 --> 00:11:22,760 Speaker 1: We measure our success by how are our funds doing 207 00:11:23,040 --> 00:11:25,440 Speaker 1: and we look back long term performance and right now 208 00:11:25,520 --> 00:11:27,960 Speaker 1: you look back over ten years and our active funds, 209 00:11:28,760 --> 00:11:32,680 Speaker 1: and we're out performing their competitive group averages sixty eight 210 00:11:32,760 --> 00:11:35,439 Speaker 1: percent or out performing their their benchmarks. If you look 211 00:11:35,480 --> 00:11:39,360 Speaker 1: at that et F Low Cost Leadership space, UM, there's 212 00:11:39,640 --> 00:11:42,040 Speaker 1: six percent of our assets would now be considered lowest costs. 213 00:11:42,080 --> 00:11:44,360 Speaker 1: So we can actually have that low cost title back 214 00:11:44,880 --> 00:11:48,000 Speaker 1: if you will, UM, if you if you kind of 215 00:11:48,040 --> 00:11:52,480 Speaker 1: continue on to that advice journey that we had for us, 216 00:11:52,559 --> 00:11:54,240 Speaker 1: it was just thankful the last time we talked to 217 00:11:54,240 --> 00:11:57,080 Speaker 1: me about eighty billion advised assets that sits at about 218 00:11:57,120 --> 00:12:01,080 Speaker 1: three out of seven point two trillion at seven point 219 00:12:01,120 --> 00:12:05,360 Speaker 1: two trillion, but it's growing it fifteen a year UM. 220 00:12:05,520 --> 00:12:08,000 Speaker 1: And they're they're six hundred fifty thousand clients that at 221 00:12:08,040 --> 00:12:11,320 Speaker 1: the bottom of the market last year and we're still 222 00:12:11,440 --> 00:12:14,400 Speaker 1: right on target with their goals. And for advice for 223 00:12:14,559 --> 00:12:17,240 Speaker 1: us too, is also a matter of you think about advisors, 224 00:12:17,559 --> 00:12:20,079 Speaker 1: how are we using model portfolios to make their result 225 00:12:20,200 --> 00:12:23,319 Speaker 1: results better? Um? Are we making sure that they have 226 00:12:23,480 --> 00:12:26,240 Speaker 1: the right products from Vanguard to actually comple what they do? 227 00:12:26,400 --> 00:12:28,719 Speaker 1: The right practices being in the advice business ourselves. We 228 00:12:28,760 --> 00:12:33,040 Speaker 1: can help improve their practices, justify the advice that they give, UM, 229 00:12:33,200 --> 00:12:36,400 Speaker 1: justify the fee, and you know, just simple things like hey, 230 00:12:36,559 --> 00:12:38,679 Speaker 1: the value of tax loss harvesting. How do you make 231 00:12:38,760 --> 00:12:41,560 Speaker 1: that that apparent to people? UM, something that for us 232 00:12:41,760 --> 00:12:45,600 Speaker 1: save our clients about three million or four months that alone, 233 00:12:46,280 --> 00:12:48,559 Speaker 1: and our digital experience. You asked about that that one. 234 00:12:48,600 --> 00:12:50,160 Speaker 1: I can tell you how far along we are in 235 00:12:51,040 --> 00:12:54,199 Speaker 1: modernizing that we're about seventy the way and doing that 236 00:12:54,360 --> 00:12:58,160 Speaker 1: and so great change. So so you mentioned the pandemic 237 00:12:58,320 --> 00:13:02,520 Speaker 1: was a little bit of the challenge. Everybody is working 238 00:13:02,640 --> 00:13:06,079 Speaker 1: remote for a long time. How do you maintain corporate 239 00:13:06,160 --> 00:13:11,040 Speaker 1: culture with twenty thousand, eighteen thousand employees when the vast 240 00:13:11,120 --> 00:13:13,880 Speaker 1: majority of them are not coming into the office. I 241 00:13:13,920 --> 00:13:15,960 Speaker 1: think it's a it's tough for every company out there, 242 00:13:16,240 --> 00:13:18,560 Speaker 1: UM when you've hired thousands of people who have never 243 00:13:18,720 --> 00:13:21,719 Speaker 1: set foot on a campus and you often model the 244 00:13:21,800 --> 00:13:24,800 Speaker 1: behavior and the culture UM. And so the first thing 245 00:13:24,880 --> 00:13:26,880 Speaker 1: for us is it's it's how it's in the leaders 246 00:13:26,920 --> 00:13:30,520 Speaker 1: that you you actually select, and that's so crucial for us. 247 00:13:30,559 --> 00:13:32,760 Speaker 1: So in our screening, you get aught interview questions. We're 248 00:13:32,760 --> 00:13:35,280 Speaker 1: trying to figure out are you purpose driven? Like are 249 00:13:35,360 --> 00:13:37,960 Speaker 1: you actually someone who's gonna be purpose driven? But then 250 00:13:38,040 --> 00:13:40,240 Speaker 1: we have something that I learned from one of my 251 00:13:40,360 --> 00:13:44,199 Speaker 1: mentors that you've talked with, Jack Brennan before, a former 252 00:13:44,280 --> 00:13:48,839 Speaker 1: chairman CEO UM, and he always established this early on 253 00:13:48,960 --> 00:13:53,640 Speaker 1: in the culture that it would be client, crew, self, 254 00:13:53,840 --> 00:13:56,760 Speaker 1: always in that order. And a lot of companies will 255 00:13:56,800 --> 00:13:59,280 Speaker 1: say that like, it will put the client first, but 256 00:14:00,280 --> 00:14:02,600 Speaker 1: we don't have another choice like our client's own us. 257 00:14:02,640 --> 00:14:05,679 Speaker 1: We don't have anyone else to serve. And then during 258 00:14:05,720 --> 00:14:08,000 Speaker 1: the pandemic and being cleared, us like, yeah, but the 259 00:14:08,040 --> 00:14:09,720 Speaker 1: only way we can mess that up is if people 260 00:14:09,760 --> 00:14:13,040 Speaker 1: start putting themselves itselves in front of the client. And 261 00:14:13,160 --> 00:14:14,880 Speaker 1: so the leaders there we have to say, okay, we 262 00:14:14,960 --> 00:14:17,559 Speaker 1: have to enforce it. It's always the client first. And 263 00:14:17,640 --> 00:14:20,880 Speaker 1: as a leader, then that means that you have to 264 00:14:20,920 --> 00:14:23,920 Speaker 1: take care of the crew before yourself. So we emphasize 265 00:14:23,960 --> 00:14:26,560 Speaker 1: that wholy that leaders are going to actually make sure 266 00:14:26,640 --> 00:14:29,640 Speaker 1: that crew know that they care more about their success 267 00:14:30,000 --> 00:14:33,440 Speaker 1: than their own. So for me, it's it's more important 268 00:14:33,440 --> 00:14:37,400 Speaker 1: to see my team's success than Tim Buckley's success. And 269 00:14:37,480 --> 00:14:39,760 Speaker 1: it's amazing how that helps build a team if you're 270 00:14:39,800 --> 00:14:42,880 Speaker 1: true behind it, and it builds the collaboration on that team, 271 00:14:43,440 --> 00:14:45,560 Speaker 1: and then down the road is somewhere where you put yourself. 272 00:14:45,640 --> 00:14:47,640 Speaker 1: But that is a cord to our culture. We're able 273 00:14:47,680 --> 00:14:49,640 Speaker 1: to do it in a virtual world. But now that 274 00:14:49,720 --> 00:14:53,040 Speaker 1: people are basically back for three days a week, it's 275 00:14:53,040 --> 00:14:56,440 Speaker 1: a lot easier to reinforce it um and people to 276 00:14:56,520 --> 00:14:59,360 Speaker 1: see it when they're actually face to face. So back 277 00:14:59,440 --> 00:15:03,640 Speaker 1: three days a week, um home optional two days a week. 278 00:15:04,280 --> 00:15:07,800 Speaker 1: How does that structure change what you expect people to 279 00:15:07,920 --> 00:15:10,000 Speaker 1: do when they actually come to the office. And so 280 00:15:10,040 --> 00:15:11,560 Speaker 1: I'm sure a lot of people have been through this 281 00:15:11,640 --> 00:15:13,280 Speaker 1: where they come into the office, and we had it 282 00:15:13,360 --> 00:15:15,560 Speaker 1: at first when people came into the office and they 283 00:15:15,600 --> 00:15:18,000 Speaker 1: were on teams when they're in the office. So what 284 00:15:18,080 --> 00:15:21,000 Speaker 1: we're finding we're finally like, okay, there, they come into 285 00:15:21,040 --> 00:15:22,680 Speaker 1: the office, they say hello to each other, they sit 286 00:15:22,680 --> 00:15:24,960 Speaker 1: down their desk, and they go on video all day long. Well, 287 00:15:25,000 --> 00:15:28,400 Speaker 1: that defeats the purpose of actually those serendipitous moments you're 288 00:15:28,400 --> 00:15:30,520 Speaker 1: bumping into each other, trading ideas, you're sitting in a 289 00:15:30,600 --> 00:15:33,240 Speaker 1: conference room, you're talking to each other, building on everyone's points. 290 00:15:33,520 --> 00:15:36,160 Speaker 1: If you're on teams, she said, why is that, Well, 291 00:15:36,200 --> 00:15:38,920 Speaker 1: it was because not everyone was coming in and you 292 00:15:39,000 --> 00:15:41,000 Speaker 1: still had some people at home and some people or 293 00:15:41,040 --> 00:15:43,120 Speaker 1: you didn't want to travel from building and building. We 294 00:15:43,160 --> 00:15:44,960 Speaker 1: have a nice campus and not everyone wanted to travel, 295 00:15:45,440 --> 00:15:47,720 Speaker 1: and we just said no, Actually, when you're here, like first, 296 00:15:47,760 --> 00:15:50,280 Speaker 1: everyone's got to be here, and then secondly, when you're here, 297 00:15:50,640 --> 00:15:53,080 Speaker 1: we expect you'd actually interact with each other, not on teams. 298 00:15:53,800 --> 00:15:56,280 Speaker 1: And you know you you want to see that that 299 00:15:56,440 --> 00:15:58,680 Speaker 1: teams usage drop in the middle of the week and 300 00:15:58,760 --> 00:16:00,760 Speaker 1: go up on the tail n This because Monday and 301 00:16:00,760 --> 00:16:02,920 Speaker 1: Friday or the virtual days. So we actually had to 302 00:16:03,080 --> 00:16:05,800 Speaker 1: establish that norm that people have gotten so used to 303 00:16:05,960 --> 00:16:08,320 Speaker 1: using teams all the time in the middle of the week, 304 00:16:08,360 --> 00:16:10,520 Speaker 1: we had to move people away from it. So let's 305 00:16:10,600 --> 00:16:13,800 Speaker 1: stick with the leadership theme and you come to the 306 00:16:13,920 --> 00:16:18,040 Speaker 1: CEO row with a unique leadership background. You used to 307 00:16:18,160 --> 00:16:21,480 Speaker 1: describe yourself as c I O square you were Chief 308 00:16:21,520 --> 00:16:28,320 Speaker 1: Investment Officer and chief information officer, an unusual combination, and 309 00:16:28,440 --> 00:16:31,200 Speaker 1: then to be elevated and CEO. How does that background 310 00:16:31,760 --> 00:16:36,480 Speaker 1: affect how you think about the role of chief executive officer. Yeah, 311 00:16:36,480 --> 00:16:39,920 Speaker 1: I think for every CEO you need perspective and I 312 00:16:39,960 --> 00:16:44,240 Speaker 1: think both the CIO jobs gave me incredible perspective. The 313 00:16:44,360 --> 00:16:47,160 Speaker 1: first one would have been back in if you think 314 00:16:47,200 --> 00:16:49,640 Speaker 1: about I became c I O right at the tail 315 00:16:49,720 --> 00:16:51,400 Speaker 1: end of the Internet. Craze I was on the web 316 00:16:51,440 --> 00:16:54,800 Speaker 1: and then took over his uh Chief Information Officer, and 317 00:16:54,880 --> 00:16:58,280 Speaker 1: that was a time of incredible hype. Right the Internet 318 00:16:58,360 --> 00:17:00,160 Speaker 1: is going to change the world, Oh my gosh, will 319 00:17:00,240 --> 00:17:03,720 Speaker 1: change how we actually consume you know, video, how we game, 320 00:17:03,960 --> 00:17:06,440 Speaker 1: how we do business, and everyone is talking about that. 321 00:17:08,000 --> 00:17:10,960 Speaker 1: You remember that well, and then it didn't happen right 322 00:17:11,000 --> 00:17:14,439 Speaker 1: away and everyone ended up disappointed. We know what happened 323 00:17:14,440 --> 00:17:17,520 Speaker 1: over the long run, it reminded you know, back then 324 00:17:17,600 --> 00:17:19,920 Speaker 1: we we used to talk about something that I've tried 325 00:17:20,000 --> 00:17:22,800 Speaker 1: to bring back for people, which is that that Gardner 326 00:17:22,920 --> 00:17:25,960 Speaker 1: hype cycle, if you remember it, and that Gardner hype 327 00:17:25,960 --> 00:17:28,960 Speaker 1: cycle is something where whenever there's a disruptive technology and 328 00:17:29,000 --> 00:17:31,280 Speaker 1: it comes in, there's a lot, there's a lot of 329 00:17:31,400 --> 00:17:36,200 Speaker 1: hype and high expectations. So unrealistic expectations followed by something 330 00:17:36,280 --> 00:17:40,400 Speaker 1: doesn't happen, you have disillusionment. You have the troth of disillusionment, 331 00:17:40,960 --> 00:17:44,320 Speaker 1: and people give up on it. But the true change 332 00:17:44,400 --> 00:17:47,600 Speaker 1: comes when hey, you know what those loyal to that 333 00:17:47,720 --> 00:17:51,120 Speaker 1: technological change figure out over not one, two, but three 334 00:17:51,400 --> 00:17:54,480 Speaker 1: five years how to drive change and how to leverage it. 335 00:17:55,440 --> 00:17:57,800 Speaker 1: And that's been true through time. It was true whether 336 00:17:57,960 --> 00:18:00,800 Speaker 1: it's with the internet. You can plout it with mapping 337 00:18:00,840 --> 00:18:04,240 Speaker 1: the genome with E v S, and it's true in 338 00:18:04,359 --> 00:18:06,760 Speaker 1: investments or you have to look at a change. And 339 00:18:07,160 --> 00:18:10,800 Speaker 1: you know, people talk today about okay, a private equity, 340 00:18:10,880 --> 00:18:13,639 Speaker 1: some magic elixir, if I can just get private equity 341 00:18:13,680 --> 00:18:16,159 Speaker 1: into my client's portfolios. It's it's not true. I mean 342 00:18:16,720 --> 00:18:20,280 Speaker 1: private equity there is greater return dispersion, but the returns 343 00:18:20,280 --> 00:18:22,520 Speaker 1: on private equity or often below the S and P 344 00:18:22,600 --> 00:18:25,240 Speaker 1: five hunter on average. So you've got to do your work. 345 00:18:25,920 --> 00:18:27,440 Speaker 1: You've got to see through and say, okay, well that 346 00:18:27,520 --> 00:18:29,040 Speaker 1: means that I need to keep fees low and I 347 00:18:29,119 --> 00:18:31,680 Speaker 1: have to get with the right GPS, etcetera. And so 348 00:18:31,800 --> 00:18:33,879 Speaker 1: you can drive you can figure out where's that long 349 00:18:34,000 --> 00:18:38,280 Speaker 1: term change going. So those two jobs give you a perspective. 350 00:18:38,359 --> 00:18:40,840 Speaker 1: So okay, avoid that hype and how do you see 351 00:18:40,880 --> 00:18:42,920 Speaker 1: through the long term change that you want that you 352 00:18:43,040 --> 00:18:46,520 Speaker 1: think should you should drive home? Um, they're probably different 353 00:18:46,600 --> 00:18:49,000 Speaker 1: in how you embrace change, and I see the world's 354 00:18:49,040 --> 00:18:53,360 Speaker 1: always changing, right, So that's the dangerous thing. Like how 355 00:18:53,440 --> 00:18:56,880 Speaker 1: people code, where you host, where you host something, all 356 00:18:56,920 --> 00:18:59,679 Speaker 1: of those things those have you know, how applications talk 357 00:18:59,720 --> 00:19:03,159 Speaker 1: to each those have totally totally changed since I was 358 00:19:03,240 --> 00:19:07,359 Speaker 1: c I O. And um, but if you think in investments, 359 00:19:07,720 --> 00:19:09,960 Speaker 1: certain things like there are more rules in there, like 360 00:19:10,720 --> 00:19:13,560 Speaker 1: that proven investment philosophy of diversification. That's not going to 361 00:19:13,720 --> 00:19:16,040 Speaker 1: change overnight, So you have to be more careful in 362 00:19:16,080 --> 00:19:18,399 Speaker 1: the investment world. And both of those give me a 363 00:19:18,440 --> 00:19:22,520 Speaker 1: balance of CEO. So Vanguard now has a hardcore tech 364 00:19:22,600 --> 00:19:26,760 Speaker 1: geek as CEO. How has that affected the company? How 365 00:19:26,800 --> 00:19:31,520 Speaker 1: has that affected how you approach the use of technology 366 00:19:31,840 --> 00:19:35,360 Speaker 1: in the world of investment. Yeah, like, thanks for calling 367 00:19:35,359 --> 00:19:37,680 Speaker 1: me a tech geek. I'll think that as a compliment. Um, 368 00:19:38,040 --> 00:19:43,160 Speaker 1: that's how it's meant. Yeah. Um, for us, it's technology 369 00:19:43,240 --> 00:19:45,679 Speaker 1: is the embodiment of our service. We're we've always been 370 00:19:45,720 --> 00:19:47,560 Speaker 1: a virtual company. Just used to be through the mail 371 00:19:47,680 --> 00:19:51,000 Speaker 1: and wanting hutter number when I joined. So, um it's 372 00:19:51,000 --> 00:19:53,639 Speaker 1: always been that way for us. So it needs to 373 00:19:53,640 --> 00:19:56,560 Speaker 1: be a necessary area of investment. And I mentioned this. 374 00:19:57,000 --> 00:19:59,200 Speaker 1: When you lead with technology What can happen to you 375 00:19:59,320 --> 00:20:01,640 Speaker 1: is you can if you don't continually make the investment, 376 00:20:01,680 --> 00:20:04,800 Speaker 1: you fall behind because it gets so costly to address 377 00:20:04,840 --> 00:20:07,479 Speaker 1: your legacy. It becomes an albatross your kind of your 378 00:20:07,560 --> 00:20:11,639 Speaker 1: legacy applications. They become a burden and they slow you 379 00:20:11,760 --> 00:20:13,119 Speaker 1: down and they slow down what you can do for 380 00:20:13,160 --> 00:20:16,920 Speaker 1: your clients. We we made the choice of you know what, 381 00:20:17,080 --> 00:20:20,160 Speaker 1: we're going to eliminate that legacy. And a few years 382 00:20:20,200 --> 00:20:23,240 Speaker 1: ago we said on whether you're investing directly with your dress, 383 00:20:23,240 --> 00:20:26,480 Speaker 1: investing through an advisor, whether you're investing through retirement plan. 384 00:20:26,920 --> 00:20:30,479 Speaker 1: The platforms that we deal with our service infrastructure, our 385 00:20:30,560 --> 00:20:36,199 Speaker 1: investment infrastructure cloud native. So we've rebuilt, we're about seventy 386 00:20:36,240 --> 00:20:38,200 Speaker 1: four percent of the way through of rebuilding all our 387 00:20:38,200 --> 00:20:41,480 Speaker 1: applications to be cloud native. Now that sounds cool, Like 388 00:20:41,600 --> 00:20:45,280 Speaker 1: what does he give you? It builds up your your resiliency, 389 00:20:45,359 --> 00:20:48,439 Speaker 1: but your speed. And I'll give you an example. Um, 390 00:20:48,760 --> 00:20:50,600 Speaker 1: maybe the team won't love that, I'll use this one. 391 00:20:50,680 --> 00:20:54,240 Speaker 1: But we we launched a mobile app last year, right 392 00:20:54,359 --> 00:20:57,480 Speaker 1: and um it was it fell flat on its face. 393 00:20:57,960 --> 00:21:00,560 Speaker 1: The mobile app like it was panned. Our science hated 394 00:21:00,600 --> 00:21:03,320 Speaker 1: the mobile app and in the past when you did that, 395 00:21:03,520 --> 00:21:04,960 Speaker 1: well you had to live with it, like you have 396 00:21:05,040 --> 00:21:08,000 Speaker 1: to wait for nine months to fix the problem. But 397 00:21:08,160 --> 00:21:11,160 Speaker 1: because it was built cloud native, that meant you could 398 00:21:11,200 --> 00:21:13,800 Speaker 1: make changes to it. You can make the changes every 399 00:21:13,840 --> 00:21:17,120 Speaker 1: two three days. And so we did two hundred releases 400 00:21:17,160 --> 00:21:21,880 Speaker 1: to it in nine months and that app has gone 401 00:21:21,920 --> 00:21:25,960 Speaker 1: way past the satisfaction ratings client satisfaction ratings of the 402 00:21:26,000 --> 00:21:29,280 Speaker 1: past one and continues to grow. And so being cloud 403 00:21:29,320 --> 00:21:32,719 Speaker 1: native can give you incredible speed resiliency. Last year are 404 00:21:32,760 --> 00:21:35,920 Speaker 1: availability and you never get a good article written when 405 00:21:35,920 --> 00:21:37,560 Speaker 1: you have high availability. You just want to avoid the 406 00:21:37,600 --> 00:21:42,800 Speaker 1: bad ones. We're nine seven available for our client application. 407 00:21:42,920 --> 00:21:46,440 Speaker 1: So um, that's a number I had seen before. So 408 00:21:46,560 --> 00:21:49,479 Speaker 1: let's talk a little bit about fees. The Vanguard effect 409 00:21:49,560 --> 00:21:54,120 Speaker 1: has been well documented. Not just the spaces that you're 410 00:21:54,160 --> 00:21:58,399 Speaker 1: in force everybody else to be more fee competitive, but 411 00:21:58,800 --> 00:22:02,920 Speaker 1: even spaces you first start looking at immediately has a 412 00:22:03,000 --> 00:22:07,560 Speaker 1: ripple effect and fees dropped. How much lower can van 413 00:22:07,640 --> 00:22:12,159 Speaker 1: good push fees? Half of my portfolio? Is it three bibs? 414 00:22:12,840 --> 00:22:15,080 Speaker 1: How about too? Okay? But aren't you going to run 415 00:22:15,119 --> 00:22:18,919 Speaker 1: out of room eventually? Well, the way we're we're built 416 00:22:19,040 --> 00:22:20,879 Speaker 1: is it's the way we're being client own. It's the 417 00:22:20,880 --> 00:22:24,360 Speaker 1: way we return profits to our clients. That's the dividend. 418 00:22:24,560 --> 00:22:26,399 Speaker 1: That's the dividend that we pay out is to to 419 00:22:26,600 --> 00:22:29,160 Speaker 1: lower that expense fore issue, and it's it's how we're 420 00:22:29,200 --> 00:22:31,600 Speaker 1: built and it comes with those are economies of scale 421 00:22:32,240 --> 00:22:35,200 Speaker 1: um Every year, just like any other company, we have 422 00:22:35,880 --> 00:22:38,600 Speaker 1: our expenses that includes kind of the big investments for 423 00:22:38,720 --> 00:22:41,040 Speaker 1: making in the business, and we have our revenue one 424 00:22:41,840 --> 00:22:44,399 Speaker 1: and we end up you know, we've had been like 425 00:22:44,480 --> 00:22:48,119 Speaker 1: you'd be very profitable year after year. Well, what do 426 00:22:48,200 --> 00:22:51,040 Speaker 1: you do with that? You can? Number one, you'll put 427 00:22:51,119 --> 00:22:53,120 Speaker 1: it back into the business. There's plenty of capital put 428 00:22:53,160 --> 00:22:55,560 Speaker 1: back into the business if it with projects that will 429 00:22:55,560 --> 00:22:58,399 Speaker 1: meet your cost of capital. So you do that. You 430 00:22:58,480 --> 00:23:00,760 Speaker 1: have to make sure you have enough liquidity. You're reserves too, 431 00:23:01,200 --> 00:23:02,920 Speaker 1: so if you have there's a big bear market, you 432 00:23:03,000 --> 00:23:06,840 Speaker 1: want to protect your investments, et cetera risk event. But 433 00:23:06,960 --> 00:23:10,960 Speaker 1: then other companies will retain earnings, the pay a dividend 434 00:23:11,600 --> 00:23:13,480 Speaker 1: go to a family. What we do is you say, 435 00:23:13,560 --> 00:23:16,560 Speaker 1: okay with that. With the that capital, we'll give it 436 00:23:16,640 --> 00:23:18,720 Speaker 1: back to our clients in the form of lower expenses. 437 00:23:19,119 --> 00:23:21,640 Speaker 1: And it's been a pretty powerful cycle, and that's why 438 00:23:22,320 --> 00:23:27,320 Speaker 1: year after year we're able to kind of lower expense ratio. 439 00:23:27,520 --> 00:23:30,680 Speaker 1: So got UM. I mentioned Jack Brennan. I bumped into 440 00:23:30,760 --> 00:23:33,480 Speaker 1: him in the hall the other day. He was he 441 00:23:33,560 --> 00:23:36,800 Speaker 1: stepped down his his CEO in two thousand and eight 442 00:23:37,280 --> 00:23:39,200 Speaker 1: and he said, Tim, when I joined Vanguard, our expense 443 00:23:39,320 --> 00:23:42,879 Speaker 1: ratio is eight eight basis points and it's you know, 444 00:23:42,960 --> 00:23:45,200 Speaker 1: less than a tenth of that. Now, wow, that's that's 445 00:23:45,240 --> 00:23:48,680 Speaker 1: pretty impressive. So many industries where you actually get more 446 00:23:49,240 --> 00:23:54,040 Speaker 1: and pay dramatically less. And this has been the history 447 00:23:54,400 --> 00:23:56,600 Speaker 1: of the firm from day one. This is a core 448 00:23:56,720 --> 00:24:01,600 Speaker 1: of Jack Bogel's philosophy. UM. A lot of people think 449 00:24:01,640 --> 00:24:05,920 Speaker 1: it's all about passive, but Jack began as an active manager. 450 00:24:06,680 --> 00:24:11,560 Speaker 1: You're now about active at Vanguard. Tell us a little 451 00:24:11,600 --> 00:24:14,320 Speaker 1: bit about what you guys are doing on the active 452 00:24:14,359 --> 00:24:17,239 Speaker 1: side of asset management. It's a funny fact of being there. 453 00:24:17,280 --> 00:24:21,119 Speaker 1: Thirty two years I joined Vanguard and UM index was 454 00:24:21,160 --> 00:24:25,640 Speaker 1: only of our assets active active. So we were active 455 00:24:25,720 --> 00:24:29,399 Speaker 1: firm when when I when I joined Vanguard UM and 456 00:24:29,520 --> 00:24:31,520 Speaker 1: it's just it's evolved over time to be to be 457 00:24:31,640 --> 00:24:35,720 Speaker 1: a index. We firmly believe in actively firmly believe a 458 00:24:35,760 --> 00:24:37,920 Speaker 1: low cost active, but it's a placed in the portfolio 459 00:24:37,960 --> 00:24:42,400 Speaker 1: has changed if you think about for most clients, it's 460 00:24:42,440 --> 00:24:44,399 Speaker 1: an index at the core, and if you're going to 461 00:24:44,560 --> 00:24:47,560 Speaker 1: if you have the the risk app type for active, 462 00:24:47,720 --> 00:24:50,120 Speaker 1: it's going to play much more of a satellite um 463 00:24:50,400 --> 00:24:52,200 Speaker 1: And so as we look at it, we we look 464 00:24:52,280 --> 00:24:55,040 Speaker 1: towards strategies that might have well maybe it's the same 465 00:24:55,040 --> 00:24:57,320 Speaker 1: a little bit higher you'd hope for information ratio, but 466 00:24:57,400 --> 00:25:00,159 Speaker 1: you have a bigger risk budget standard deviation, and so 467 00:25:00,240 --> 00:25:03,720 Speaker 1: you look for more excess excess return, so that plays 468 00:25:03,800 --> 00:25:07,320 Speaker 1: for a better compliment to the index portfolio. Now, how 469 00:25:07,359 --> 00:25:12,280 Speaker 1: do we think about active managers? People talk about yes people, 470 00:25:12,320 --> 00:25:14,920 Speaker 1: it's philosophy and process and you'll go through all of those. 471 00:25:15,359 --> 00:25:17,639 Speaker 1: But we found the best way to evaluate one is 472 00:25:18,359 --> 00:25:20,840 Speaker 1: make sure that they can tell you what their edges, 473 00:25:21,560 --> 00:25:23,200 Speaker 1: what is their active edge, and it has to be 474 00:25:23,280 --> 00:25:26,520 Speaker 1: one that can't be easily duplicated in the market because 475 00:25:26,560 --> 00:25:28,639 Speaker 1: in a zero sum game right where you're competing with 476 00:25:28,640 --> 00:25:31,080 Speaker 1: other managers, you want one an edge that nobody else has. 477 00:25:31,680 --> 00:25:33,639 Speaker 1: So you can't just say we have smart people and 478 00:25:33,720 --> 00:25:36,920 Speaker 1: they collaborate well with technology, right everybody's got smart people 479 00:25:37,000 --> 00:25:41,119 Speaker 1: and everyone's got great technology. You can't just say you 480 00:25:41,200 --> 00:25:43,680 Speaker 1: know what, we think differently. We want you to prove it. 481 00:25:43,880 --> 00:25:46,480 Speaker 1: So how do you think differently? So you've talked with 482 00:25:46,640 --> 00:25:49,960 Speaker 1: the leaders of Bailey Gifford. Where do they hire from, Well, 483 00:25:49,960 --> 00:25:53,560 Speaker 1: they don't hire from business schools, right, They'll hire military 484 00:25:53,600 --> 00:25:56,520 Speaker 1: intelligence officers and have them work actually I'm serious with 485 00:25:56,560 --> 00:25:58,800 Speaker 1: the poet and with someone else, and they keep them 486 00:25:58,840 --> 00:26:01,439 Speaker 1: in pods of teens that they work together, but they 487 00:26:01,480 --> 00:26:03,679 Speaker 1: don't collaborate. They don't want group things. They don't let 488 00:26:03,720 --> 00:26:05,800 Speaker 1: them work with other groups. And then you measure do 489 00:26:05,920 --> 00:26:10,840 Speaker 1: they truly keep that edge of differentiated thinking? We do 490 00:26:10,960 --> 00:26:15,399 Speaker 1: it to ourselves are active fixed income group against super 491 00:26:15,440 --> 00:26:19,320 Speaker 1: smart people supported by great technology. But what's there? What's 492 00:26:19,359 --> 00:26:21,480 Speaker 1: that edge that no one else could duplicate in there? 493 00:26:22,400 --> 00:26:25,480 Speaker 1: It comes from our structure. If you think about the 494 00:26:25,600 --> 00:26:29,760 Speaker 1: fact that we have at like, we're client owned, so 495 00:26:29,840 --> 00:26:32,040 Speaker 1: we're delivering as close to at costs as possible. We're 496 00:26:32,040 --> 00:26:34,800 Speaker 1: gonna be a lower fee than than almost everybody out there. 497 00:26:35,000 --> 00:26:37,399 Speaker 1: That means a low hurdle rate. What do you do 498 00:26:37,480 --> 00:26:41,680 Speaker 1: with that? Well, for us, that means that hey, when 499 00:26:41,800 --> 00:26:44,080 Speaker 1: you're not getting paid to take risk. When spreads are 500 00:26:44,119 --> 00:26:46,280 Speaker 1: tight like right now, then don't take a lot. You 501 00:26:46,359 --> 00:26:49,600 Speaker 1: don't have to, you don't have to make you don't 502 00:26:49,600 --> 00:26:52,159 Speaker 1: have to take that extra spread or go out and 503 00:26:52,840 --> 00:26:56,920 Speaker 1: credit quality and take extra risk there because look, you 504 00:26:56,960 --> 00:26:58,919 Speaker 1: have a low expense ratu. You can be higher quality 505 00:26:59,400 --> 00:27:01,560 Speaker 1: and you equal or maybe you fall behind just a 506 00:27:01,640 --> 00:27:03,919 Speaker 1: little bit, and you'll keep a law of dry powder. 507 00:27:05,040 --> 00:27:07,560 Speaker 1: And so then when you have spreads wide now you 508 00:27:07,640 --> 00:27:10,480 Speaker 1: have you know, dislocations in the marketplace, you have plenty 509 00:27:10,480 --> 00:27:13,639 Speaker 1: of dry powder, and you deploy it and with that 510 00:27:13,800 --> 00:27:16,800 Speaker 1: strategy you I'll perform over the long run. And I 511 00:27:16,920 --> 00:27:19,880 Speaker 1: mentioned that ten year performance. Do you look at our 512 00:27:20,160 --> 00:27:22,440 Speaker 1: active fixed income. I believe nine percent of the funds 513 00:27:22,440 --> 00:27:25,640 Speaker 1: have outperformed their competition over the long run. So their 514 00:27:25,640 --> 00:27:28,800 Speaker 1: competitive group averages. So it's a and straight up the 515 00:27:28,880 --> 00:27:31,720 Speaker 1: numbers huge, So it's a it's a differentiated way. But 516 00:27:31,800 --> 00:27:34,280 Speaker 1: we measured like do they truly deploy that black powder? 517 00:27:34,440 --> 00:27:37,000 Speaker 1: They that dry powder? Did they take advantage of it? 518 00:27:37,520 --> 00:27:39,800 Speaker 1: So you mentioned Bailey Gifford. I bet a lot of 519 00:27:39,840 --> 00:27:43,080 Speaker 1: people here in the States don't know them been around 520 00:27:43,119 --> 00:27:46,440 Speaker 1: for a century in the UK. If not longer highly regarded, 521 00:27:46,520 --> 00:27:50,040 Speaker 1: great track record. I want to put that in context 522 00:27:50,359 --> 00:27:54,639 Speaker 1: of leadership. You're reaching out to I guess not a competitor, 523 00:27:54,760 --> 00:27:59,600 Speaker 1: but appear saying how can we get better? How often 524 00:27:59,640 --> 00:28:02,720 Speaker 1: does to car What sort of strategies do you put 525 00:28:02,760 --> 00:28:06,080 Speaker 1: into place? How often are you saying, Hey, let's sit 526 00:28:06,160 --> 00:28:09,760 Speaker 1: down and talk shop with our outside managers or with 527 00:28:09,800 --> 00:28:13,080 Speaker 1: outside firms with you know, Bailey Gifford is a great entity. 528 00:28:13,240 --> 00:28:17,000 Speaker 1: They were they were managing money for one of the 529 00:28:17,080 --> 00:28:19,680 Speaker 1: public pensions for Yeah, So we have we have a 530 00:28:19,800 --> 00:28:24,160 Speaker 1: team um who are constantly out there looking for who 531 00:28:24,200 --> 00:28:27,440 Speaker 1: could be great outside managers, and they will look for 532 00:28:27,520 --> 00:28:30,120 Speaker 1: that active edge and look for that differentiation, and they're 533 00:28:30,200 --> 00:28:32,920 Speaker 1: constantly out there so that if there's an opportunity that 534 00:28:32,960 --> 00:28:35,800 Speaker 1: pops up into fund or there's an idea for fund, 535 00:28:36,240 --> 00:28:38,160 Speaker 1: that we actually have a list that we can go 536 00:28:38,320 --> 00:28:40,360 Speaker 1: to right off of people that we respect and that 537 00:28:40,440 --> 00:28:43,320 Speaker 1: we could work with, and that working with Vanguard, you know, 538 00:28:43,440 --> 00:28:45,560 Speaker 1: one of these say one of the differentiators is that 539 00:28:45,640 --> 00:28:48,000 Speaker 1: we're so long term. They have such a long term 540 00:28:48,080 --> 00:28:50,720 Speaker 1: focus that they truly can have a low turnover and 541 00:28:50,800 --> 00:28:53,520 Speaker 1: stick with an idea, not worry, Hey they're underperforming for 542 00:28:53,640 --> 00:28:56,440 Speaker 1: two years, that like we're going to move on from them, 543 00:28:56,680 --> 00:29:00,280 Speaker 1: So we're probably a lot more patient. Um. But at 544 00:29:00,320 --> 00:29:02,640 Speaker 1: the same time, you know, highly educated and how the 545 00:29:02,800 --> 00:29:06,160 Speaker 1: in the questions we ask So you joined the leadership 546 00:29:06,240 --> 00:29:08,840 Speaker 1: team in two thousand and one, which is you know, 547 00:29:09,480 --> 00:29:12,360 Speaker 1: going back now, Yeah, a decade into your career. That's 548 00:29:12,400 --> 00:29:16,960 Speaker 1: a pretty fast advancement. I assume you were relatively young 549 00:29:17,080 --> 00:29:20,520 Speaker 1: compared to the rest of the leadership team. How do 550 00:29:20,640 --> 00:29:25,040 Speaker 1: you get from that entry to senior management? What was 551 00:29:25,120 --> 00:29:27,800 Speaker 1: the career path like from there? Yeah, I was I 552 00:29:27,960 --> 00:29:31,680 Speaker 1: was young and over my head really Oh yeah, definitely, 553 00:29:31,800 --> 00:29:33,560 Speaker 1: I mean I was. I had been running the web 554 00:29:33,600 --> 00:29:37,160 Speaker 1: and that was that was enough for me. Um. I 555 00:29:37,800 --> 00:29:40,000 Speaker 1: you know, unfortunately, back then, our our c I O 556 00:29:40,840 --> 00:29:46,280 Speaker 1: UH suddenly passed away and Jack Brennan asked me to 557 00:29:47,840 --> 00:29:50,920 Speaker 1: step in and lead our technology group. Um. It was 558 00:29:50,960 --> 00:29:54,440 Speaker 1: a surprise choice for everyone. It was a surprise for me, 559 00:29:55,440 --> 00:29:57,360 Speaker 1: and I remember talking to him about it going pushing 560 00:29:57,400 --> 00:29:59,680 Speaker 1: back a little bit, like, you know, like I don't 561 00:29:59,760 --> 00:30:01,680 Speaker 1: have the I T background that other people would have, 562 00:30:02,840 --> 00:30:05,600 Speaker 1: And he said to me, Tim, I'm not asking you 563 00:30:05,680 --> 00:30:07,680 Speaker 1: to code, I'm asking you to lead and then he 564 00:30:07,760 --> 00:30:10,160 Speaker 1: went through the competencies that you would expect me to 565 00:30:10,200 --> 00:30:12,040 Speaker 1: bring to the table and how I could bring our 566 00:30:12,360 --> 00:30:16,720 Speaker 1: I T division to the next level. That stuck with me. 567 00:30:17,040 --> 00:30:18,520 Speaker 1: A couple of things stuck with me. It was the 568 00:30:19,160 --> 00:30:23,680 Speaker 1: importance of competencies and developing those competencies and people and 569 00:30:23,720 --> 00:30:26,360 Speaker 1: the importance of taking risk in the development of people. 570 00:30:27,160 --> 00:30:29,840 Speaker 1: Another thing occurred to me probably a year later, and 571 00:30:29,960 --> 00:30:34,040 Speaker 1: that was that, Um, and we're big believers in doing 572 00:30:34,080 --> 00:30:37,480 Speaker 1: three three sixties on people, so getting feedback. Every leader 573 00:30:37,480 --> 00:30:39,880 Speaker 1: should go out and get feedback not just from their boss, 574 00:30:39,960 --> 00:30:42,440 Speaker 1: but from their peers and those people on their teams. 575 00:30:43,440 --> 00:30:46,400 Speaker 1: So I did a three sixty. And you know, it 576 00:30:46,440 --> 00:30:49,840 Speaker 1: always starts off with your strengths and where where you're 577 00:30:49,840 --> 00:30:52,240 Speaker 1: doing well, and say like, oh gosh, you know Tim's 578 00:30:52,520 --> 00:30:55,520 Speaker 1: strategic and he's got he's got to drive, and he 579 00:30:55,560 --> 00:30:59,040 Speaker 1: gets results in collaborative and love and everything. And then 580 00:30:59,080 --> 00:31:01,280 Speaker 1: I get down to the Okay, here's what his weakness 581 00:31:01,320 --> 00:31:03,200 Speaker 1: is when he needs to work. And you know, the 582 00:31:03,280 --> 00:31:05,400 Speaker 1: bottom was patients and we can come back to that 583 00:31:05,520 --> 00:31:10,719 Speaker 1: some other time. Yeah, yeah, I know, UM, and it's 584 00:31:10,760 --> 00:31:14,120 Speaker 1: still a weakness. UM. But second from the bottom was 585 00:31:14,200 --> 00:31:19,000 Speaker 1: developing talent. Man. That was stung because I realized I 586 00:31:19,240 --> 00:31:21,160 Speaker 1: had been a taker all this time, not this, not 587 00:31:21,280 --> 00:31:24,320 Speaker 1: a giver. And you had been mentored by Jack Brennan, 588 00:31:25,280 --> 00:31:28,480 Speaker 1: by Jack Brennan and Bill McNabb and Mike Miller and 589 00:31:28,960 --> 00:31:31,320 Speaker 1: you know, all these people from time who had taken 590 00:31:31,360 --> 00:31:34,680 Speaker 1: an interest in my career, and they took an interest 591 00:31:34,720 --> 00:31:38,200 Speaker 1: in my career, and when people asked about me, I 592 00:31:38,320 --> 00:31:41,200 Speaker 1: hadn't done as much. Now, there might have been one 593 00:31:41,280 --> 00:31:42,880 Speaker 1: or two people that said I was the best thing 594 00:31:42,920 --> 00:31:46,040 Speaker 1: to happen to their career, but um, by and large, 595 00:31:46,040 --> 00:31:48,560 Speaker 1: I hadn't done enough. And so I spent the next 596 00:31:48,840 --> 00:31:52,600 Speaker 1: you know, twenty two years saying okay, well how do 597 00:31:52,680 --> 00:31:55,360 Speaker 1: I develop talent? And I would tell you that for me, um, 598 00:31:56,040 --> 00:32:00,560 Speaker 1: my proudest moments of Vanguard are when someone that I 599 00:32:00,600 --> 00:32:03,320 Speaker 1: have mentored ends up on our our senior leadership team, 600 00:32:04,080 --> 00:32:06,640 Speaker 1: and fully half of that team I can say I 601 00:32:06,760 --> 00:32:08,960 Speaker 1: hand it, had a hand and mentoring them along. So 602 00:32:09,600 --> 00:32:13,080 Speaker 1: it takes conservative effort, and for a leader, it's there's 603 00:32:13,160 --> 00:32:15,600 Speaker 1: nothing more rewarding because that's your That's the way you 604 00:32:15,680 --> 00:32:18,640 Speaker 1: have exponential impact if you can pass on your lessons 605 00:32:18,680 --> 00:32:20,239 Speaker 1: and someone else builds on them and they teach them 606 00:32:20,280 --> 00:32:22,560 Speaker 1: to somebody else. That's that's where a leader can have 607 00:32:22,640 --> 00:32:25,840 Speaker 1: true impact. How does a company the size of Vanguard 608 00:32:26,200 --> 00:32:33,760 Speaker 1: institutionalize that sort of mentoring, leadership grooming UM bringing up 609 00:32:33,800 --> 00:32:38,000 Speaker 1: the next generation, getting people to reach outside their comfort 610 00:32:38,120 --> 00:32:43,680 Speaker 1: zone and become better colleagues, workers, and eventually leaders at 611 00:32:43,720 --> 00:32:48,240 Speaker 1: every at every leadership level. UM. We do talent oversight 612 00:32:48,320 --> 00:32:50,160 Speaker 1: where we'll go through and you you should know your 613 00:32:50,200 --> 00:32:54,040 Speaker 1: teams and you'll know your leader. You're like, everyone knows 614 00:32:54,040 --> 00:32:58,320 Speaker 1: their leadership team, people in their group, where they're stronger competencies, 615 00:32:58,400 --> 00:33:01,280 Speaker 1: where they need to develop, and we will talk about 616 00:33:01,320 --> 00:33:06,720 Speaker 1: we constantly rotate talent to develop them and rotate rotate tent. Well, look, 617 00:33:06,800 --> 00:33:09,640 Speaker 1: I mean the same way that I was rotated between 618 00:33:10,320 --> 00:33:13,320 Speaker 1: you know what would be a corporate area to service 619 00:33:13,360 --> 00:33:17,240 Speaker 1: area to an I T two investments and you wrote 620 00:33:17,320 --> 00:33:19,720 Speaker 1: you give up your best talent And it's odd most 621 00:33:19,760 --> 00:33:22,080 Speaker 1: companies don't. Do you want to hold on your best talent, 622 00:33:22,160 --> 00:33:24,760 Speaker 1: but advantguard you're rewarded for give up your best talent 623 00:33:25,040 --> 00:33:27,719 Speaker 1: and make sure they develop and how do you develop them? 624 00:33:27,760 --> 00:33:30,000 Speaker 1: And we do what We rotate people based off of 625 00:33:30,040 --> 00:33:32,520 Speaker 1: their competencies we know. Think of them as buckets that 626 00:33:32,560 --> 00:33:35,200 Speaker 1: you need to fill. And it may be okay, well 627 00:33:35,360 --> 00:33:39,080 Speaker 1: what someone's you know, vision and strategic thinking, And it 628 00:33:39,200 --> 00:33:41,800 Speaker 1: might be how well they know operations management? How good 629 00:33:41,800 --> 00:33:44,360 Speaker 1: are they developing crew? And these are buckets that you're 630 00:33:44,440 --> 00:33:46,400 Speaker 1: you're trying to fill along the way. You can't fill 631 00:33:46,440 --> 00:33:49,880 Speaker 1: them all in one job and or with one boss. 632 00:33:49,960 --> 00:33:52,080 Speaker 1: Some bosses will be better than others. So we do 633 00:33:52,360 --> 00:33:55,959 Speaker 1: if we understand those about our people, then we rotate 634 00:33:55,960 --> 00:33:57,640 Speaker 1: and we know what the next one or two or 635 00:33:57,720 --> 00:34:00,920 Speaker 1: three rotations will be, and we do it around their competencies. 636 00:34:01,840 --> 00:34:04,440 Speaker 1: As we rotate them. There's a big there's a give up. 637 00:34:05,360 --> 00:34:09,120 Speaker 1: Someone loses there their expertise in a role. How do 638 00:34:09,200 --> 00:34:13,719 Speaker 1: you But what they're gaining is context. They're gaining context 639 00:34:14,120 --> 00:34:17,640 Speaker 1: and becoming a better leader, better decision maker. You just 640 00:34:17,800 --> 00:34:19,799 Speaker 1: have to It's a system you have to balance because 641 00:34:19,840 --> 00:34:22,040 Speaker 1: you can't have everyone rotate to a new new area. 642 00:34:22,120 --> 00:34:25,560 Speaker 1: You have to keep institutional knowledge and really sandwich people 643 00:34:25,640 --> 00:34:28,200 Speaker 1: like experience on the top, experience on the bottom, and 644 00:34:28,280 --> 00:34:30,600 Speaker 1: you kind of someone fresh in the middle. So you 645 00:34:30,719 --> 00:34:34,440 Speaker 1: mentioned Bill McNabb, who was your predecessor as well as 646 00:34:34,520 --> 00:34:39,399 Speaker 1: Jack Brennan, his predecessor. Those those are two rock star 647 00:34:40,440 --> 00:34:44,320 Speaker 1: finance ceo s. What's it like for you as a 648 00:34:44,400 --> 00:34:49,759 Speaker 1: CEO still having access to their expertise and experience. You 649 00:34:49,840 --> 00:34:52,960 Speaker 1: said you just bumped into Brennan. Always tell us a 650 00:34:53,000 --> 00:34:56,600 Speaker 1: little bit about how you use the legacy former CEOs 651 00:34:56,600 --> 00:34:59,320 Speaker 1: who are still around and how cool it is. I 652 00:34:59,400 --> 00:35:03,120 Speaker 1: mean what I mean two very different leaders and um, 653 00:35:03,719 --> 00:35:08,120 Speaker 1: two fabulous mentors and great friends, um, both of them. 654 00:35:08,560 --> 00:35:11,200 Speaker 1: And they have a different way to see the world 655 00:35:11,239 --> 00:35:14,480 Speaker 1: and see leadership. And I would encourage everyone out there 656 00:35:14,560 --> 00:35:16,560 Speaker 1: that often people come into a role. Oh, I gotta 657 00:35:16,760 --> 00:35:18,880 Speaker 1: put my impromature on there. I can't talk to the 658 00:35:18,920 --> 00:35:23,719 Speaker 1: past leaders and look these um. Whenever I we Tay 659 00:35:23,760 --> 00:35:26,759 Speaker 1: make a big decision to Vanguard, and I talked about 660 00:35:26,800 --> 00:35:29,000 Speaker 1: some of them, I would actually talk to Bill and 661 00:35:29,080 --> 00:35:32,000 Speaker 1: talk to Jack first. I would understand, you know, why 662 00:35:32,080 --> 00:35:34,440 Speaker 1: didn't we make this decision before? How do we get 663 00:35:34,520 --> 00:35:36,560 Speaker 1: to this point? They would give me the historical context 664 00:35:36,960 --> 00:35:39,319 Speaker 1: and often give you information that oh I didn't think 665 00:35:39,320 --> 00:35:41,759 Speaker 1: about that, and you might adjust, you might not. And 666 00:35:42,360 --> 00:35:46,480 Speaker 1: they are accessible. Um. They made us leave our phones backstage, 667 00:35:46,760 --> 00:35:49,239 Speaker 1: but I could text right now. You got yours. I could. 668 00:35:49,280 --> 00:35:50,879 Speaker 1: I could text Bill right now and you get back 669 00:35:50,880 --> 00:35:54,920 Speaker 1: to me in five minutes. Um. But neither of them 670 00:35:54,960 --> 00:35:59,560 Speaker 1: will ever reach out to me and really unsolicited advice. 671 00:35:59,719 --> 00:36:01,880 Speaker 1: Not Kate, Tim, what are you doing? This? This is? 672 00:36:02,400 --> 00:36:04,359 Speaker 1: This is this is one way. If I reach out 673 00:36:04,360 --> 00:36:06,080 Speaker 1: to them, they get back to me, But they don't 674 00:36:06,280 --> 00:36:07,719 Speaker 1: reach out and go, hey, what are you thinking about? 675 00:36:07,719 --> 00:36:11,120 Speaker 1: Where did you do that for? And UM, no, it's uh, 676 00:36:11,840 --> 00:36:15,239 Speaker 1: it's it's great. You know I mentioned that, UM, a 677 00:36:15,400 --> 00:36:18,040 Speaker 1: tough decision where the retirement business. Both of them said, hey, 678 00:36:18,160 --> 00:36:21,640 Speaker 1: we should have done that earlier, and so it's reinforcing 679 00:36:21,719 --> 00:36:24,919 Speaker 1: to have that. UM. And we're looking and they're they're 680 00:36:24,960 --> 00:36:28,160 Speaker 1: proud that we just became in that business number one 681 00:36:28,200 --> 00:36:32,080 Speaker 1: in competitive NPS, so that businesses is totally shifted and 682 00:36:32,200 --> 00:36:35,200 Speaker 1: turned around. Um. But they were a hundred percent behind it. 683 00:36:35,960 --> 00:36:40,280 Speaker 1: Let's let's go back one more CEO to Jack Bogel, 684 00:36:40,960 --> 00:36:43,680 Speaker 1: Obviously you might give me some un solicited advice. Well, 685 00:36:43,760 --> 00:36:46,399 Speaker 1: I was gonna say for sure. He never was shy 686 00:36:46,480 --> 00:36:49,759 Speaker 1: about sharing his opinion, and clearly a lot of his 687 00:36:49,840 --> 00:36:53,480 Speaker 1: philosophy is in the DNA of Van Guard. Put the 688 00:36:53,560 --> 00:36:56,960 Speaker 1: client for us, keep costs as low as possible, always 689 00:36:57,080 --> 00:37:01,520 Speaker 1: try and make the investor better. But when we look 690 00:37:01,600 --> 00:37:05,440 Speaker 1: at Vanguard today, there's a lot of things that Jack 691 00:37:05,480 --> 00:37:08,200 Speaker 1: would have kicked and screamed about E t f s. 692 00:37:08,239 --> 00:37:10,759 Speaker 1: To begin with, he was not a big fan. Why 693 00:37:10,800 --> 00:37:14,320 Speaker 1: do we have to invest overseas American companies participating that? 694 00:37:14,920 --> 00:37:19,520 Speaker 1: And then lastly, the possibility of putting private equity and 695 00:37:19,640 --> 00:37:23,279 Speaker 1: retirement accounts. He would be furious. I would imagine he 696 00:37:23,440 --> 00:37:25,239 Speaker 1: pushed back on me on the web and would have 697 00:37:25,360 --> 00:37:28,919 Speaker 1: good debates on that. And I think his vision, though, 698 00:37:29,280 --> 00:37:32,000 Speaker 1: that's what was so powerful, and that's what remains. This 699 00:37:32,200 --> 00:37:34,440 Speaker 1: this idea of putting the client first and giving him 700 00:37:34,440 --> 00:37:37,880 Speaker 1: a fair shake. That's what you know, that's what defines us. 701 00:37:38,480 --> 00:37:40,920 Speaker 1: People want to define us as a low cost index 702 00:37:41,000 --> 00:37:44,920 Speaker 1: fund um, which Jack Bowood should be and was incredibly 703 00:37:44,960 --> 00:37:47,440 Speaker 1: proud of. I mean, he brought this this idea that 704 00:37:47,600 --> 00:37:51,719 Speaker 1: existed out there and brought it mainstream. And you know, 705 00:37:51,840 --> 00:37:54,000 Speaker 1: so many people have done something to so much to 706 00:37:54,080 --> 00:37:57,400 Speaker 1: extend that. But he was the visionary behind indexing for 707 00:37:58,239 --> 00:38:01,560 Speaker 1: the main street investor, and so we want to remember that, 708 00:38:01,680 --> 00:38:04,279 Speaker 1: but that's not all he was. He was that vision 709 00:38:04,320 --> 00:38:05,520 Speaker 1: of how do you put the client first. How do 710 00:38:05,560 --> 00:38:08,040 Speaker 1: you let him keep more of their return? So we look, 711 00:38:08,120 --> 00:38:09,920 Speaker 1: what are other ways to do it? Because it started 712 00:38:09,960 --> 00:38:12,360 Speaker 1: with low cost active but how do you do it 713 00:38:12,400 --> 00:38:14,960 Speaker 1: through advice? You know, how do you do it directly 714 00:38:15,160 --> 00:38:18,440 Speaker 1: advising clients? How do you help advisors become better at 715 00:38:18,480 --> 00:38:20,440 Speaker 1: what they're doing so people keep more of the return, 716 00:38:20,480 --> 00:38:24,040 Speaker 1: they have a better chance of raising the investment success 717 00:38:24,120 --> 00:38:26,480 Speaker 1: of their clients. So that's how we define what we do. 718 00:38:27,000 --> 00:38:30,960 Speaker 1: Private equity is just one of those that in private equity, look, 719 00:38:31,000 --> 00:38:34,560 Speaker 1: I said, it's not an easy game. There is the 720 00:38:35,120 --> 00:38:37,480 Speaker 1: first the average return is typically a little bit below 721 00:38:37,600 --> 00:38:41,000 Speaker 1: the SNP and there's a wide dispersion of returns. So 722 00:38:41,120 --> 00:38:42,719 Speaker 1: we're going into that. How do we make sure that 723 00:38:42,840 --> 00:38:45,440 Speaker 1: our clients are on the right side of that distribution? 724 00:38:46,280 --> 00:38:49,040 Speaker 1: And you know, relative fees matter, and their access matters, 725 00:38:49,080 --> 00:38:51,640 Speaker 1: and we had to vet all of those. That's very 726 00:38:51,719 --> 00:38:55,440 Speaker 1: consistent with the original vision of anger M. So let 727 00:38:55,520 --> 00:38:57,880 Speaker 1: me throw a quote of yours back at you and 728 00:38:58,120 --> 00:39:01,720 Speaker 1: and let you this could be danger pursue this quote. 729 00:39:01,800 --> 00:39:05,800 Speaker 1: Our clients should not only expect change, but demand change. 730 00:39:06,320 --> 00:39:11,680 Speaker 1: Explain that, well, there are owners um and you never 731 00:39:11,760 --> 00:39:13,960 Speaker 1: want to be complacent as a business, so as our owners, 732 00:39:14,000 --> 00:39:16,640 Speaker 1: they should actually demand that we get better and better. 733 00:39:17,239 --> 00:39:20,120 Speaker 1: And the other one is that if a company wants 734 00:39:20,160 --> 00:39:22,439 Speaker 1: to lead, if if you want to lead, you don't 735 00:39:22,480 --> 00:39:25,400 Speaker 1: get to set the pace that you go at. Now 736 00:39:25,480 --> 00:39:27,239 Speaker 1: most people would think that, okay, if you're the lead, 737 00:39:27,280 --> 00:39:29,279 Speaker 1: you're the one setting the pace of the race. But 738 00:39:29,400 --> 00:39:32,640 Speaker 1: the truth matter, No, it's it's it's set by like 739 00:39:32,880 --> 00:39:34,879 Speaker 1: the performance of your competitors, you have to stay ahead 740 00:39:34,920 --> 00:39:37,359 Speaker 1: of them and the expectations of your clients. If our 741 00:39:37,400 --> 00:39:40,120 Speaker 1: clients have high expectations, we will keep our pace high 742 00:39:40,920 --> 00:39:43,399 Speaker 1: and we have to exceed both of those year after year. 743 00:39:43,440 --> 00:39:45,000 Speaker 1: And so we have always going to make sure we 744 00:39:45,080 --> 00:39:47,120 Speaker 1: have the team, the plan, and the capabilities to do 745 00:39:47,280 --> 00:39:51,000 Speaker 1: just that. So before we take questions from the audience, 746 00:39:51,120 --> 00:39:54,680 Speaker 1: let me ask you. You've been at Vanguard for thirty 747 00:39:54,719 --> 00:39:58,040 Speaker 1: two years, you've been CEO for just over five years. 748 00:39:58,560 --> 00:40:03,560 Speaker 1: What's next? What comes next for the Vanguard Group? Verry, 749 00:40:03,760 --> 00:40:07,360 Speaker 1: It's a what everyone could expect from us is to 750 00:40:07,520 --> 00:40:12,239 Speaker 1: continue what we'd find a straightforward but compelling strategy, and 751 00:40:12,400 --> 00:40:16,360 Speaker 1: it's to make sure we're performed producing the top performing 752 00:40:16,440 --> 00:40:19,400 Speaker 1: funds that we have the top performing funds and ets 753 00:40:19,440 --> 00:40:22,800 Speaker 1: out there, will wrap them with low cost, scalable advice 754 00:40:23,040 --> 00:40:26,480 Speaker 1: and deliver them on a world class digitally enabled platform. 755 00:40:26,920 --> 00:40:29,080 Speaker 1: Now it sounds simple to do, but you've got to 756 00:40:29,120 --> 00:40:31,440 Speaker 1: bring those all together. And if you do that well 757 00:40:31,480 --> 00:40:34,719 Speaker 1: and you can keep improving it, you'll create value into 758 00:40:34,760 --> 00:40:39,440 Speaker 1: the future. So let's let's good answer. Let's uh go 759 00:40:39,719 --> 00:40:44,600 Speaker 1: to some of the audience questions. The finance industry's record 760 00:40:44,640 --> 00:40:47,839 Speaker 1: on diversity is not so great. What is Vanguard doing 761 00:40:47,960 --> 00:40:52,719 Speaker 1: to lead the industry to faster change. It's one of 762 00:40:52,800 --> 00:40:55,360 Speaker 1: those ones we put a first, You've got to have 763 00:40:55,680 --> 00:40:58,759 Speaker 1: a big goal out there. So for us, it's will 764 00:40:58,800 --> 00:41:01,920 Speaker 1: continue to grow the diverse your anger, but by we'll 765 00:41:01,960 --> 00:41:04,480 Speaker 1: put the goal out there that, um, every level of 766 00:41:04,600 --> 00:41:07,320 Speaker 1: leadership should look just like the rest of a Vanguard. 767 00:41:07,880 --> 00:41:09,320 Speaker 1: And so we looked at and said that is a 768 00:41:09,400 --> 00:41:11,840 Speaker 1: goal that is attainable, but you need to have a 769 00:41:11,920 --> 00:41:16,160 Speaker 1: distinct strategy around it. So we we have chief Diversity 770 00:41:16,200 --> 00:41:19,320 Speaker 1: Officer that works with all of our division heads to 771 00:41:19,480 --> 00:41:21,680 Speaker 1: make sure that we have the right strategy, the right 772 00:41:21,719 --> 00:41:25,800 Speaker 1: practices around how we do you know, attraction and retention, 773 00:41:25,880 --> 00:41:29,600 Speaker 1: but critically development. You bring people in, you've worked hard recreema, 774 00:41:29,600 --> 00:41:31,160 Speaker 1: but you're making sure they're developing in the way that 775 00:41:31,200 --> 00:41:34,520 Speaker 1: we talked about and success for success for us in 776 00:41:34,560 --> 00:41:36,920 Speaker 1: the past five years, we've seen you know, both our 777 00:41:36,960 --> 00:41:40,920 Speaker 1: diversionary or leadership go up six percentage points. So I 778 00:41:41,080 --> 00:41:43,279 Speaker 1: like this question, what's one of the biggest lessons you 779 00:41:43,440 --> 00:41:48,520 Speaker 1: learned in how to develop that talent? You've you've got 780 00:41:48,600 --> 00:41:51,839 Speaker 1: to figure out how to be candid um and you've 781 00:41:51,880 --> 00:41:56,279 Speaker 1: got people shy from giving people feedback and it's it's 782 00:41:56,920 --> 00:41:59,800 Speaker 1: everyone wants it um. It never feels good. So you 783 00:41:59,880 --> 00:42:02,760 Speaker 1: have to figure out how will someone receive that feedback, 784 00:42:03,239 --> 00:42:04,880 Speaker 1: and you've got to make it about getting them to 785 00:42:04,960 --> 00:42:07,600 Speaker 1: the next level. And if I can, you can give 786 00:42:07,640 --> 00:42:11,359 Speaker 1: feedback to any anybody, if they believe you're on you're 787 00:42:11,480 --> 00:42:13,400 Speaker 1: on their side. And so how do you put it 788 00:42:13,400 --> 00:42:14,839 Speaker 1: in a way that they're going to say, Okay, well 789 00:42:15,040 --> 00:42:16,680 Speaker 1: this is to help you get the next level. One 790 00:42:16,719 --> 00:42:19,080 Speaker 1: of my observations is or how can we work on that? 791 00:42:19,560 --> 00:42:21,080 Speaker 1: And that is a great way to get someone to 792 00:42:21,160 --> 00:42:23,960 Speaker 1: receive feedback? And then my advice to other people if 793 00:42:23,960 --> 00:42:25,920 Speaker 1: you want to do up yourself, something I've always done 794 00:42:26,040 --> 00:42:28,440 Speaker 1: is I ask for feedback and gosh, that makes it 795 00:42:28,600 --> 00:42:31,000 Speaker 1: so much easier on a boss. And I used to 796 00:42:31,560 --> 00:42:33,920 Speaker 1: like poor Bill McNab would do a review and say, hey, 797 00:42:33,960 --> 00:42:35,320 Speaker 1: great year to me, like all right, tell me what 798 00:42:35,400 --> 00:42:37,200 Speaker 1: I need to do better, not tell me like what 799 00:42:37,239 --> 00:42:38,799 Speaker 1: would the team say? And I would stay after him 800 00:42:38,880 --> 00:42:41,200 Speaker 1: until he gave me something to grow on and at 801 00:42:41,200 --> 00:42:44,200 Speaker 1: any level, like, I don't care what level you're at, 802 00:42:44,239 --> 00:42:45,800 Speaker 1: you should have two or three things you can grow on. 803 00:42:46,400 --> 00:42:48,960 Speaker 1: And you're asking for feedback even the CEO. I asked 804 00:42:49,000 --> 00:42:52,440 Speaker 1: for feedback, and I make sure my team, even Greg Davis, 805 00:42:52,480 --> 00:42:55,560 Speaker 1: you could you have more accomplished ce io. Greg Davis 806 00:42:55,600 --> 00:42:57,920 Speaker 1: is gonna hear where he's great, but he's always gonna say, Greg, 807 00:42:58,000 --> 00:42:59,920 Speaker 1: your next level leadership, here's what you would work on. 808 00:43:00,719 --> 00:43:02,560 Speaker 1: And so it's gonna be you know, it's gonna be 809 00:43:02,640 --> 00:43:05,440 Speaker 1: that for him or for Karen Reese or for whomever 810 00:43:05,560 --> 00:43:09,160 Speaker 1: is on the team. What was your biggest career mistake 811 00:43:09,239 --> 00:43:11,880 Speaker 1: and what did you learn from it? Which one do 812 00:43:11,920 --> 00:43:14,279 Speaker 1: we want to choose here? I would say that, um, 813 00:43:16,080 --> 00:43:19,560 Speaker 1: it's I got a few of them, but let's go 814 00:43:19,640 --> 00:43:23,439 Speaker 1: with conviction a lesson here that um, I'll go back 815 00:43:23,520 --> 00:43:26,600 Speaker 1: in time that you know I mentioned that that hype, 816 00:43:26,800 --> 00:43:30,120 Speaker 1: and I was the web guy, and I was convinced 817 00:43:30,160 --> 00:43:33,160 Speaker 1: the world was gonna change overnight and online advice was 818 00:43:33,200 --> 00:43:35,960 Speaker 1: going to take off and aggregation would be a key 819 00:43:36,000 --> 00:43:40,120 Speaker 1: element of it. And I was selling hard and we 820 00:43:40,280 --> 00:43:45,920 Speaker 1: invested a lot of money in it, and nothing happened, right. 821 00:43:46,200 --> 00:43:48,680 Speaker 1: Uh remember talking to my boss at the time. He said, 822 00:43:48,760 --> 00:43:51,640 Speaker 1: I knew that wasn't gonna work out. And I said, well, 823 00:43:51,880 --> 00:43:54,400 Speaker 1: like Jack, why don't you say something or do something? 824 00:43:55,080 --> 00:43:57,520 Speaker 1: And uh, he said to him, you had to learn 825 00:43:57,600 --> 00:44:01,600 Speaker 1: that just having conviction doesn't make troph It's not enough. 826 00:44:01,680 --> 00:44:04,719 Speaker 1: It's not enough. And um, but I also learned all 827 00:44:04,719 --> 00:44:07,040 Speaker 1: those things that I conviction about, like there's another lesson, 828 00:44:07,080 --> 00:44:09,840 Speaker 1: there's over time you stay with it, like like digital 829 00:44:09,920 --> 00:44:13,400 Speaker 1: advice is accepted now, and those things you also you 830 00:44:13,480 --> 00:44:16,319 Speaker 1: have to be You have to just because it didn't 831 00:44:16,320 --> 00:44:18,799 Speaker 1: work doesn't mean you leave it behind. You know, when 832 00:44:18,880 --> 00:44:22,440 Speaker 1: we were talking about the things Jack Bogel wouldn't have loved. 833 00:44:23,239 --> 00:44:26,120 Speaker 1: I meant to ask you about direct indexing. This is 834 00:44:26,160 --> 00:44:28,880 Speaker 1: a big new push you guys are doing. Tell us 835 00:44:28,880 --> 00:44:32,239 Speaker 1: a little bit about that. Does that fit into the 836 00:44:32,320 --> 00:44:36,480 Speaker 1: sphere of digital or how does that work within Vanguard, 837 00:44:37,160 --> 00:44:40,320 Speaker 1: but directed We looked at direct indexing years ago. We 838 00:44:40,400 --> 00:44:42,960 Speaker 1: started thinking about it. What's the way that you you 839 00:44:43,080 --> 00:44:45,960 Speaker 1: could disrupt the E T F or or the mutual 840 00:44:46,040 --> 00:44:48,520 Speaker 1: fund like is there you always should be looking is 841 00:44:48,560 --> 00:44:51,520 Speaker 1: there a better way to do it? And directed nexting 842 00:44:51,840 --> 00:44:55,080 Speaker 1: existed for a while. It was reserved for the ultra 843 00:44:55,239 --> 00:44:58,839 Speaker 1: ultra high net worth and we could see that there's 844 00:44:59,120 --> 00:45:02,160 Speaker 1: huge tax benef it's for a lot of investors and 845 00:45:02,360 --> 00:45:05,800 Speaker 1: using direct indexing. But we started to see customization is 846 00:45:05,880 --> 00:45:08,160 Speaker 1: people care more about the values of how they invest, 847 00:45:08,280 --> 00:45:11,280 Speaker 1: and could you create portfolios where you're not gonna undermine 848 00:45:11,320 --> 00:45:13,920 Speaker 1: someone's retirement, but let them invest a court of their values. 849 00:45:14,000 --> 00:45:17,759 Speaker 1: And we got very interested and said, rather than hope 850 00:45:17,840 --> 00:45:20,320 Speaker 1: that it goes away or doesn't undermine, why don't we 851 00:45:20,360 --> 00:45:21,920 Speaker 1: embrace it and see if we can grow it and 852 00:45:21,960 --> 00:45:23,920 Speaker 1: see if it is a better way to do something. 853 00:45:24,480 --> 00:45:27,319 Speaker 1: And we'll find out over time, but we'll be we'll 854 00:45:27,360 --> 00:45:31,160 Speaker 1: be investing heavily in And this is our our final question. 855 00:45:31,760 --> 00:45:35,120 Speaker 1: If you could go back to your early days of 856 00:45:35,200 --> 00:45:38,720 Speaker 1: senior leadership and and give yourself a piece of advice, 857 00:45:38,880 --> 00:45:45,440 Speaker 1: what would that be? I one I've learned through time, 858 00:45:45,520 --> 00:45:52,719 Speaker 1: and UM, it's always ask more questions, UM, fewer statements, 859 00:45:53,280 --> 00:45:57,680 Speaker 1: more questions and listen, listen to the answers, and encourage 860 00:45:57,719 --> 00:46:00,960 Speaker 1: the debate. I catch myself still doing it to a UM. 861 00:46:01,040 --> 00:46:04,359 Speaker 1: I have to do it, UM. And you you're gonna 862 00:46:04,600 --> 00:46:07,440 Speaker 1: learn so much more if you let that team go. 863 00:46:07,680 --> 00:46:10,799 Speaker 1: And one thing I've learned, you know you've always heard 864 00:46:10,840 --> 00:46:13,040 Speaker 1: you can like you may not be the smartest in 865 00:46:13,080 --> 00:46:14,239 Speaker 1: the room. I grew up with this. You may not 866 00:46:14,360 --> 00:46:15,759 Speaker 1: be the smartest in room, Tim, but you'll be the 867 00:46:15,800 --> 00:46:18,680 Speaker 1: hardest working. And that's that's how I grew up. And 868 00:46:19,360 --> 00:46:22,360 Speaker 1: I came to learn something else, which is UM. You know, 869 00:46:22,480 --> 00:46:24,279 Speaker 1: even if you think you're the smartest in the room, 870 00:46:24,560 --> 00:46:28,120 Speaker 1: you're never smarter than the whole room. So in time, 871 00:46:28,160 --> 00:46:30,560 Speaker 1: I've learned, okay that like you were not gonna be 872 00:46:30,600 --> 00:46:33,319 Speaker 1: smarter than than the room. How do we bring out 873 00:46:33,360 --> 00:46:34,799 Speaker 1: the best in that room? How do we get them 874 00:46:34,840 --> 00:46:36,800 Speaker 1: to collaborate? How do we get them build knowledge on 875 00:46:36,920 --> 00:46:40,880 Speaker 1: each other? And you'll get you'll produce great things as 876 00:46:40,920 --> 00:46:44,800 Speaker 1: a team. Wow, that was really quite an hour of 877 00:46:45,000 --> 00:46:51,440 Speaker 1: fascinating conversation with Tim Buckley, Vanguard's CEO. If you enjoy 878 00:46:51,560 --> 00:46:54,239 Speaker 1: this conversation well, feel free to check out any of 879 00:46:54,320 --> 00:46:58,440 Speaker 1: our previous five D discussions we've had over the past 880 00:46:58,560 --> 00:47:03,000 Speaker 1: eight years. You can find that at iTunes, Spotify, YouTube, 881 00:47:03,280 --> 00:47:07,480 Speaker 1: wherever you get your podcasts. Sign up from my daily 882 00:47:07,520 --> 00:47:10,120 Speaker 1: reading list at rid Halts dot com. Follow me on 883 00:47:10,239 --> 00:47:13,880 Speaker 1: Twitter at rid Halts. You can follow all of the 884 00:47:13,920 --> 00:47:18,919 Speaker 1: Bloomberg Family of podcasts on Twitter at podcast I would 885 00:47:18,960 --> 00:47:21,520 Speaker 1: be remiss if I did not thank the crack team 886 00:47:22,080 --> 00:47:27,000 Speaker 1: that helps us put this conversation together each week. Robert 887 00:47:27,040 --> 00:47:30,800 Speaker 1: Bragg is our audio engineer, Paris Wald is my producer. 888 00:47:31,360 --> 00:47:35,879 Speaker 1: Sean Russo is my head of research. Latika val Bron 889 00:47:36,120 --> 00:47:40,279 Speaker 1: is our project manager. I'm Barry rid Halts. You've been 890 00:47:40,360 --> 00:47:43,680 Speaker 1: listening to Masters in Business on Bloomberg Radio.