On the one-month anniversary of taking the helm as Vanguard’s new CEO, I conducted a live interview, via video, with Salim Ramji, asking him about what’s ahead for Vanguard’s 50 million clients.
Vanguard announced May 14 that the ex-BlackRock Inc. executive Ramji, 53, had been named new chief executive officer, starting July 8. His background also included a senior position with consultant McKinsey & Company, where I had also worked, so I figured I'd check the alumni directory for his email address and fire off a brief, introductory email.
I received a very personable reply, despite not expecting anything in return. I wrote Ramji that his response reminded me a great deal of how I first met Jack Bogle. “That’s a rather high bar,” he responded.
Ramji responded that Bogle’s “books and the company he started are a source of inspiration for me.” After Ramji started at Vanguard, he wrote me suggesting a “meet-up.” This interview is the result of his suggestion.
10 Questions for Vanguard CEO Salim Ramji
What have been your priorities during your first month as CEO?
I’ve been spending the bulk of my time meeting with and listening to crew members (staff) and clients. I want to understand how we can better meet client needs.
Vanguard has received a lot of criticisms on its customer service. What do you think of these criticisms?
Clients love Vanguard and hold the company in incredible esteem. It’s special and unique. So, when we let them down, they feel it and we feel it. Clients deserve to be heard, and we need to listen and then act. Criticism will make us better. The worse outcome is the upset client we don’t hear from and then leaves Vanguard.
Are systems and customer service related and how will you be addressing these issues?
They are related. Modernization started three years ago though perhaps could have started earlier. We are making behind the scenes investments. When completed, this will give us the ability to innovate and apply new interfaces and visuals faster. I’m determined to make sure the job gets done. We will have the most modern technology infrastructure in the industry. We will continue to make investments. It’s a journey and we will match and then exceed competitors’ capabilities.
How can Vanguard make these investments given it has 27% of the fund industry assets but only about 5% of revenue, according to Eric Balchunas of Bloomberg? Competitors have expensive products that can cross-subsidize to allow them to offer loss leaders such as index funds with even lower expense ratios so how will Vanguard compete?
We can compete. Our competitors have some hidden and not so hidden subsidies. Our model gives us a natural advantage in that we don’t have shareholders with different priorities than our clients. Thus, when we have a surplus, we return it to our clients with lower costs. This advantage, along with our large scale, allows us to compete and continue to make investments.
There is a theory (that I may have started) that Vanguard would like to see smaller clients move to Vanguard’s Personal Advisory Services or, if they don’t, Vanguard is happy if the client moves their Vanguard funds to Fidelity or Schwab and let them do the record keeping and reporting. What do you think of that theory?
The theory could make sense for a publicly held or any for-profit company but not us. The beauty of the model is that we only work for one constituency—the client. We don’t want clients to leave.
You mentioned one of your priorities was focusing on new client needs. Can you elaborate?
We have been very focused on helping clients accumulate assets, but the industry hasn’t done much to help on drawdowns. I want to focus on new products like retirement income and other drawdown strategies with a range of tools and advice. If clients don’t spend as much as they want, because they are too anxious to spend, that’s a bad thing. This could involve partnering with other companies such as insurance companies. Products using TIPS ladders is another possibility.
You were responsible for all of the iShares assets at BlackRock. iShares has over 1,400 ETFs. Can we expect Vanguard to rapidly expand its offerings? What about crypto ETFs which have had huge inflows at iShares?
I’m not going to copy competitors. It’s important that a company stay consistent with who they are. Vanguard must look through the lens of our clients. But I want more innovation. For example, we have an outstanding active fixed income capability. Vanguard has had active funds from its early days and is one of the largest active management firms. Jack Bogle’s “cost matters hypothesis” is something we will always keep in mind. We will not be launching crypto ETFs.
Are you a Boglehead?
Yes, and this is my definition of a Boglehead. I’ve read all of his books. He was an amazing founder, visionary, and a really important voice—not just the industry but in society. He created an institution people trust which is a rare thing these days.
Is Vanguard going to do something next year to celebrate the 50th anniversary of the firm Jack Bogle founded?
Yes. It’s still to be determined but planning is now underway. This September 24th will actually be the 50th anniversary of Jack Bogle filing the Vanguard articles of incorporation though the company didn’t start operations until the following year. The analogy is the U.S. Declaration of Independence occurred in 1776, but the constitution wasn’t ratified until years later.
Would you consider speaking at the 2025 Boglehead’s conference?
Absolutely! The only reason I can’t make it this year is that it’s parent’s weekend at the college where my son just started his freshman year. I’m happy to do a video for the 2024 Bogleheads conference.
My Take: Ramji Is a Boglehead
Bloomberg recently wrote that Vanguard’s New CEO Has to Win the Hearts of Bogleheads. Based on these ten answers as well as some discussion on customer service issues, Ramji won the heart of this Boglehead. He is embracing the culture of John C. Bogle. In addition, I brought up more customer service issues and he responded “I own them” even though they happened long before he started at Vanguard.
Will he succeed? Recently, I asked a BlackRock representative what he thought of Ramji. “I predict great things are going to happen at Vanguard,” he responded. I now share that prediction. I’m convinced that Salim Ramji is indeed a Boglehead.
