Susan Dziubinski: So that’s a look at the funds and the investments. Now, you and I sat down about six months ago after Vanguard announced that it had brought in a new CEO from BlackRock, Salim Ramji. Now he’s only been on the job for six months, but what are your impressions so far of what he’s been saying? Anything that he’s been doing?
Daniel Sotiroff: This is like the $10 trillion question. It’s what everybody wants to know. So on the surface, you look at all the interviews he’s been doing, all the press he’s been doing—he’s saying all the right things, and I think he gets it. He’s a smart guy. He’s been around this industry for a while. He understands what Vanguard is, what it means to the industry, what it’s done for millions of investors. I’m pretty much sold on that. I’m not concerned about that. So far, everything I would say has played out generally as I would expect. The first few months are pretty boring. And usually that’s just the CEO getting into the office, trying to figure out the lay of the land and what’s going on and how do I fit in here and everything like that.
No Surprises Yet as Vanguard’s New CEO Starts Slow and Steady
You usually got to wait about six to 12 months with any CEO transition before you actually start to see things move around, start to take shape, and you can kind of see what he’s doing. In a lot of ways, Vanguard has been right on schedule, maybe a little bit early. So December, they announced they were going to do a little bit of a reorg. Basically what that means is they’re going to carve out the wealth and advice module from their Vanguard personal investor division, and they’re going to make that its own stand-alone division. And I don’t think there’s really anything you have to read into it. Basically, it’s just Vanguard saying, “Hey, we’re getting really serious about the advice and wealth business.”
We’ve known that. This is not a surprise. We’ve known they’ve been going down this path. They’re just getting a little bit more serious about it, and they’re dedicating an entire division to that effort.
Vanguard Shifts Toward Financial Advice
The other thing I’d mentioned here is along the lines of this $10 trillion question: With an external hire, a lot of people I think were questioning this. Is this going to be a problem? Is this something that’s going to throw Vanguard off its investor-friendly ethos? I’d like to point out two things I think really … They’re food for thought, let’s put it that way. A lot of people have been focused on Salim and Salim only, and I don’t think they’ve been paying attention to what has been going on with the other leadership ranks within Vanguard. So that gives us a little bit of a clue. So what I mean by that, Buckley and McNabb, the previous two CEOs before Salim, actually had multiple roles. So yes, they were the CEO, but they were also the president of Vanguard, and they were the chairman of Vanguard’s board of trustees. So, they actually had three roles and multiple responsibilities associated with those roles.
Meet the Three Executives Now Steering Vanguard’s Future
When Salim came on, those responsibilities were actually split between three people. Salim’s the CEO, he’s definitely going to be leading the company, setting its direction, charting its course, or whatever you want to say. But the role of president actually went to Greg Davis, who’s been their chief investment officer now going on eight years. So very experienced Vanguard veteran. He’s been there for a quarter-century, plus or minus a few years. And then the other person that took over the chairman of the board position is a man most people have never heard of named Mark Loughridge, who’s Vanguard lead independent director on the board of trustees. And he’s now going to be Vanguard’s, I believe, first nonexecutive chairman. So what you’re seeing is that actually a lot of the responsibility of leading Vanguard has been split between those three people. So it’s not like Salim is doing this on his own. He’s actually going to have some Vanguard veterans right alongside him helping him out, which is good to know. This is a really tough job. This is a very different company that has been under past CEOs. It’s going to take a lot.
The other thing I would point out to people is that, again, we just talked about flows in the amount of money: Vanguard’s winning. There’s no incentive to change anything. Most asset managers would love to be in Vanguard’s position. So it’s like, why would you go out and change this when, really, the whole investor-friendly ethos thing, that’s working. That’s what people want. They want someone they can trust and that is really prioritizing their interests. So for those two reasons, it’s really hard to see that this is really going to be anything different in the future, I guess.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
