Salim Ramji will match, then 'exceed,' Vanguard rivals' technology with Amazon help -- a move Fidelity has already made -- and he's an outright 'Boglehead,' he says in new interview
The new Vanguard CEO acknowledges the company 'could have started earlier' than three years ago, and his domain architect, Joseph Wagner, Jr., says starting fresh is helping purge 'weird errors.'
8 min read
Brooke's Note: We have two diverging objectives in our coverage of the RIA industry – keep it newsy and keep it varied. But sometimes one company has a newsy streak. Vanguard is currently on that roll and so this is the first of a handful that you'll see in coming days. Because it is, with $293 billion of AUM, right at the top as an RIA, and with $9.3 trillion, also right at the top as an asset manager [with many of those assets in RIA hands], very pertinent to the RIA discussion. Add in a new CEO making a series of moves, and it's a recipe for an impromptu story series.
Salim Ramji has one answer to the two questions that dog his Vanguard future -- can he restore Bogle culture to 1995 levels and bring his firm's digital platform service to 2025 standards? See: Salim Ramji takes Vanguard CEO helm.
He'll match that expectation and raise you one, he suggests.
The new CEO of the Malvern, Pa., asset manager is adamant that he is on offense – even where Vanguard has been on defense for much of the past two decades.
“We will have the most modern technology infrastructure in the industry, [and] we will continue to make investments.
"It’s a journey, and we will match and then exceed competitors’ capabilities,” Ramji said in a Q&A with fellow McKinsey alum Allan Roth.
Yet, he acknowledges, Vanguard can't “innovate" much until an “infrastructure” overhaul is complete.
“Modernization started three years ago, though perhaps [it] could have started earlier. We're making behind the scenes investments, when completed … will give us the ability to innovate.
"I’m determined to make sure the job gets done,” he added in the ETF.com interview.
Service gap
Ramji's claim "is industry speak for, 'We're behind the competition, but we're running as fast as we can. Once we catch up in the cycle, we should be best in class for at least a few days before again being leapfrogged,'" says Philip Waxelbaum, principal of Masada Consulting, via email.
“Misjudging, and or intentionally interrupting [the] continuous technology upgrade cycle always produces the same results. Now [Ramji] will execute a multi-generation upgrade giving him confidence he can hold the top of the hill, briefly,” Waxelbaum adds.
Vanguard's deepening, nine-year Amazon tie is one cause for hope, analysts say. It's a move Fidelity made with success.
In an interview posted on Amazon's website, Vanguard domain architect and cloud specialist Joseph Wagner, Jr., noted that his company is making gains and benefiting from a fresh start with Amazon Web Services (AWS).
“We're building applications the right way, and you don't have to worry about unexpected downtime or weird errors because you didn't build something right the first time," he says.
Bogle Bro'
BlackRock's audacious Microsoft hook-up reveals fee-compression busting pivot to annuities sales and software distribution, as eMoney and Envestnet deals increasingly make sense, but analysts warn of existential RIA risk if Vanguard et al. join the fray
Ramji's technology claim is reassuring, but Vanguard has a 20-year history of crying wolf on this topic, according to Jeff DeMaso, publisher of The Independent Vanguard Advisor newsletter.
“I'm pulling for Ramji and Vanguard to deliver on this one, but not exactly holding my breath. Vanguard, as a low-cost provider, has never been known for delivering the best service," he says.
“I often point to this 2004 WSJ article [behind a paywall], as an example: Customer Service Suffers as Investors Pour Into Vanguard - WSJ.
"Tim Buckley once said they were spending a billion dollars on tech. So, Ramji's promise of industry-leading tech isn't necessarily out of step with past comments from Vanguard's leadership.”
Ramji also made it a point to endorse Vanguard founder John “Jack” Bogle's culture and vision by calling himself a "Boglehead."
The term of endearment adopted by Bogle's adherents reflects the founder's keep-it-simple-and-cheap philosophy, by which the company has grown to a $9.3-trillion, managed-asset giant.
"Yes [I am a Boglehead] … I've read all his books. He was an amazing founder, visionary, and a really important voice," Ramji said.
Bogleheads.org, a website that honors the Vanguard founder and his investment philosophy, declined to discuss Ramji's endorsement.
BlackRock or not
Commenters on a sub-Reddit forum titled /r/Bogleheads, said Ramji was paying the requisite homage.
“I'd be pretty uncomfortable if a Vanguard CEO didn't offer at least some lip service in that direction,” wrote one person.
Story Timeline
“It’ll be interesting to see what Vanguard, and he, are up to,” wrote another.
"Are they going to shift to more of a BlackRock model and not want brokerage services anymore, or are they going to go more of a Fidelity route and invest substantially in their brokerage side?"
“I do hope vanguard software becomes more like Fidelity or M1. The funds are great, but I no longer recommend the brokerage,” said another, acknowledging Vanguard's weakness. See: Reddit and weep; Fidelity soars 68% in social media interactions, after embracing TikTok and other media, but sticks with the traditional output on Facebook and LinkedIn
Setting the stage
Going full Boglehead sets Ramji apart, says Daniel Wiener, co-founder of Newton, Mass. RIA, RWA Wealth Partners, with $16 billion in managed assets.
Vanguard's website snafu -- perhaps an unforced error, a CTO says -- has no ETA for a fix but it led to CEO Tim Buckley to read the automated message script to desperate callers
“I don't recall any [other Vanguard CEO] calling themselves a Boglehead," he says via email.
Ramji was responsible for all iShares assets at BlackRock and is Vanguard’s first outsider CEO.
“The former CEOs were all insiders and were Bogle trainees … not Ramji.
"So, it reminds shareholders, employees, board members, the press, whomever, that he's not going to do anything radically different from what Jack might do,” Wiener adds.
Ramji stands a chance at delivering on culture and technology – thanks to the hand-off from former CEO Tim Buckley, too, says Will Trout, director of securities and investments at Boston consultancy, Datos Insights. See: During CEO Tim Buckley's waning months, Vanguard is imposing fees.
“Buckley nicely set the stage for Ramji … now it's time for [him] to put his mark on Vanguard,” he adds. See: Vanguard warns its phone-reliant investors of 'termination' -- without warning or explanation -- under new contract, effective July 1.
“By wrapping himself in the aura of ‘Saint Jack,’ it's a way to make [any future] medicine go down more smoothly,” he says.
Boggling the mind
Trout also argues that Ramji's technology claims may not be as far-fetched as some in the industry believe. See: With technology still its Achilles heel, Vanguard makes Charlotte, N.C., a 'hub' for software engineers.
“Investing in remote servicing and tech hires is a small part of the story,” Trout says.
“For some time now, Vanguard has been making a big bet on data and [the] cloud, not least through partnerships with AWS and other big vendors.
"Data should be a multiplier [that] will far outstrip investment in either personnel or outsourcing,” he adds.
Others are less convinced that Ramji can turn Vanguard into a bonafide tech-forward shop,
The company has frequently been in the news for glitches and crashes, and software that is reportedly a by-word for poor user experience. See: Vanguard's website snafu.
Focus on products
Half-way through his first hundred days, Ramji's growing to-do list also includes reducing client attrition, growing the firm’s active ETF business and building out insurance, or TIPS-based products for retirees drawing down on assets. See: Vanguard reads the room then launches new long and short duration active muni ETFs.
Although Ramji has been clear he will not "copy competitors," new funds and services that carry a distinct whiff of BlackRock – its mix of investments and annuities in ‘LifePath’ target-date-funds, for instance – could be in the offing.
“I want to focus on new products like retirement income and other drawdown strategies with a range of tools and advice … This could involve partnering with other companies such as insurance companies. Products using TIPS ladders is another possibility,” he explained.
BlackRock chose Microsoft Azure over Amazon AWS.
New arrows
Given Vanguard administers 27% of all fund industry assets, but only brings in about 5% of the industry's revenue, Ramji may also have little choice but to green-light new products that can cross-pollinate each other.
“The passive investing revolution has run its course … [and] razor-thin margins and limited shelf-space for distribution call for a set of new arrows,” says Trout.
“Private capital investments, active ETFs, and multi-asset-class investment strategies will fit nicely … and while Vanguard does not want to consider itself a product or funds shop, it needs to generate more idea-capital and tools.
“With Ramji, there are truly no sacred cows."
Rely on RIABiz? Tell Google.
Naming us a preferred source puts our reporting first in your Top Stories and AI Overviews. Takes one click, and only you see the difference.