Vanguard’s new chief plans to attract “millions and millions more” of customers

Vanguard’s new CEO Salim Ramji, the first outsider to lead the $9.3 trillion asset manager, has big plans to expand its reach far beyond the 50 million people it serves.

The Pennsylvania-based group best known for its retirement plans and low-cost funds is trying to expand its advisory offerings. It is a dominant player in U.S. mutual funds and exchange-traded funds and has struggled to grow internationally, lagging behind market leader BlackRock, which manages $10.5 trillion in assets, while its clients and counterparties routinely complain about its clumsy technology.

“I really believe there could be millions more people who could benefit from what Vanguard has to offer,” Ramji told the Financial Times. “Part of the opportunity for the next five years, ten years and beyond is scaling up that capacity. Even with 50 minutes [customers]There are millions and millions more, even in this country [the US].”

Ramji was appointed Tuesday to replace outgoing CEO Tim Buckley and joins Vanguard months after leaving BlackRock, where he led strategy, asset management and most recently the iShares ETF and index business. Former colleagues praised him as a great communicator with a strong vision for where the industry is going, but also said they sensed his desire to lead something.

Ramji has a strong foundation in areas that Vanguard considers its bread and butter, as well as experience in asset management where it hopes to grow. As an outsider, however, he will have to tread carefully: the company remains so closely tied to founder Jack Bogle that its vocal fans still call themselves Bogleheads five years after his death.

“It’s ultimately that cultural element that’s a big selling point,” says Daniel Sotiroff, senior manager research analyst at Morningstar. “I don’t think it would be good to deviate from that, and I think enforcing that is going to be his biggest challenge.”

Unlike most competitors, Vanguard has a joint structure: the company owns its funds and spends a large portion of its net revenues on lowering costs for investors. “The mission and purpose started by Bogle and continued by his successors will continue under my leadership,” Ramji said. “I intend to pursue that with the zeal of a convert.”

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

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

After starting his career as a lawyer at the British ‘magic circle’ firm Clifford Chance, Ramji became a consultant at McKinsey and rose to become a senior partner responsible for the asset and wealth management practice.

“He’s world-class and he came in that way,” says Andy Saperstein, Ramji’s first boss at McKinsey who is now co-president of Morgan Stanley. “He’s not trying to make something marginally better, [instead asking] what can we do differently that will have an impact.”

As head of iShares, Ramji helped build a product launch machine that spawned a wide range of ETFs, ranging from funds focused on narrow segments of fixed income securities to the hugely successful spot bitcoin ETF.

In contrast, Vanguard has consciously chosen to stick to a relatively small number of funds that it believes work for investors. According to Morningstar, Vanguard has 348 mutual funds and ETFs worldwide, compared to BlackRock’s 1,963.

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

Vanguard's bar chart narrowly follows BlackRock-owned iShares, showing new chief for established ETF leader

Ramji represented BlackRock on the board of the Investment Company Institute, where he impressed George Walker, current ICI chairman and CEO of Neuberger Berman, as someone who is good at “generating sensible consensus.” . . I’ve never seen him anything other than cool.”

That calm could be tested if 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 over US stock markets. Due to the sheer size of its index funds, Vanguard is the largest shareholder in many U.S. companies.

Ramji was among a handful of executives cited as BlackRock’s next generation of leaders, but Larry Fink, the founder, is still calling the shots. Ramji announced in January that he would be looking for other opportunities.

When Vanguard said less than two months later it would consider external candidates for its fifth CEO, Ramji topped the industry charts.

“He has proven to be very versatile and resilient at BlackRock. . . He has an incredibly high IQ and a high EQ,” says Ron O’Hanley, CEO of State Street, who was a consulting client of Ramji and has stayed in touch.

Ramji, who starts in July, said the board seemed interested in his ability to bundle technology and scale BlackRock’s asset management and ETF businesses during the hiring process. “Technology is something that every asset or asset management company leader needs to focus on. It is something I have focused on as a top priority in each of the different roles I have held,” he said.

Industry analysts say Ramji’s experience would help Vanguard capitalize on expected consolidation in asset management and continued flows into ETFs and passive, index-tracking products.

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

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