Vanguard's new chief plans to lure 'millions and millions more' clients

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Vanguard's newly named chief executive Salim Ramji, the first outsider to lead the $9.3tn asset manager, has big plans to extend its reach well beyond the 50mn people it serves.

The Pennsylvania-based group best known for retirement plans and low-cost funds is seeking to expand its advisory offerings. A dominant player in US mutual funds and exchange traded funds, it has struggled to grow internationally, lagging behind market leader BlackRock, which manages $10.5tn in assets, while its customers and counterparties routinely complain about its clunky technology.

"I really do believe that there can be millions more people who can benefit from what Vanguard has to offer," Ramji told the Financial Times. "Part of the opportunity over the next five years, 10 years and beyond is to scale that capability. Even with 50mn [customers], there are millions and millions more, even in this country [the US]."

Named on Tuesday to replace retiring chief executive Tim Buckley, Ramji joins Vanguard months after leaving BlackRock, where he headed strategy, wealth management and most recently its iShares ETF and index business. Former colleagues praised him as a great communicator with a strong vision about where the industry was going but also said they could sense his desire to lead something.

Ramji has a strong grounding in areas that Vanguard considers its bread and butter as well as experience in wealth management where it hopes to grow. As an outsider, though, he will have to move cautiously: the firm remains so closely identified with founder Jack Bogle, that its vocal fans still call themselves Bogleheads, five years after his death.

"It's really that cultural element at the end of the day that is a big selling point," said Daniel Sotiroff, senior manager research analyst at Morningstar. "I think deviating from that would not be good, and I think maintaining that is going to be his biggest challenge."

Unlike most of its competitors, Vanguard has a mutual structure: the firm is owned by its funds and ploughs much of its net revenue back into lowering costs for investors. "The mission and purpose started by Bogle and continued by his successors will continue under my leadership," Ramji said. "I plan to pursue that with the zeal of a convert."

On Tuesday, Ramjii underscored that message as he made his first public visit to Vanguard's headquarters and sent an email to its 20,000 employees, who are known as crew. "Vanguard's clarity and consistency of purpose is something I have long admired," he wrote.

Vanguard remains so closely identified with founder Jack Bogle that its vocal fans still call themselves Bogleheads © Bloomberg

After starting his career as a lawyer at the UK "magic circle" firm Clifford Chance, Ramji became a McKinsey consultant, rising to become a senior partner in charge of its asset and wealth management practice.

"He's world class and he came in that way," said Andy Saperstein, Ramji's first boss at McKinsey, who is now co-president of Morgan Stanley. "He doesn't try to make something marginally better, [instead asking] what could we do differently that will have an impact."

As head of iShares, Ramji helped build a product-launching machine that churned out a wide range of ETFs, ranging from funds focusing on narrow slices of fixed income securities to the wildly successful spot bitcoin ETF.

By contrast, Vanguard has been deliberate about sticking with a relatively small number of funds that it feels work for investors. According to Morningstar, Vanguard has 348 global mutual funds and ETFs, compared to BlackRock's 1,963.

At the end of last year, Vanguard reported that more than 90 per cent of its assets came from the US, compared to 68 per cent for BlackRock. It recently shut its Chinese joint venture and a German wealth platform.

Ramji represented BlackRock on the board of the Investment Company Institute, where he impressed George Walker, the current ICI chair and chief executive of Neuberger Berman, as someone good at "generating sensible consensus . . . I have never seen him to be anything but cool".

That calm could be tested as Ramji takes the reins at an asset manager that has drawn criticism from progressive activists for failing to join net zero climate initiatives and for its outsized influence in US stock markets. Because of the sheer size of its index funds, Vanguard is the largest shareholder in many American companies.

Ramji was among a handful of executives cited as next generation leaders of BlackRock, but Larry Fink, its founder, remains firmly in control. Ramji announced in January that he would be seeking other opportunities.

When Vanguard said less than two months later that it would be considering external candidates for its fifth CEO, Ramji was at the top of industry lists.

"He's proved to be quite versatile and resilient at BlackRock . . . He's got an incredibly high IQ and high EQ," said State Street chief executive Ron O'Hanley, who was a consulting client of Ramji's and has stayed in touch.

Ramji, who will start in July, said that during the recruitment process, the board seemed interested in his ability to marshal technology and scale up BlackRock's wealth management and ETF businesses. "Technology is something that any leader of any wealth or asset management firm has to focus on. It's something that I focused on as a top priority in each of the different roles I had," he said.

Industry analysts said Ramji's experience would help Vanguard as it seeks to capitalise on expected consolidation in asset management and continuing flows to ETFs and passive, index-tracking products.

"Distribution, education and operational excellence are becoming more important than just guessing the next theme," said Dave Nadig, a longtime ETF industry observer.

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