May 9, 2025 • 46 mins
Barry speaks with Karin Risi, who spent 27 years at Vanguard, the world’s 2nd largest asset manager. She has reported directly to the past four CEOs of VG. Risi formulated enterprise-level strategy, drove client and revenue growth, oversaw talent development, and influenced capital allocation for the $10 trillion investment firm serving 50 million investors globally.
Risi led the firm’s $2.5T AUM Personal Investor business from 2015 to 2020; she also helped to create and drive the firm’s growth in Personal Advisors, a group that currently manages 350 billion in client assets. She has also handled Corporate crisis comms, M&A, and strategic partnerships.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
Business with Barry Ritholts on Bloomberg Radio.
Speaker 2 (00:16):
This week on the podcast, I have an extra special guest,
the Vanguard Group's Karen reci the person who is responsible
for so many initiatives, so much growth, so many new products,
including the Vanguard Ria, the internal advisory service that runs
three hundred and fifty billion dollars. This is a fascinating
(00:38):
conversation if you're at all interested in what it's like
to be part of a fast growing organization that is
racking up trillions of dollars in assets, what it's like
to create new initiatives. Really, this is tour de force conversation.
She has just concluded about twenty eight years at Vanguard
and is moving over to Harbor Vest, which is the
(00:59):
out side private equity shop that Vanguard has been working with.
I thought this conversation was fascinating, and I think you
will also with no further ado, my conversation with the
Vanguard Group and Harbor Vests Karen REESI.
Speaker 3 (01:16):
Thanks for having me, Barry. I'm happy to be here.
Speaker 2 (01:18):
I'm happy to have you. I want to talk about
your time at Vanguard, but before I do that Bachelor's
in Finance MBA from Villanova. Finance always was a career plan.
That's what it kind of looks like.
Speaker 3 (01:32):
Yes, I think it looks that way, but I'll say
I got more intentional over time, Barry, But no, I
initially actually wanted to go to art school. Oh real
little known fact.
Speaker 2 (01:41):
Yes, so we did from Villanova. Do you go straight
into the NBA or do you work and then go back?
Speaker 3 (01:46):
I worked for a few years at Sinoco in Center City, Philadelphia,
and then I started my MBA there and then joined
Vanguard and finished up my MBA in my first couple
of years at Vanguard.
Speaker 2 (01:56):
Really, so right from business school and then the only
company you've worked for since school is Vanguard. That's an
impressive run. How did you find your way to Vanguard?
Speaker 3 (02:06):
Like so many people at Vanguard, I had a friend
that worked there, So I was a couple of years
out of school in investor relations at Snoko, and then
I had a friend who said, you know, if you
want to get more into finance and investments, we have
an opening at Vanguard. I think you'd really like it.
And that truly is how I got into the interview process.
(02:27):
I grew up in the area. I grew up in
the suburbs of Philadelphia, so I knew Vanguard go Berts, yes,
but I didn't know really that much about it, and
I only had one friend who worked there. But I
went for the interview process and joined as an investment
analyst in nineteen ninety seven.
Speaker 2 (02:43):
So late nineties, Vanguard had to be a really interesting place.
What was it like during that period?
Speaker 3 (02:48):
It was an interesting place. It was not an unknown
like many of my you know, retired predecessors are. You know,
when they joined Vanguard in the eighties, it was really
off the radar. We were starting to gain traction. Indexing
was starting to gain traction, the hiring classes were getting bigger.
So I joined with you know, dozens of other people
(03:09):
when I joined Vanguard in May of ninety seven, and
you know, we were still though, this small ish firm
in Malvern, Pennsylvania, Valley Forge, Pennsylvania, very different from Wall Street.
Speaker 2 (03:23):
So if you join Vanguard in ninety seven, Jack Brennan.
Speaker 1 (03:27):
Is CEO, is that right?
Speaker 3 (03:28):
That's exactly right.
Speaker 2 (03:29):
A delightful, serious individual and I find him, like every
other prior CEO of Vanguard, fascinating guy.
Speaker 3 (03:38):
Yes, yes, and you're right a serious individual. Yes, Jack
was leading the firm by the time I got there
in ninety seven, but of course Jack Bogel was still
sort of around present on campus. You know, his whole
spirit looms large even today.
Speaker 2 (03:53):
And so if I memory serves, it was only a
couple of years later Brennan kicked himself up to chairman
and Bill McNabb comes in it as CEO. So you
worked with some really tremendous corporate leaders.
Speaker 3 (04:08):
I did. In fact, if you think about the CEOs
at Vanguard I worked. I had a really special opportunity
to work directly for Jack Brennan, just for one year
on a special assignment working on scalable advice, which we'll
figure later into my career trajectory. And then I worked
directly for Bill McNabb, our next CEO. I worked for
(04:28):
him in multiple capacities when he was running our institutional business,
and then again I worked for him directly as a
member of the senior team when he was CEO. Similarly,
Tim Buckley, our last CEO, worked for him in multiple capacities.
He ran our retail division, and I was working for
him at that time, and then I worked for him
again when he took the CEO spot.
Speaker 2 (04:48):
So you mentioned Jack Bogel. Did you get to spend
a lot of time with him? He is Saint Jack
is pretty legendary.
Speaker 3 (04:54):
He is legendary for sure, not a lot of time.
I never worked directly with Jack, but as I I said,
you know, I was working on the third floor of
the Victory Building, which is where Jack still had his
office for a time, and then he moved down to
the second floor. So he was very present on campus
in my earliest years at Vanguard, but I did not
work with him directly.
Speaker 2 (05:14):
So you were head of strategy, Product, marketing, Communications? Like,
is that one job? Is that four jobs? Tell us
a little bit about your progression over twenty seven years
through the leadership ranks at Vanguard.
Speaker 3 (05:26):
Yeah, that what you just described was my final post
at Vanguard, and it was, yeah, kind of like four jobs,
but it was one one assignment throughout the twenty seven
years though I had, as you know, a bunch of
different roles at Vanguard, really strong rotational culture at the firm.
So I joined in the corporate division as an investment analyst.
(05:47):
Then I moved to corporate strategy. Then I moved and
I did probably a five year stint in a couple
of different roles in our institutional division, and then I
spent probably a dozen years in our retail division, where
as you mentioned, I ran the Ultimately I ran the division,
but I started in different roles in the division, particularly
leading the advisory group before taking over. And then my
(06:08):
final post before I retired at the end of last
year was as you mentioned, strategy marketing, global investment, product development,
oversight of all of our external managers, and then also
corporate communication.
Speaker 2 (06:21):
So let's put some flesh on the bones. So when
I hear corporate communications, I think investor relations, public relations,
just and for It's kind of interesting for most of
Vanguard's history, not a very aggressively public firm, kind of
a low key firm. Not that Jack was low key,
(06:41):
but the firm itself wasn't doing the usual rounds. Isn't
out there yelling and jumping up and down with the
hair on fire, just very quietly, at least from my observation.
Tell me if I'm wrong.
Speaker 3 (06:53):
No, I think that's a fair characterization. Jack Bogel certainly
was out in the industry and vocal at the firm level.
You're right, we didn't do a lot of advertising. We
were quite happy to be in Malvern, Pennsylvania and sort
of out of the limelight. That was intentional on our part,
especially in the earlier years. I think over time we've
(07:14):
gotten far more comfortable taking a stand and expressing our
point of view. But by and large your characterization is fair.
The corporate communications function at Vanguard today, you know, has
evolved considerably from back in the early days. We now
have a crisis communications function, certainly a well developed and
global PR function, as well as all of the standard
(07:37):
sort of corporate messaging and things that you would see
on our digital properties.
Speaker 2 (07:41):
Product development, that's such an ambiguous phrase. Tell us what
product development means specifically at Vanguard.
Speaker 3 (07:48):
Of course, for Vanguard, it means investment product development. So
I head oversight of our four hundred and twenty plus
the numbers probably even greater now, first mutual funds and
increasingly ETFs, and we do as you know, all of
our passively managed products are our managed in house by
our investment management group. But our actively managed funds are
(08:11):
active equity funds. I should say, we do active fixed
in house, but our active equity funds are subadvised to
a stable of investment advisors, and I had purview over that.
My team's identified and then oversaw and built the relationships
with each of those external advisors firms like Wellington, Prime Cap,
et cetera.
Speaker 2 (08:27):
And a lot of people don't realize because you know,
Vanguard and Blackrock are synonymous with broad indexing. But am
I getting the numbers right? About twenty five percent on
the equity side is active or is it even higher
than that?
Speaker 3 (08:41):
It's about probably just shy of a trillion dollars in
active equity.
Speaker 2 (08:45):
Uh huh that's real money.
Speaker 3 (08:47):
Yeah, yeah, it's real money.
Speaker 2 (08:48):
How many subadvisors are you working with? And what is
that process like?
Speaker 3 (08:52):
Well? Today, I think the number it fluctuates a bit
as we add managers to the stable in part ways
with some others, but I think the high water mark
was probably in the mid twenties. It's probably down to
twenty two or twenty three now, you have to check
with the team. But when I left, I think it
was about twenty two or twenty three different managers. And
given the design of the product and the client need
we're trying to meet, we look for the best possible
(09:14):
active manager to fill that mandate.
Speaker 2 (09:16):
So I didn't realize until you just said this earlier.
All of the active fixed income is in house, but
the active equity is external. What's the difference between the
two for our audience? I think I have an idea
of the difference in terms of active fixed income has
certain attributes that active equity doesn't, but I want to
(09:40):
hear it from you.
Speaker 3 (09:41):
Well, maybe one minor clarification. Vast majority of our active
fixed income is managed in house. Wellington does manage one
or two active mandates for us, still legacy mandates like
Jenny May, et cetera. But really the difference being Vanguard
chooses to manage funds in house where we have the
talent and expertise to do so, and active fixed income.
(10:02):
Our bond desk is tremendously deep in talent. Greg Davis,
who I know you've had on the show before. He's great,
Yes he is. He and his team have built out
our fixed income capabilities over the years, and so we
really are in a strong position to offer active fixed
income across the range, and I think you'll see Vanguard
leaning into our fixed income product lineup even more going forward.
Speaker 2 (10:24):
At risk of oversimplifying this, it always feels like active
fixed income, you can run a screen and screen out
riskier product, riskier bonds, lower quality bonds, and that immediately
accrues to outperformance. For an active bond portfolio, you could
(10:46):
develop screens to select certain quality bonds that you have,
certain return characteristics that you like. Am I wrong? And
I always feel like I'm making I'm dumbing it down
too much. It feels like you can do more on
the fixed income side actively and generate a return for
your effort, whereas it's so much harder to do that
(11:08):
on the equity side.
Speaker 3 (11:09):
I think that's fair, and I think Sarah Dever, who
runs our fixed income shop at Vanguard now, would agree
with you. I think there's a lot of opportunity that
the team sees based on what's happening in the environment.
And perhaps I don't know, I'm not in a position
to say relative to active equity. I don't know if
our active equity managers would agree, but I know that
Sarah's team would agree.
Speaker 2 (11:30):
You mentioned that Vanguard is headquartered in Melvern, that it
was a purposeful decision not to locate and headquarters in
Boston and New York City. What are the advantages of that,
How does that accrue to the culture.
Speaker 3 (11:43):
I do think it plays a big role in our culture,
especially over decades. I think it's a big part of
in some ways the talent we attract. There is a
very purposeful decision on the part of most people in
our industry to in many cases relocate their family to
the suburbs of Philadelphia. Many of them are coming from
New York or other areas, And you have to really
(12:04):
buy into the mission and purpose of Vanguard and its
company and its culture to you know, make a consequential
decision like that. And I think it speaks to the
ability for our mission and purpose to resonate with top
talent in the industry.
Speaker 2 (12:20):
And to be fair, Philadelphia is a great American I
I agree. Every time I've ever gone to Vanguard, I've
always arranged a weekend in Philly. It's always a blast.
The food is great, the history is great. It's not
like nothing is New York. But I would put Philly
in Boston, you know, absolutely on par in terms of, hey,
(12:41):
we have this great city right here.
Speaker 3 (12:43):
I would agree with you, Barry, And I think from
a Vanguard culture perspective, it also allowed us to really
instill in you know, now twenty thousand crew around the globe,
but those of us in Malvern for sure. This notion
that our culture is really reflection more of Main Street
than Wall Street. You kind of hear that around Vanguard
every now and then, and it speaks to the clients
(13:05):
that we serve and the way we think about product
development and all of the rest of it.
Speaker 2 (13:08):
Huh, really interesting. So I mentioned Vanguard is about to
celebrate its fiftieth anniversary. By the time the sales it's
already happened.
Speaker 3 (13:17):
That's right.
Speaker 2 (13:17):
That's a nineteen seventy four was when it was launched.
That's an amazing run fifty years. What does that mean
to affirm the size of Vanguard?
Speaker 3 (13:27):
Oh, I think it's you know, an important milestone. But
it is a reflection of everything that Vanguard has been
over the last fifty years. I think, you know, our culture,
our mission, our purpose has been incredibly consistent from the
top down, you know, modeled by every leader you mentioned,
the CEOs of Vanguard that you have already had the
pleasure of talking to.
Speaker 2 (13:49):
Got to get the new guy in.
Speaker 3 (13:50):
Yeah, you got to get the new guy in. But
you know, there is just a remarkable consistency across what
we try to do for clients and how our leaders
express that and how our crew you know, feel that
and reflect that to our clients when they serve them
every day.
Speaker 2 (14:04):
So I'm going to share a Bill McNabb's story, which
I'm sure you experienced, and I want to just get
your reaction to it. He told the story here during
the financial crisis, he would occasionally plug into the phone
system and listen to advisors speaking to clients, and not
only were the clients freaked out, but you could hear
people on the phone. They were a little nervous. All
(14:27):
hands on deck, phone call, Hey, listen, We're going to
come through this better than ever. Nobody's getting fired, nobody's
getting laid off. Take a deep breath, go do your jobs.
And suddenly everybody is just, you know, running on all cylinders.
What was your experience during the financial crisis with McNab
at the HELM.
Speaker 3 (14:46):
Very similar to what you just described and very consistent
with how Vanguard approaches crisis. Really, I mean, the GFC
was definitely qualified as a crisis for our firm in
the industry and investors, and there was a calmness coming
from Bill as the CEO, but also the rest of
the leadership team and providing assurance to our crew. And
(15:07):
You're right, there was, you know, an explicit assurance that
we were going to keep calm and carry on and
really importantly continue investing in our strategic priorities. Where you know,
some firms were immediately pulling back after the GFC, Vanguard
had the luxury of you know, we are playing a
(15:28):
long game and continuing. I recall Bill and the leadership
team expressing to our crew at the time, We're going
to continue to invest in our strategic priorities. We're leaning
in really and I think it had a very big
calming effect on the car.
Speaker 2 (15:41):
That's how he told it. And I'm not surprised that
at your reaction. I mentioned Jack Brennan, Bill mcnah have
another rock steady guy that's whose hand you on on
the tailer. You know, this guy isn't going to be
rattled by a market sellof or a crisis, and that's
that's really fascinating. My colleague Eric Belchunis wrote a column
(16:05):
called the Vanguard Effect way back in twenty sixteen, and
at the time he ran the numbers and said Vanguard's
low fee approach has saved investors either directly or through
indirect fee pressure a trillion dollars. That was almost ten
years ago. I think we could bullpark it closer to
(16:27):
two trillion dollars. Tell us about the focus on cost
and how that's impacted investors and the entire industry.
Speaker 3 (16:37):
Yeah, I'm not going to check your math on that,
but I'll buy Eric's and your your estimate there on
what we've saved investors over time. And I think the
focus on cost has been relentless, something that is in
the fabric of the organization. We counsel our investors and
our clients to focus on the things they can control,
and you know, expense ratios, whether it's mutual funds or ETFs,
(16:59):
these are things that are within an investor's control and
it helps them keep more of their return. It's part
of our whole, you know, portfolio construction methodology when we
advise clients. It's one of the factors, not the only factor,
and maybe not even the first factor, Barry, but certainly
keeping cost low is something that Vanguard feels obligated to
do for it's now fifty plus million investors around the world. Wow,
(17:20):
and the Vanguard effect to use Eric's phrase is real.
I mean we have seen that, particularly when we enter
new markets outside the US.
Speaker 2 (17:30):
You see feed compression imediately when Vanguard shakes everybody's cage.
Speaker 1 (17:35):
Yes.
Speaker 2 (17:36):
So it's funny because Eric eventually writes the book the
boggle effect. You mentioned. Cost isn't the first principle. I
kind of get the sense then, of the things that
you can control. It's being a long term investor and
being a buy and hold investor. That wasn't popular when
(17:57):
Vanguard launched in nineteen seventy four, was it.
Speaker 3 (18:00):
No, Sometimes it's still not even popular today. But we've
been pretty clear and steadfast in our view that investors
should have a goal. It should be intentional about what
they're trying to achieve, having some balance and diversification, being
thoughtful about how you construct a portfolio and perhaps getting
the help of an advisor to do that if an
investor would benefit from that, and really having the discipline
(18:22):
to your point of sticking with it for the long term,
and understanding what your personal risk tolerance is, your investment
time horizon, and really thinking about how you're going to
achieve those goals.
Speaker 2 (18:34):
So I want to ask you a question, and I'm
very cognizant of the fact that you are no longer
with Vanguard. We'll talk a little bit about where you've went.
There has been in the industry as a whole, but
surprisingly at Vanguard also a move towards some privates some alternatives.
(18:57):
Tell us about this evolution.
Speaker 3 (18:59):
Yeah, I think it's an exciting one, both for the
industry but also for Vanguard. As you mentioned, we began
offering in twenty twenty. I think we began offering private
equity fund to some of our retail investors, those that
were qualified for it. It was a first for Vanguard,
but I would say the notion of broadening access to
(19:22):
different types of investments for mainstream investors is not a first.
I mean, it's what we did with mutual funds, it's
what we did with ETFs, it's what we endeavored to
do with advice, and so private equity is part and
parcel really of that advice offer for many of our
advice clients. I think you'll see a lot more of that.
In fact, there was subsequent to my leaving, there was
a recent announcement that there is even another product that
(19:45):
there'll be more information on. With partnering with Blackstone and Wellington,
which is pretty exciting.
Speaker 2 (19:52):
And where did you end up shifting after twenty seven years.
Speaker 3 (19:56):
Well, I'm still making the shift, you know. I'm still
kind of writing my next chapter, which is really exciting.
But I will be joining Harborvest Partner's board next month.
Speaker 2 (20:06):
So May, first, you're at harbor Vest Vanguard, did I
want to say Experiments which they've expanded, which was working
with harbor Vest, which you know, maybe the layperson knows Vanguard,
but they don't know harbor Vest. They're one of the
biggest private equity in private credit shops out there, right,
tell us what are you doing at Harborvest.
Speaker 3 (20:27):
Really excited to join harbor Vest in May. I'm going
to be joining their board, really getting to know the
firm in a different capacity. When I was at Vanguard,
of course, in twenty twenty, we partnered with Harborvest. I
oversaw the team that actually selected Harborvest among multiple managers
that we considered for our first private equity offer for
both retail and ocio clients at the time. So multiple
(20:50):
series or vintages of that fund have progressed and Vanguard
continues to work with Harborvest. And now I'm looking forward
to working with them in a different capacity.
Speaker 2 (20:59):
So this raised this's a fascinating question. There has been
a giant shift from public to private assets over the
past you know, certainly decade or so. Not everybody can
be in the top ten percent, as the joke goes,
but it seems like there's almost a land grab going
on for the retail investor thinking about a traditional sixty
(21:23):
forty portfolio, why should they also be thinking about adding
a slug of private debt or private equity to their portfolio.
Speaker 3 (21:32):
Yeah, I think it's one of the next things that
we as an industry, not just vanguard, but more broadly,
advisors have to help clients with retail clients in particular,
who are used to, as you said, at conventional sixty
forty public portfolio, really thinking about is first is there
a role for privates in their portfolio construction? And then
(21:54):
if yes, if appropriate, then how they should integrate that
into their portfolio, and then which manager they should do
that with. So it is a you know, a multi
layered decision process, and I think one that advisors can
really help with. That's a personal opinion. I think advisors
can help clients who maybe know a little bit about
private equity but not enough or have heard about private
(22:16):
credit and all of the you know, press headlines that
private credit is getting right now, and really trying to
figure out is this right for me? And and in fact,
can it generate excess returns well above public markets over time?
And is that something I should incorporate into my portfolio.
I think that's a you know, a problem statement that
many clients aren't even approaching yet, but but perhaps should.
(22:39):
Perhaps there is a spot for and I think if
you look at all of you called it a land grab,
I think that's pretty fair. I think there's a ton
of movement. Sure, everybody I speak with and probably those
that you speak with too, are talking about democratizing privates.
I think it's a trend right now, but I think
in general it's something that should be here to say.
Speaker 2 (23:00):
So, let me ask you two questions about that, an
easy question and a hard question. The easy question is, Hey,
is this about non correlated diversified returns or is this
about generating alpha and outperforming markets at public markets?
Speaker 3 (23:14):
Yeah? I think it can be both. It's a really
good distinction. I think it can be both. It depends
on your wealth level, It depends on how much of
your overall allocation you're going to put into privates, and
then what type of private market asset class you're going
to be working with. So yes, I think it can
be an uncorrelated return opportunity and also an alpha generation opportunity.
Speaker 2 (23:36):
So now the hard question. Vanguard built its reputation on
low cost alternatives, have a reputation of being pricey, So
how do you square that circle?
Speaker 3 (23:49):
I think it's going to be a matter of you
pay different things for different asset classes, and private market
investing is different than public market investing, so I would
imagine that investors should expect to pay more for a
private equity offer or a private credit offer. The key
for me, you know, and again speaking personally, would be
I want to know that I'm getting a top quality
(24:11):
manager at a fair price. I think, you know, giving
a fair price is the obligation that the industry has
to investors.
Speaker 2 (24:18):
And that's the Vanguer culture, even spilling over into private
So we've come to know Vanguard not just for passive,
not just for indexing, not just for stocks and bonds,
but generally a putting clients first, A fiduciary approach to
asset management is that consistent with some of the criticism
(24:40):
we've seen of the alternative space, or is it simply
as much as not all alternatives are created equally.
Speaker 3 (24:48):
Certainly, not all alternatives are created equally. I think you
could say that for sure, And I think with regard
to what Vanguard endeavors to do, it'll be up to
the current CEO and his leadership team. But I would
suspect that they will stay true to the notion of
trying to provide clients with the best possible offers that
meet their long term investing needs. And I do think
(25:09):
that there is a place for private assets in that,
but that'll be up to the current team to decide.
Speaker 2 (25:16):
Really really fascinating. So I read a crazy stat that
in the state of Pennsylvania, if you are a certified
financial planner, ninety three percent odds that you work for Vanguard.
Can that possibly be correct?
Speaker 3 (25:30):
Again, I'm not going to check your stat but I
think yes. Having built out the personal advisor offer from
the ground up and passed it on to multiple of
my colleagues since then, we're now well over I think
a thousand advisors for sure, so it's possible. Luckily, we
have other domestic offices. Not just Pennsylvania, there's also Charlotte
(25:53):
and Arizona and Dallas, so we can we can attract
talent in the CFP ranks from multiple spots.
Speaker 2 (25:59):
So I have to ask you. You're working at this
giant shop and you say, I know, let's build an RIA,
your registered investment advisory firm that's a fiduciary within a
giant asset manager. Tell us about the genesis of this.
Speaker 3 (26:16):
Yeah, well, definitely not my vision alone. There was. It
was a firm wide kind of push. For sure. We
had been this is going way back. We had been
chasing scalable advice for decades. At Vanguard. We had an
offer very small relative to you know, the firm size
at the time. It was called Asset Management Services. The
(26:39):
minimum was five hundred thousand dollars to invest. You got
a one on one dedicated advisor, much the same way
you do today. And I think we charged back then, Barry,
probably ninety basis points on the first million. Okay, great offer.
Clients loved it, high ENDPS scores, but certainly not scalable.
You know, we had a few hundred, fewer than two
(26:59):
high advisors really powering that offer. And you know, fewer
than ten thousand clients, So we knew that we had
the ability to offer great advice using mostly Vanguard product
at the core of the advice methodology at the time,
and we wanted to scale it. But I credit really
Jack Brennan initially for wanting that scalable advice. I mentioned
(27:23):
at the top of the program that I had a
special opportunity to work for Jack doing research, really kind
of pulling together research and helping the senior team determine
whether they were going to try to do this scalable
advice offer. And there were multiple iterations before Personal Advisor.
Personal Advisor, which we launched in twenty fifteen, that's the
(27:44):
offer you just referenced, well over three hundred and fifty
billion now serving hundreds of thousands of clients. It started
with multiple iterations inside of Vanguard, so I think we
had a couple of goes at it before we perfected
what I had the really the privilege to lead in
twenty fifteen.
Speaker 2 (28:02):
Huh, that's really fascinating. I know Vanguard has a direct
indexing product now, it's kind of fascinating to look at
all these different product lines and divisions because in the
early days Jack Bogel didn't want to do ETFs, didn't
want to do international. Hey, we do one thing, we
do it really well, and everybody else can can play catch.
Speaker 3 (28:24):
Up, and you can add advice to that list. He
didn't want to do advice either. In fact, oh for sure,
we had thousands of frontline phone associates who were told
do not use the word advice. You know, there was
definitely a very clear line between guidance and advice, and
we were very careful to step back from the advice line,
if you will.
Speaker 2 (28:44):
So what's the difference between guidance and advice?
Speaker 3 (28:48):
Well, there is a regulatory difference, for sure, and that's
what we were homing in on at the time.
Speaker 2 (28:53):
But well, you have discretion, right your fiduciaries. Yes, so
I don't see the difference. Listen, if you're giving your
child advice or you're giving them guidance, maybe guidance is
a little gentler.
Speaker 3 (29:08):
Yes, guidance is gendler. It's there is definitely a difference.
But you know, I had in earlier in my career,
I led phone groups, you know, hundreds of phone associates
and we would train them to serve the client's transactional
needs and help them with guidance. But I cannot tell you.
(29:28):
In the same way that Bill McNabb would monitor phone calls,
I would monitor phone calls when I was leading those groups,
and so many clients just wanted to know which fund
should I buy, you know, that was what you said.
I had a small stable of friends and now we have,
you know, four hundred different options, and I think it
It also led to the genesis of our personal advisor offer,
(29:49):
because we realized there was an incredible pent up demand
people who had joined Vanguard, you know, perhaps with a
single mutual fund, you know, maybe they started with a
money market fund.
Speaker 2 (30:00):
Totally self directed.
Speaker 3 (30:01):
Totally self directed is really the legacy of the firm.
You know, we still have a much greater cadre of
self directed clients than advised clients. The vast majority of
vast majority of vast majority of clients.
Speaker 2 (30:12):
Although I say this as an RIA I know the
RIA side of the industry are big buyers and supporters
of Vanguard products.
Speaker 3 (30:22):
Oh for sure, I mean I would acknowledge that the
RIA channel, for sure is it's a totally different division
at Vanguard, but it is absolutely critical to our success
and growth over time. What we've been talking about is
really that direct relationship when a client, you know, opens
a mutual fund account directly with Vanguard and then that
is essentially what what I'm referring to as self directed.
(30:44):
But in the same timeframe, we were growing our Financial
Advisor Services division as well, and that is a critical
component of what we do today.
Speaker 2 (30:53):
And when this first rolled out, there was a little rumbling.
I think Vanguard managed to thread the needle and say
we're not offering advice, we're offering guidance and not exactly
competing with that channel.
Speaker 3 (31:07):
Well, we were offering advice, but you're right that there
was a little bit of needle threading to do. I
think partially we were able to do that well because
there was so much internal collaboration across the senior leaders
at the firm. First Martha King and then Tom Rampoola
ran the FAS division at that time, and when Tom
took over, I was running the retail division, and there
(31:30):
was a lot of discussion around, you know, what we
needed to do to both serve rias really well through
Tom's division and also be a growing and thriving ria
ourselves serving individual investors with our own advice methodology, and
I think there's been a lot of collaboration between those
divisions over time, where we use research and the things
(31:52):
that we learn through our Investment Strategy group or our
in house research, we share that with the rias that
we serve.
Speaker 2 (32:00):
So here's a crazy stat I want to throw out
at you. So total investible assets of stocks bonds were
not quite one hundred trillion, but where it's not that
far off in the United States, how is it possible
that nobody in the RIA space has market share? You
guys are three hundred and fifty billion dollars And it's like, eh.
Speaker 3 (32:21):
Well, there are some pretty big and very strong independent
arias and we serve a lot of them. Their clients
a vanguards. But you're right, it's a it's a fragmented market. Still,
there's definitely a top tier for sure.
Speaker 2 (32:33):
All right, But there's ten firms with yes, you're one
hundred billion, two hundred billion, and a ton of firms
with twenty forty sixty billion. And it's funny when I
discuss these numbers with family, they think five billion is
a lot of money. I'm like, oh no, no, we're peons.
They don't really, they don't really know what trillions are,
but why is the industry so fragmented?
Speaker 3 (32:55):
You know, I don't know what the why is behind that,
but I can certainly say, just in the time that
I've left Vanguard, all of the conversations I've had around
the industry, there is a ton of interest in and
you see it yourself, all of the consolidation that is
happening among all of those mid and smaller tier rias.
You know, the larger firms the top tier are either
(33:15):
buying up those arias. There's consolidation across the industry. There's
a lot of private equity money invested and investing interested
in investing more in the RIA space. There's just a
ton of movement in wealth management, which I think is
exciting and hopefully is good for investors.
Speaker 2 (33:30):
And there's some crazy number the average advisors age is
like sixty six. So there's a whole succession planning.
Speaker 3 (33:35):
Yeah, that's the other thing, You're right, the demographics. It's
you know, lots of rias are you know, looking to
turn over their book and they don't have a strong
succession plan.
Speaker 1 (33:44):
Huh.
Speaker 2 (33:45):
That's really fascinating. So one of the things you launched
at Vanguard there's so many different initiatives you did, but
the Vanguard Women's Initiative for Leadership Success. Tell us a
little bit about that. What led to this project and
what have the results been.
Speaker 3 (34:01):
They call it WILLS internally at Vanguard, and you're right,
it's the Women's Initiative for Leadership Success. It was spearheaded
under Bill mcnath Leadership and I mention that because it
is so important that top down the CEO made it
a priority, and I think that's why it continues to
thrive today. I had the honor of being one of
the founding leaders of our WILLS initiative more than fifteen
(34:23):
years ago at this point, but it's still an incredibly
important employee resource group within the firm, and it was
the first of several, so we probably have half a
dozen or more different employee resource groups now. But the
importance of encouraging women and helping them develop into leaders
at Vanguard, and I use the term leader broadly, so
(34:45):
leader of people, but also specialists in portfolio management, or
legal or data analytics, you name it. So there's just
been a lot of evolution over time, but that consistent
drumbeat of helping our women develop into to the you know,
highest potential leaders that they could be at the firm
in whatever area of expertise they were best suited to.
Speaker 2 (35:08):
What sort of advice would you give to a young
woman aspiring to a leadership role in the world of
investing in finance?
Speaker 3 (35:15):
If I think particularly about the advice and counsel that
I have given to many younger women in the organization,
I often will say, don't be afraid to take a risk.
You know, do the work, develop a point of view,
have your own point of view, and be willing to
share it. That's you know, there's often a confidence gap.
It's not an aptitude gap.
Speaker 2 (35:35):
But men blunder in regardless of their competency. Women are
much more circumspect. Pardon me for man's blating sexism, but
like my observations have been, man as a as a dude,
I I'm out over my skis, I have no radio training.
What am I doing here? And I've noticed since I've
(35:58):
been doing this that men just seem to be we
are blithe idiots stumbling into things, and women seem to
be more thoughtful in circumspect.
Speaker 3 (36:08):
Those are your words, so I'll just say yes, I
find many times men are infinitely comfortable sharing their point
of view regardless. Yes, but I think women can often
use some encouragement to, you know, want one do the work,
develop the point of view right that there is work
to be done. But once you have a point of view,
(36:29):
take a risk and share it and know that it's okay.
When you are wrong, you will be wrong. I think
there's often a fear of the criticism that will you know,
will follow when you express your point of view, and
I think a lot of the council is develop the
point of view, take the risk because no one will
know you're in the room until you open your mouth,
right and you know related, but perhaps a little different
(36:53):
than that, I would give the advice to women who
are looking for expanded leadership opportunities more responsibility to be
explicit in asking for it. And that's also something that
you hope. You keep your head down and do the work,
and you get noticed, and you get chosen for the
special project or the next assignment or the rotation, and
(37:14):
often you know you're just not top of mind, and
that's okay. So you have to be more explicit about
expressing your interest in taking on more responsibility, expanding your
remit within the organization or getting on some research project.
You have to tell people that you're interested in doing
more than you've already been asked to do.
Speaker 2 (37:35):
So let me throw you a curveball. You served or
you are serving as a director on the Vanguard Foundation board.
Speaker 3 (37:42):
I did serve as a member of the Vanguard Foundation
Board when I was at the firm. I also served
as a member of the Irish Funds Board, and I
also had the opportunity it's separate from Vanguard but related,
I also served on Vanguard Charitables Board for a number
of years. So all of those, you know, through different lenses,
were opportunities outside of my day to day's swim lane
(38:06):
or you know job, if you will to give back
to either the community with regard to the Vanguard Foundation,
or get involved in our international business through our Irish
Funds distribution through that board or in Vanguard Charitables case,
really think about donor advise funds and learn more about that.
Speaker 2 (38:23):
And that's a big that's like eighteen twenty billion dollars
something like that. That's a big chunk of money that
people are saying, help us distribute this philanthropically exactly right,
huh quite fascinating. All right, let's jump to our favorite questions,
starting with what are you watching these days or listening to?
What's keeping you entertained on the What am I watching?
Speaker 3 (38:44):
I would say, hacks is Do you like it? I
love it?
Speaker 2 (38:49):
We not only do we love the show, but we
watch it straight.
Speaker 3 (38:54):
You know.
Speaker 2 (38:54):
At the end there's a little podcast discussion, yes, by
the showrunners and the creators, and they're just charming to
lifeful people.
Speaker 3 (39:00):
Yeah. Yeah, for those that don't know, I think it's
worth a It's very different from anything you see on
TV right now. Gene smart Is, you know, talk about
longevity in a career. She's in her seventies. I love
seeing that, and it's just a darkly funny, you know,
mentorship between one character and a much younger characters. It's
(39:21):
a good one.
Speaker 2 (39:23):
Tell us about your mentors who helped shape your career.
Speaker 3 (39:27):
Man too many to count. At Vanguard really just spoiled
with lots of great leaders, all of whom were mentors
in different ways, particularly in the very early days of
my career, people like Jeff Moltor taking a chance on me,
giving me my first job at Vanguard when I was
not an obvious choice. Really helping me develop a thick skin.
(39:47):
He was notorious for giving very straight feedback. Martha King
I mentioned her earlier, just one of my earliest female
role models at the firm when there really weren't that many.
There still are not enough across the industry, but many
more today than back in the late nineties. And then
certainly I mentioned I've already talked about Jack Brennan, Bill McNabb,
(40:10):
and Tim Buckley, but certainly Bill McNabb and Tim Buckley
for sure figure prominently in my career as advocates for
me over decades. They are still to this day as
I think about writing my next chapter and what I
want to do post Vanguard, I still am looking to
the mentorship and advocacy of both Bill and Tim, so
(40:30):
very grateful for them both.
Speaker 2 (40:32):
Really really interesting list. Let's talk about books. What are
some of your favorites? What are you reading currently?
Speaker 3 (40:37):
Well, favorites for sure. You can't spend twenty eight years
of Vanguard without the required reading. A random walked down
Wall Street I think was dropped on my chair truly
within the first month of my joining the firm. One
of my Burt mais yes Bert Malkil, who is the Yes,
longtime board member at Vanguard, But really, you know, required
reading on passive the benefits of passive investing, And you know,
(41:01):
when I joined Vanguard, I knew about indexing, but I
didn't know it to the depth that I would later,
And so that was was an early educational book, probably
in the same era when Genius failed is a fat
line yep. Roger Lowenstein and the Rise and Fall of
long term capital management. Think about when I joined Vanguard
in ninety seven. You know that was all unfolding in
(41:23):
the early two thousands. I didn't know anything about hedge funds,
I didn't know anything about leverage. Really, it moved so
far afield from what was happening in Malvern, Pennsylvania that
it was just like a fascinating read and really a
cautionary tale that for.
Speaker 2 (41:38):
The financial crisis not but a decade later. Correct, all
those lessons were totally ignored. If anything, maybe it made
people too cocky. You don't worry about it, The FED puts.
Speaker 3 (41:48):
Yeah, yeah, yeah, that's a fair point. What am I
reading now? I just finished, and I'm like way behind
the times because a million colleagues had suggested I read
Outlive by Peter Attia M h. You know it's been
on the bestseller list for multiple years now. Yeah, but
fascinating to think about the longevity and the notion of
(42:09):
health span versus life span. Looking inwardly for each person.
I have some work to do to live to one hundred,
but I'm gained for it. And the book on my
shelf next is related to that. It's called the Longevity Principle,
and that takes sort of a broader view of how
society will need to change to support from an infrastructure, healthcare,
(42:30):
financial sector, all these different dimensions that will need to
change to support all these people who will be living
to maybe one hundred in the future and not that
far away.
Speaker 2 (42:39):
And the conversation the way the math works, if you
make it into your sixties without dropping debt of a
heart attack or whatever, the odds of hitting mid eighties
or beyond go up dramatically, yes, And so suddenly the
question is, hey, have I saved enough money if I'm
going to be around to eighty five ninety. It's a
genuine planning issue for anybody thinking about their financial future.
Speaker 3 (43:03):
You're right. I remember when we first started the personal
Advisor offer and we were creating the advice methodology, we conservatively.
You know, our planning horizon was to one hundred years.
Speaker 2 (43:12):
Well, Evan Monte Carlos, that goes to one hundred.
Speaker 3 (43:15):
Yes, And I cannot tell you how many clients at
the time said that's insane, I'm going to drop that
at seventy or eighty or whatever, and they would fight
with us. And now it's you know, it's not inconceivable.
Speaker 2 (43:25):
That doesn't surprise me at all. Our final two questions,
what advice would you give to a recent college grad
interested in a career in wealth management or personal financial guidance?
Speaker 3 (43:38):
I would say, for sure, pay attention to the company
and the mission and purpose of that company. Be proud
of the company you work for. Worry about that more
than the job or the starting salary. Think hard about
the company that you want to connect yourself with. I mean,
it's it's unlikely that many college grads are going to
(43:59):
have a twenty eight year run at a company like
I just did. But even if you're only going to
be there for a shorter stint, you know, think about
the company ahead of the actual job you're going to do.
Because my next piece of advice is do more than
is asked. Think about how you can contribute outside of,
you know, your finite job description. Lastly, I would say,
(44:20):
seek to understand the context. When you join a company
and you're right out of college and you're eager to
make a mark, I think it's really important to understand
what came before you. You know, take the time to
invest in relationships with your peers and understand the context
of what's going on at the firm and the history
behind it before you charge into whatever you're going to do.
Speaker 2 (44:41):
And our final question, what do you know about the
world of wealth management and investing today That would have
been useful in nineteen ninety seven when you were first
getting your feet wet.
Speaker 3 (44:51):
Yeah. Well again here I feel like a bit of
a ringer because not many twenty three year olds have
the benefit of people like Jack Brennan or Bill McNab, etc.
Telling them explicitly. I remember sitting in the office with
Jack Brennan and he said, all you need to do
is live below your means. And it was something that
Jack Bobo used to say all the time, and it
(45:12):
was instilled in you the minute you got into Vanguard,
along with things like invest in the four oh one
k and take advantage of the company match and build
up an emergency fund, and all these things that are
the basic tenets of financial planning. But when you're in
your early twenties you don't necessarily focus on These are
things that I actually, twenty eight years later, have benefited
(45:35):
from because the magic of compounding was a very real
thing that I was able to take advantage of before
perhaps many of my peers who were working at different
companies where that wasn't such a strong focus, but at
Vanguard such a strong focus.
Speaker 2 (45:49):
Well, thank you, Karen for being so generous with your time.
We have been speaking with Karen reci formally of the
Vanguard Group, now on the board of Harbor. If you
enjoy this conversation, well, be sure and check out any
of the five hundred and fifty we've done. You can
find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find
(46:12):
your favorite podcast. And be sure and check out my
new book How Not to Invest The ideas, numbers and
behaviors that destroy wealth and how to avoid them How
Not to Invest at your favorite bookstore today. I would
be remiss if I did not thank the Crack staff
that helps you put these conversations together each week. John
(46:33):
Wasserman is my audio engineer. Anna Luke is my producer.
Sean Russo is my researcher. I'm Barry Rickols. You've been
listening to Masters in Business on Bloomberg Radio.
Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
Business with Barry Ritholts on Bloomberg Radio.
Speaker 2 (00:16):
This week on the podcast, I have an extra special guest,
the Vanguard Group's Karen reci the person who is responsible
for so many initiatives, so much growth, so many new products,
including the Vanguard Ria, the internal advisory service that runs
three hundred and fifty billion dollars. This is a fascinating
(00:38):
conversation if you're at all interested in what it's like
to be part of a fast growing organization that is
racking up trillions of dollars in assets, what it's like
to create new initiatives. Really, this is tour de force conversation.
She has just concluded about twenty eight years at Vanguard
and is moving over to Harbor Vest, which is the
(00:59):
out side private equity shop that Vanguard has been working with.
I thought this conversation was fascinating, and I think you
will also with no further ado, my conversation with the
Vanguard Group and Harbor Vests Karen REESI.
Speaker 3 (01:16):
Thanks for having me, Barry. I'm happy to be here.
Speaker 2 (01:18):
I'm happy to have you. I want to talk about
your time at Vanguard, but before I do that Bachelor's
in Finance MBA from Villanova. Finance always was a career plan.
That's what it kind of looks like.
Speaker 3 (01:32):
Yes, I think it looks that way, but I'll say
I got more intentional over time, Barry, But no, I
initially actually wanted to go to art school. Oh real
little known fact.
Speaker 2 (01:41):
Yes, so we did from Villanova. Do you go straight
into the NBA or do you work and then go back?
Speaker 3 (01:46):
I worked for a few years at Sinoco in Center City, Philadelphia,
and then I started my MBA there and then joined
Vanguard and finished up my MBA in my first couple
of years at Vanguard.
Speaker 2 (01:56):
Really, so right from business school and then the only
company you've worked for since school is Vanguard. That's an
impressive run. How did you find your way to Vanguard?
Speaker 3 (02:06):
Like so many people at Vanguard, I had a friend
that worked there, So I was a couple of years
out of school in investor relations at Snoko, and then
I had a friend who said, you know, if you
want to get more into finance and investments, we have
an opening at Vanguard. I think you'd really like it.
And that truly is how I got into the interview process.
(02:27):
I grew up in the area. I grew up in
the suburbs of Philadelphia, so I knew Vanguard go Berts, yes,
but I didn't know really that much about it, and
I only had one friend who worked there. But I
went for the interview process and joined as an investment
analyst in nineteen ninety seven.
Speaker 2 (02:43):
So late nineties, Vanguard had to be a really interesting place.
What was it like during that period?
Speaker 3 (02:48):
It was an interesting place. It was not an unknown
like many of my you know, retired predecessors are. You know,
when they joined Vanguard in the eighties, it was really
off the radar. We were starting to gain traction. Indexing
was starting to gain traction, the hiring classes were getting bigger.
So I joined with you know, dozens of other people
(03:09):
when I joined Vanguard in May of ninety seven, and
you know, we were still though, this small ish firm
in Malvern, Pennsylvania, Valley Forge, Pennsylvania, very different from Wall Street.
Speaker 2 (03:23):
So if you join Vanguard in ninety seven, Jack Brennan.
Speaker 1 (03:27):
Is CEO, is that right?
Speaker 3 (03:28):
That's exactly right.
Speaker 2 (03:29):
A delightful, serious individual and I find him, like every
other prior CEO of Vanguard, fascinating guy.
Speaker 3 (03:38):
Yes, yes, and you're right a serious individual. Yes, Jack
was leading the firm by the time I got there
in ninety seven, but of course Jack Bogel was still
sort of around present on campus. You know, his whole
spirit looms large even today.
Speaker 2 (03:53):
And so if I memory serves, it was only a
couple of years later Brennan kicked himself up to chairman
and Bill McNabb comes in it as CEO. So you
worked with some really tremendous corporate leaders.
Speaker 3 (04:08):
I did. In fact, if you think about the CEOs
at Vanguard I worked. I had a really special opportunity
to work directly for Jack Brennan, just for one year
on a special assignment working on scalable advice, which we'll
figure later into my career trajectory. And then I worked
directly for Bill McNabb, our next CEO. I worked for
(04:28):
him in multiple capacities when he was running our institutional business,
and then again I worked for him directly as a
member of the senior team when he was CEO. Similarly,
Tim Buckley, our last CEO, worked for him in multiple capacities.
He ran our retail division, and I was working for
him at that time, and then I worked for him
again when he took the CEO spot.
Speaker 2 (04:48):
So you mentioned Jack Bogel. Did you get to spend
a lot of time with him? He is Saint Jack
is pretty legendary.
Speaker 3 (04:54):
He is legendary for sure, not a lot of time.
I never worked directly with Jack, but as I I said,
you know, I was working on the third floor of
the Victory Building, which is where Jack still had his
office for a time, and then he moved down to
the second floor. So he was very present on campus
in my earliest years at Vanguard, but I did not
work with him directly.
Speaker 2 (05:14):
So you were head of strategy, Product, marketing, Communications? Like,
is that one job? Is that four jobs? Tell us
a little bit about your progression over twenty seven years
through the leadership ranks at Vanguard.
Speaker 3 (05:26):
Yeah, that what you just described was my final post
at Vanguard, and it was, yeah, kind of like four jobs,
but it was one one assignment throughout the twenty seven
years though I had, as you know, a bunch of
different roles at Vanguard, really strong rotational culture at the firm.
So I joined in the corporate division as an investment analyst.
(05:47):
Then I moved to corporate strategy. Then I moved and
I did probably a five year stint in a couple
of different roles in our institutional division, and then I
spent probably a dozen years in our retail division, where
as you mentioned, I ran the Ultimately I ran the division,
but I started in different roles in the division, particularly
leading the advisory group before taking over. And then my
(06:08):
final post before I retired at the end of last
year was as you mentioned, strategy marketing, global investment, product development,
oversight of all of our external managers, and then also
corporate communication.
Speaker 2 (06:21):
So let's put some flesh on the bones. So when
I hear corporate communications, I think investor relations, public relations,
just and for It's kind of interesting for most of
Vanguard's history, not a very aggressively public firm, kind of
a low key firm. Not that Jack was low key,
(06:41):
but the firm itself wasn't doing the usual rounds. Isn't
out there yelling and jumping up and down with the
hair on fire, just very quietly, at least from my observation.
Tell me if I'm wrong.
Speaker 3 (06:53):
No, I think that's a fair characterization. Jack Bogel certainly
was out in the industry and vocal at the firm level.
You're right, we didn't do a lot of advertising. We
were quite happy to be in Malvern, Pennsylvania and sort
of out of the limelight. That was intentional on our part,
especially in the earlier years. I think over time we've
(07:14):
gotten far more comfortable taking a stand and expressing our
point of view. But by and large your characterization is fair.
The corporate communications function at Vanguard today, you know, has
evolved considerably from back in the early days. We now
have a crisis communications function, certainly a well developed and
global PR function, as well as all of the standard
(07:37):
sort of corporate messaging and things that you would see
on our digital properties.
Speaker 2 (07:41):
Product development, that's such an ambiguous phrase. Tell us what
product development means specifically at Vanguard.
Speaker 3 (07:48):
Of course, for Vanguard, it means investment product development. So
I head oversight of our four hundred and twenty plus
the numbers probably even greater now, first mutual funds and
increasingly ETFs, and we do as you know, all of
our passively managed products are our managed in house by
our investment management group. But our actively managed funds are
(08:11):
active equity funds. I should say, we do active fixed
in house, but our active equity funds are subadvised to
a stable of investment advisors, and I had purview over that.
My team's identified and then oversaw and built the relationships
with each of those external advisors firms like Wellington, Prime Cap,
et cetera.
Speaker 2 (08:27):
And a lot of people don't realize because you know,
Vanguard and Blackrock are synonymous with broad indexing. But am
I getting the numbers right? About twenty five percent on
the equity side is active or is it even higher
than that?
Speaker 3 (08:41):
It's about probably just shy of a trillion dollars in
active equity.
Speaker 2 (08:45):
Uh huh that's real money.
Speaker 3 (08:47):
Yeah, yeah, it's real money.
Speaker 2 (08:48):
How many subadvisors are you working with? And what is
that process like?
Speaker 3 (08:52):
Well? Today, I think the number it fluctuates a bit
as we add managers to the stable in part ways
with some others, but I think the high water mark
was probably in the mid twenties. It's probably down to
twenty two or twenty three now, you have to check
with the team. But when I left, I think it
was about twenty two or twenty three different managers. And
given the design of the product and the client need
we're trying to meet, we look for the best possible
(09:14):
active manager to fill that mandate.
Speaker 2 (09:16):
So I didn't realize until you just said this earlier.
All of the active fixed income is in house, but
the active equity is external. What's the difference between the
two for our audience? I think I have an idea
of the difference in terms of active fixed income has
certain attributes that active equity doesn't, but I want to
(09:40):
hear it from you.
Speaker 3 (09:41):
Well, maybe one minor clarification. Vast majority of our active
fixed income is managed in house. Wellington does manage one
or two active mandates for us, still legacy mandates like
Jenny May, et cetera. But really the difference being Vanguard
chooses to manage funds in house where we have the
talent and expertise to do so, and active fixed income.
(10:02):
Our bond desk is tremendously deep in talent. Greg Davis,
who I know you've had on the show before. He's great,
Yes he is. He and his team have built out
our fixed income capabilities over the years, and so we
really are in a strong position to offer active fixed
income across the range, and I think you'll see Vanguard
leaning into our fixed income product lineup even more going forward.
Speaker 2 (10:24):
At risk of oversimplifying this, it always feels like active
fixed income, you can run a screen and screen out
riskier product, riskier bonds, lower quality bonds, and that immediately
accrues to outperformance. For an active bond portfolio, you could
(10:46):
develop screens to select certain quality bonds that you have,
certain return characteristics that you like. Am I wrong? And
I always feel like I'm making I'm dumbing it down
too much. It feels like you can do more on
the fixed income side actively and generate a return for
your effort, whereas it's so much harder to do that
(11:08):
on the equity side.
Speaker 3 (11:09):
I think that's fair, and I think Sarah Dever, who
runs our fixed income shop at Vanguard now, would agree
with you. I think there's a lot of opportunity that
the team sees based on what's happening in the environment.
And perhaps I don't know, I'm not in a position
to say relative to active equity. I don't know if
our active equity managers would agree, but I know that
Sarah's team would agree.
Speaker 2 (11:30):
You mentioned that Vanguard is headquartered in Melvern, that it
was a purposeful decision not to locate and headquarters in
Boston and New York City. What are the advantages of that,
How does that accrue to the culture.
Speaker 3 (11:43):
I do think it plays a big role in our culture,
especially over decades. I think it's a big part of
in some ways the talent we attract. There is a
very purposeful decision on the part of most people in
our industry to in many cases relocate their family to
the suburbs of Philadelphia. Many of them are coming from
New York or other areas, And you have to really
(12:04):
buy into the mission and purpose of Vanguard and its
company and its culture to you know, make a consequential
decision like that. And I think it speaks to the
ability for our mission and purpose to resonate with top
talent in the industry.
Speaker 2 (12:20):
And to be fair, Philadelphia is a great American I
I agree. Every time I've ever gone to Vanguard, I've
always arranged a weekend in Philly. It's always a blast.
The food is great, the history is great. It's not
like nothing is New York. But I would put Philly
in Boston, you know, absolutely on par in terms of, hey,
(12:41):
we have this great city right here.
Speaker 3 (12:43):
I would agree with you, Barry, And I think from
a Vanguard culture perspective, it also allowed us to really
instill in you know, now twenty thousand crew around the globe,
but those of us in Malvern for sure. This notion
that our culture is really reflection more of Main Street
than Wall Street. You kind of hear that around Vanguard
every now and then, and it speaks to the clients
(13:05):
that we serve and the way we think about product
development and all of the rest of it.
Speaker 2 (13:08):
Huh, really interesting. So I mentioned Vanguard is about to
celebrate its fiftieth anniversary. By the time the sales it's
already happened.
Speaker 3 (13:17):
That's right.
Speaker 2 (13:17):
That's a nineteen seventy four was when it was launched.
That's an amazing run fifty years. What does that mean
to affirm the size of Vanguard?
Speaker 3 (13:27):
Oh, I think it's you know, an important milestone. But
it is a reflection of everything that Vanguard has been
over the last fifty years. I think, you know, our culture,
our mission, our purpose has been incredibly consistent from the
top down, you know, modeled by every leader you mentioned,
the CEOs of Vanguard that you have already had the
pleasure of talking to.
Speaker 2 (13:49):
Got to get the new guy in.
Speaker 3 (13:50):
Yeah, you got to get the new guy in. But
you know, there is just a remarkable consistency across what
we try to do for clients and how our leaders
express that and how our crew you know, feel that
and reflect that to our clients when they serve them
every day.
Speaker 2 (14:04):
So I'm going to share a Bill McNabb's story, which
I'm sure you experienced, and I want to just get
your reaction to it. He told the story here during
the financial crisis, he would occasionally plug into the phone
system and listen to advisors speaking to clients, and not
only were the clients freaked out, but you could hear
people on the phone. They were a little nervous. All
(14:27):
hands on deck, phone call, Hey, listen, We're going to
come through this better than ever. Nobody's getting fired, nobody's
getting laid off. Take a deep breath, go do your jobs.
And suddenly everybody is just, you know, running on all cylinders.
What was your experience during the financial crisis with McNab
at the HELM.
Speaker 3 (14:46):
Very similar to what you just described and very consistent
with how Vanguard approaches crisis. Really, I mean, the GFC
was definitely qualified as a crisis for our firm in
the industry and investors, and there was a calmness coming
from Bill as the CEO, but also the rest of
the leadership team and providing assurance to our crew. And
(15:07):
You're right, there was, you know, an explicit assurance that
we were going to keep calm and carry on and
really importantly continue investing in our strategic priorities. Where you know,
some firms were immediately pulling back after the GFC, Vanguard
had the luxury of you know, we are playing a
(15:28):
long game and continuing. I recall Bill and the leadership
team expressing to our crew at the time, We're going
to continue to invest in our strategic priorities. We're leaning
in really and I think it had a very big
calming effect on the car.
Speaker 2 (15:41):
That's how he told it. And I'm not surprised that
at your reaction. I mentioned Jack Brennan, Bill mcnah have
another rock steady guy that's whose hand you on on
the tailer. You know, this guy isn't going to be
rattled by a market sellof or a crisis, and that's
that's really fascinating. My colleague Eric Belchunis wrote a column
(16:05):
called the Vanguard Effect way back in twenty sixteen, and
at the time he ran the numbers and said Vanguard's
low fee approach has saved investors either directly or through
indirect fee pressure a trillion dollars. That was almost ten
years ago. I think we could bullpark it closer to
(16:27):
two trillion dollars. Tell us about the focus on cost
and how that's impacted investors and the entire industry.
Speaker 3 (16:37):
Yeah, I'm not going to check your math on that,
but I'll buy Eric's and your your estimate there on
what we've saved investors over time. And I think the
focus on cost has been relentless, something that is in
the fabric of the organization. We counsel our investors and
our clients to focus on the things they can control,
and you know, expense ratios, whether it's mutual funds or ETFs,
(16:59):
these are things that are within an investor's control and
it helps them keep more of their return. It's part
of our whole, you know, portfolio construction methodology when we
advise clients. It's one of the factors, not the only factor,
and maybe not even the first factor, Barry, but certainly
keeping cost low is something that Vanguard feels obligated to
do for it's now fifty plus million investors around the world. Wow,
(17:20):
and the Vanguard effect to use Eric's phrase is real.
I mean we have seen that, particularly when we enter
new markets outside the US.
Speaker 2 (17:30):
You see feed compression imediately when Vanguard shakes everybody's cage.
Speaker 1 (17:35):
Yes.
Speaker 2 (17:36):
So it's funny because Eric eventually writes the book the
boggle effect. You mentioned. Cost isn't the first principle. I
kind of get the sense then, of the things that
you can control. It's being a long term investor and
being a buy and hold investor. That wasn't popular when
(17:57):
Vanguard launched in nineteen seventy four, was it.
Speaker 3 (18:00):
No, Sometimes it's still not even popular today. But we've
been pretty clear and steadfast in our view that investors
should have a goal. It should be intentional about what
they're trying to achieve, having some balance and diversification, being
thoughtful about how you construct a portfolio and perhaps getting
the help of an advisor to do that if an
investor would benefit from that, and really having the discipline
(18:22):
to your point of sticking with it for the long term,
and understanding what your personal risk tolerance is, your investment
time horizon, and really thinking about how you're going to
achieve those goals.
Speaker 2 (18:34):
So I want to ask you a question, and I'm
very cognizant of the fact that you are no longer
with Vanguard. We'll talk a little bit about where you've went.
There has been in the industry as a whole, but
surprisingly at Vanguard also a move towards some privates some alternatives.
(18:57):
Tell us about this evolution.
Speaker 3 (18:59):
Yeah, I think it's an exciting one, both for the
industry but also for Vanguard. As you mentioned, we began
offering in twenty twenty. I think we began offering private
equity fund to some of our retail investors, those that
were qualified for it. It was a first for Vanguard,
but I would say the notion of broadening access to
(19:22):
different types of investments for mainstream investors is not a first.
I mean, it's what we did with mutual funds, it's
what we did with ETFs, it's what we endeavored to
do with advice, and so private equity is part and
parcel really of that advice offer for many of our
advice clients. I think you'll see a lot more of that.
In fact, there was subsequent to my leaving, there was
a recent announcement that there is even another product that
(19:45):
there'll be more information on. With partnering with Blackstone and Wellington,
which is pretty exciting.
Speaker 2 (19:52):
And where did you end up shifting after twenty seven years.
Speaker 3 (19:56):
Well, I'm still making the shift, you know. I'm still
kind of writing my next chapter, which is really exciting.
But I will be joining Harborvest Partner's board next month.
Speaker 2 (20:06):
So May, first, you're at harbor Vest Vanguard, did I
want to say Experiments which they've expanded, which was working
with harbor Vest, which you know, maybe the layperson knows Vanguard,
but they don't know harbor Vest. They're one of the
biggest private equity in private credit shops out there, right,
tell us what are you doing at Harborvest.
Speaker 3 (20:27):
Really excited to join harbor Vest in May. I'm going
to be joining their board, really getting to know the
firm in a different capacity. When I was at Vanguard,
of course, in twenty twenty, we partnered with Harborvest. I
oversaw the team that actually selected Harborvest among multiple managers
that we considered for our first private equity offer for
both retail and ocio clients at the time. So multiple
(20:50):
series or vintages of that fund have progressed and Vanguard
continues to work with Harborvest. And now I'm looking forward
to working with them in a different capacity.
Speaker 2 (20:59):
So this raised this's a fascinating question. There has been
a giant shift from public to private assets over the
past you know, certainly decade or so. Not everybody can
be in the top ten percent, as the joke goes,
but it seems like there's almost a land grab going
on for the retail investor thinking about a traditional sixty
(21:23):
forty portfolio, why should they also be thinking about adding
a slug of private debt or private equity to their portfolio.
Speaker 3 (21:32):
Yeah, I think it's one of the next things that
we as an industry, not just vanguard, but more broadly,
advisors have to help clients with retail clients in particular,
who are used to, as you said, at conventional sixty
forty public portfolio, really thinking about is first is there
a role for privates in their portfolio construction? And then
(21:54):
if yes, if appropriate, then how they should integrate that
into their portfolio, and then which manager they should do
that with. So it is a you know, a multi
layered decision process, and I think one that advisors can
really help with. That's a personal opinion. I think advisors
can help clients who maybe know a little bit about
private equity but not enough or have heard about private
(22:16):
credit and all of the you know, press headlines that
private credit is getting right now, and really trying to
figure out is this right for me? And and in fact,
can it generate excess returns well above public markets over time?
And is that something I should incorporate into my portfolio.
I think that's a you know, a problem statement that
many clients aren't even approaching yet, but but perhaps should.
(22:39):
Perhaps there is a spot for and I think if
you look at all of you called it a land grab,
I think that's pretty fair. I think there's a ton
of movement. Sure, everybody I speak with and probably those
that you speak with too, are talking about democratizing privates.
I think it's a trend right now, but I think
in general it's something that should be here to say.
Speaker 2 (23:00):
So, let me ask you two questions about that, an
easy question and a hard question. The easy question is, Hey,
is this about non correlated diversified returns or is this
about generating alpha and outperforming markets at public markets?
Speaker 3 (23:14):
Yeah? I think it can be both. It's a really
good distinction. I think it can be both. It depends
on your wealth level, It depends on how much of
your overall allocation you're going to put into privates, and
then what type of private market asset class you're going
to be working with. So yes, I think it can
be an uncorrelated return opportunity and also an alpha generation opportunity.
Speaker 2 (23:36):
So now the hard question. Vanguard built its reputation on
low cost alternatives, have a reputation of being pricey, So
how do you square that circle?
Speaker 3 (23:49):
I think it's going to be a matter of you
pay different things for different asset classes, and private market
investing is different than public market investing, so I would
imagine that investors should expect to pay more for a
private equity offer or a private credit offer. The key
for me, you know, and again speaking personally, would be
I want to know that I'm getting a top quality
(24:11):
manager at a fair price. I think, you know, giving
a fair price is the obligation that the industry has
to investors.
Speaker 2 (24:18):
And that's the Vanguer culture, even spilling over into private
So we've come to know Vanguard not just for passive,
not just for indexing, not just for stocks and bonds,
but generally a putting clients first, A fiduciary approach to
asset management is that consistent with some of the criticism
(24:40):
we've seen of the alternative space, or is it simply
as much as not all alternatives are created equally.
Speaker 3 (24:48):
Certainly, not all alternatives are created equally. I think you
could say that for sure, And I think with regard
to what Vanguard endeavors to do, it'll be up to
the current CEO and his leadership team. But I would
suspect that they will stay true to the notion of
trying to provide clients with the best possible offers that
meet their long term investing needs. And I do think
(25:09):
that there is a place for private assets in that,
but that'll be up to the current team to decide.
Speaker 2 (25:16):
Really really fascinating. So I read a crazy stat that
in the state of Pennsylvania, if you are a certified
financial planner, ninety three percent odds that you work for Vanguard.
Can that possibly be correct?
Speaker 3 (25:30):
Again, I'm not going to check your stat but I
think yes. Having built out the personal advisor offer from
the ground up and passed it on to multiple of
my colleagues since then, we're now well over I think
a thousand advisors for sure, so it's possible. Luckily, we
have other domestic offices. Not just Pennsylvania, there's also Charlotte
(25:53):
and Arizona and Dallas, so we can we can attract
talent in the CFP ranks from multiple spots.
Speaker 2 (25:59):
So I have to ask you. You're working at this
giant shop and you say, I know, let's build an RIA,
your registered investment advisory firm that's a fiduciary within a
giant asset manager. Tell us about the genesis of this.
Speaker 3 (26:16):
Yeah, well, definitely not my vision alone. There was. It
was a firm wide kind of push. For sure. We
had been this is going way back. We had been
chasing scalable advice for decades. At Vanguard. We had an
offer very small relative to you know, the firm size
at the time. It was called Asset Management Services. The
(26:39):
minimum was five hundred thousand dollars to invest. You got
a one on one dedicated advisor, much the same way
you do today. And I think we charged back then, Barry,
probably ninety basis points on the first million. Okay, great offer.
Clients loved it, high ENDPS scores, but certainly not scalable.
You know, we had a few hundred, fewer than two
(26:59):
high advisors really powering that offer. And you know, fewer
than ten thousand clients, So we knew that we had
the ability to offer great advice using mostly Vanguard product
at the core of the advice methodology at the time,
and we wanted to scale it. But I credit really
Jack Brennan initially for wanting that scalable advice. I mentioned
(27:23):
at the top of the program that I had a
special opportunity to work for Jack doing research, really kind
of pulling together research and helping the senior team determine
whether they were going to try to do this scalable
advice offer. And there were multiple iterations before Personal Advisor.
Personal Advisor, which we launched in twenty fifteen, that's the
(27:44):
offer you just referenced, well over three hundred and fifty
billion now serving hundreds of thousands of clients. It started
with multiple iterations inside of Vanguard, so I think we
had a couple of goes at it before we perfected
what I had the really the privilege to lead in
twenty fifteen.
Speaker 2 (28:02):
Huh, that's really fascinating. I know Vanguard has a direct
indexing product now, it's kind of fascinating to look at
all these different product lines and divisions because in the
early days Jack Bogel didn't want to do ETFs, didn't
want to do international. Hey, we do one thing, we
do it really well, and everybody else can can play catch.
Speaker 3 (28:24):
Up, and you can add advice to that list. He
didn't want to do advice either. In fact, oh for sure,
we had thousands of frontline phone associates who were told
do not use the word advice. You know, there was
definitely a very clear line between guidance and advice, and
we were very careful to step back from the advice line,
if you will.
Speaker 2 (28:44):
So what's the difference between guidance and advice?
Speaker 3 (28:48):
Well, there is a regulatory difference, for sure, and that's
what we were homing in on at the time.
Speaker 2 (28:53):
But well, you have discretion, right your fiduciaries. Yes, so
I don't see the difference. Listen, if you're giving your
child advice or you're giving them guidance, maybe guidance is
a little gentler.
Speaker 3 (29:08):
Yes, guidance is gendler. It's there is definitely a difference.
But you know, I had in earlier in my career,
I led phone groups, you know, hundreds of phone associates
and we would train them to serve the client's transactional
needs and help them with guidance. But I cannot tell you.
(29:28):
In the same way that Bill McNabb would monitor phone calls,
I would monitor phone calls when I was leading those groups,
and so many clients just wanted to know which fund
should I buy, you know, that was what you said.
I had a small stable of friends and now we have,
you know, four hundred different options, and I think it
It also led to the genesis of our personal advisor offer,
(29:49):
because we realized there was an incredible pent up demand
people who had joined Vanguard, you know, perhaps with a
single mutual fund, you know, maybe they started with a
money market fund.
Speaker 2 (30:00):
Totally self directed.
Speaker 3 (30:01):
Totally self directed is really the legacy of the firm.
You know, we still have a much greater cadre of
self directed clients than advised clients. The vast majority of
vast majority of vast majority of clients.
Speaker 2 (30:12):
Although I say this as an RIA I know the
RIA side of the industry are big buyers and supporters
of Vanguard products.
Speaker 3 (30:22):
Oh for sure, I mean I would acknowledge that the
RIA channel, for sure is it's a totally different division
at Vanguard, but it is absolutely critical to our success
and growth over time. What we've been talking about is
really that direct relationship when a client, you know, opens
a mutual fund account directly with Vanguard and then that
is essentially what what I'm referring to as self directed.
(30:44):
But in the same timeframe, we were growing our Financial
Advisor Services division as well, and that is a critical
component of what we do today.
Speaker 2 (30:53):
And when this first rolled out, there was a little rumbling.
I think Vanguard managed to thread the needle and say
we're not offering advice, we're offering guidance and not exactly
competing with that channel.
Speaker 3 (31:07):
Well, we were offering advice, but you're right that there
was a little bit of needle threading to do. I
think partially we were able to do that well because
there was so much internal collaboration across the senior leaders
at the firm. First Martha King and then Tom Rampoola
ran the FAS division at that time, and when Tom
took over, I was running the retail division, and there
(31:30):
was a lot of discussion around, you know, what we
needed to do to both serve rias really well through
Tom's division and also be a growing and thriving ria
ourselves serving individual investors with our own advice methodology, and
I think there's been a lot of collaboration between those
divisions over time, where we use research and the things
(31:52):
that we learn through our Investment Strategy group or our
in house research, we share that with the rias that
we serve.
Speaker 2 (32:00):
So here's a crazy stat I want to throw out
at you. So total investible assets of stocks bonds were
not quite one hundred trillion, but where it's not that
far off in the United States, how is it possible
that nobody in the RIA space has market share? You
guys are three hundred and fifty billion dollars And it's like, eh.
Speaker 3 (32:21):
Well, there are some pretty big and very strong independent
arias and we serve a lot of them. Their clients
a vanguards. But you're right, it's a it's a fragmented market. Still,
there's definitely a top tier for sure.
Speaker 2 (32:33):
All right, But there's ten firms with yes, you're one
hundred billion, two hundred billion, and a ton of firms
with twenty forty sixty billion. And it's funny when I
discuss these numbers with family, they think five billion is
a lot of money. I'm like, oh no, no, we're peons.
They don't really, they don't really know what trillions are,
but why is the industry so fragmented?
Speaker 3 (32:55):
You know, I don't know what the why is behind that,
but I can certainly say, just in the time that
I've left Vanguard, all of the conversations I've had around
the industry, there is a ton of interest in and
you see it yourself, all of the consolidation that is
happening among all of those mid and smaller tier rias.
You know, the larger firms the top tier are either
(33:15):
buying up those arias. There's consolidation across the industry. There's
a lot of private equity money invested and investing interested
in investing more in the RIA space. There's just a
ton of movement in wealth management, which I think is
exciting and hopefully is good for investors.
Speaker 2 (33:30):
And there's some crazy number the average advisors age is
like sixty six. So there's a whole succession planning.
Speaker 3 (33:35):
Yeah, that's the other thing, You're right, the demographics. It's
you know, lots of rias are you know, looking to
turn over their book and they don't have a strong
succession plan.
Speaker 1 (33:44):
Huh.
Speaker 2 (33:45):
That's really fascinating. So one of the things you launched
at Vanguard there's so many different initiatives you did, but
the Vanguard Women's Initiative for Leadership Success. Tell us a
little bit about that. What led to this project and
what have the results been.
Speaker 3 (34:01):
They call it WILLS internally at Vanguard, and you're right,
it's the Women's Initiative for Leadership Success. It was spearheaded
under Bill mcnath Leadership and I mention that because it
is so important that top down the CEO made it
a priority, and I think that's why it continues to
thrive today. I had the honor of being one of
the founding leaders of our WILLS initiative more than fifteen
(34:23):
years ago at this point, but it's still an incredibly
important employee resource group within the firm, and it was
the first of several, so we probably have half a
dozen or more different employee resource groups now. But the
importance of encouraging women and helping them develop into leaders
at Vanguard, and I use the term leader broadly, so
(34:45):
leader of people, but also specialists in portfolio management, or
legal or data analytics, you name it. So there's just
been a lot of evolution over time, but that consistent
drumbeat of helping our women develop into to the you know,
highest potential leaders that they could be at the firm
in whatever area of expertise they were best suited to.
Speaker 2 (35:08):
What sort of advice would you give to a young
woman aspiring to a leadership role in the world of
investing in finance?
Speaker 3 (35:15):
If I think particularly about the advice and counsel that
I have given to many younger women in the organization,
I often will say, don't be afraid to take a risk.
You know, do the work, develop a point of view,
have your own point of view, and be willing to
share it. That's you know, there's often a confidence gap.
It's not an aptitude gap.
Speaker 2 (35:35):
But men blunder in regardless of their competency. Women are
much more circumspect. Pardon me for man's blating sexism, but
like my observations have been, man as a as a dude,
I I'm out over my skis, I have no radio training.
What am I doing here? And I've noticed since I've
(35:58):
been doing this that men just seem to be we
are blithe idiots stumbling into things, and women seem to
be more thoughtful in circumspect.
Speaker 3 (36:08):
Those are your words, so I'll just say yes, I
find many times men are infinitely comfortable sharing their point
of view regardless. Yes, but I think women can often
use some encouragement to, you know, want one do the work,
develop the point of view right that there is work
to be done. But once you have a point of view,
(36:29):
take a risk and share it and know that it's okay.
When you are wrong, you will be wrong. I think
there's often a fear of the criticism that will you know,
will follow when you express your point of view, and
I think a lot of the council is develop the
point of view, take the risk because no one will
know you're in the room until you open your mouth,
right and you know related, but perhaps a little different
(36:53):
than that, I would give the advice to women who
are looking for expanded leadership opportunities more responsibility to be
explicit in asking for it. And that's also something that
you hope. You keep your head down and do the work,
and you get noticed, and you get chosen for the
special project or the next assignment or the rotation, and
(37:14):
often you know you're just not top of mind, and
that's okay. So you have to be more explicit about
expressing your interest in taking on more responsibility, expanding your
remit within the organization or getting on some research project.
You have to tell people that you're interested in doing
more than you've already been asked to do.
Speaker 2 (37:35):
So let me throw you a curveball. You served or
you are serving as a director on the Vanguard Foundation board.
Speaker 3 (37:42):
I did serve as a member of the Vanguard Foundation
Board when I was at the firm. I also served
as a member of the Irish Funds Board, and I
also had the opportunity it's separate from Vanguard but related,
I also served on Vanguard Charitables Board for a number
of years. So all of those, you know, through different lenses,
were opportunities outside of my day to day's swim lane
(38:06):
or you know job, if you will to give back
to either the community with regard to the Vanguard Foundation,
or get involved in our international business through our Irish
Funds distribution through that board or in Vanguard Charitables case,
really think about donor advise funds and learn more about that.
Speaker 2 (38:23):
And that's a big that's like eighteen twenty billion dollars
something like that. That's a big chunk of money that
people are saying, help us distribute this philanthropically exactly right,
huh quite fascinating. All right, let's jump to our favorite questions,
starting with what are you watching these days or listening to?
What's keeping you entertained on the What am I watching?
Speaker 3 (38:44):
I would say, hacks is Do you like it? I
love it?
Speaker 2 (38:49):
We not only do we love the show, but we
watch it straight.
Speaker 3 (38:54):
You know.
Speaker 2 (38:54):
At the end there's a little podcast discussion, yes, by
the showrunners and the creators, and they're just charming to
lifeful people.
Speaker 3 (39:00):
Yeah. Yeah, for those that don't know, I think it's
worth a It's very different from anything you see on
TV right now. Gene smart Is, you know, talk about
longevity in a career. She's in her seventies. I love
seeing that, and it's just a darkly funny, you know,
mentorship between one character and a much younger characters. It's
(39:21):
a good one.
Speaker 2 (39:23):
Tell us about your mentors who helped shape your career.
Speaker 3 (39:27):
Man too many to count. At Vanguard really just spoiled
with lots of great leaders, all of whom were mentors
in different ways, particularly in the very early days of
my career, people like Jeff Moltor taking a chance on me,
giving me my first job at Vanguard when I was
not an obvious choice. Really helping me develop a thick skin.
(39:47):
He was notorious for giving very straight feedback. Martha King
I mentioned her earlier, just one of my earliest female
role models at the firm when there really weren't that many.
There still are not enough across the industry, but many
more today than back in the late nineties. And then
certainly I mentioned I've already talked about Jack Brennan, Bill McNabb,
(40:10):
and Tim Buckley, but certainly Bill McNabb and Tim Buckley
for sure figure prominently in my career as advocates for
me over decades. They are still to this day as
I think about writing my next chapter and what I
want to do post Vanguard, I still am looking to
the mentorship and advocacy of both Bill and Tim, so
(40:30):
very grateful for them both.
Speaker 2 (40:32):
Really really interesting list. Let's talk about books. What are
some of your favorites? What are you reading currently?
Speaker 3 (40:37):
Well, favorites for sure. You can't spend twenty eight years
of Vanguard without the required reading. A random walked down
Wall Street I think was dropped on my chair truly
within the first month of my joining the firm. One
of my Burt mais yes Bert Malkil, who is the Yes,
longtime board member at Vanguard, But really, you know, required
reading on passive the benefits of passive investing, And you know,
(41:01):
when I joined Vanguard, I knew about indexing, but I
didn't know it to the depth that I would later,
And so that was was an early educational book, probably
in the same era when Genius failed is a fat
line yep. Roger Lowenstein and the Rise and Fall of
long term capital management. Think about when I joined Vanguard
in ninety seven. You know that was all unfolding in
(41:23):
the early two thousands. I didn't know anything about hedge funds,
I didn't know anything about leverage. Really, it moved so
far afield from what was happening in Malvern, Pennsylvania that
it was just like a fascinating read and really a
cautionary tale that for.
Speaker 2 (41:38):
The financial crisis not but a decade later. Correct, all
those lessons were totally ignored. If anything, maybe it made
people too cocky. You don't worry about it, The FED puts.
Speaker 3 (41:48):
Yeah, yeah, yeah, that's a fair point. What am I
reading now? I just finished, and I'm like way behind
the times because a million colleagues had suggested I read
Outlive by Peter Attia M h. You know it's been
on the bestseller list for multiple years now. Yeah, but
fascinating to think about the longevity and the notion of
(42:09):
health span versus life span. Looking inwardly for each person.
I have some work to do to live to one hundred,
but I'm gained for it. And the book on my
shelf next is related to that. It's called the Longevity Principle,
and that takes sort of a broader view of how
society will need to change to support from an infrastructure, healthcare,
(42:30):
financial sector, all these different dimensions that will need to
change to support all these people who will be living
to maybe one hundred in the future and not that
far away.
Speaker 2 (42:39):
And the conversation the way the math works, if you
make it into your sixties without dropping debt of a
heart attack or whatever, the odds of hitting mid eighties
or beyond go up dramatically, yes, And so suddenly the
question is, hey, have I saved enough money if I'm
going to be around to eighty five ninety. It's a
genuine planning issue for anybody thinking about their financial future.
Speaker 3 (43:03):
You're right. I remember when we first started the personal
Advisor offer and we were creating the advice methodology, we conservatively.
You know, our planning horizon was to one hundred years.
Speaker 2 (43:12):
Well, Evan Monte Carlos, that goes to one hundred.
Speaker 3 (43:15):
Yes, And I cannot tell you how many clients at
the time said that's insane, I'm going to drop that
at seventy or eighty or whatever, and they would fight
with us. And now it's you know, it's not inconceivable.
Speaker 2 (43:25):
That doesn't surprise me at all. Our final two questions,
what advice would you give to a recent college grad
interested in a career in wealth management or personal financial guidance?
Speaker 3 (43:38):
I would say, for sure, pay attention to the company
and the mission and purpose of that company. Be proud
of the company you work for. Worry about that more
than the job or the starting salary. Think hard about
the company that you want to connect yourself with. I mean,
it's it's unlikely that many college grads are going to
(43:59):
have a twenty eight year run at a company like
I just did. But even if you're only going to
be there for a shorter stint, you know, think about
the company ahead of the actual job you're going to do.
Because my next piece of advice is do more than
is asked. Think about how you can contribute outside of,
you know, your finite job description. Lastly, I would say,
(44:20):
seek to understand the context. When you join a company
and you're right out of college and you're eager to
make a mark, I think it's really important to understand
what came before you. You know, take the time to
invest in relationships with your peers and understand the context
of what's going on at the firm and the history
behind it before you charge into whatever you're going to do.
Speaker 2 (44:41):
And our final question, what do you know about the
world of wealth management and investing today That would have
been useful in nineteen ninety seven when you were first
getting your feet wet.
Speaker 3 (44:51):
Yeah. Well again here I feel like a bit of
a ringer because not many twenty three year olds have
the benefit of people like Jack Brennan or Bill McNab, etc.
Telling them explicitly. I remember sitting in the office with
Jack Brennan and he said, all you need to do
is live below your means. And it was something that
Jack Bobo used to say all the time, and it
(45:12):
was instilled in you the minute you got into Vanguard,
along with things like invest in the four oh one
k and take advantage of the company match and build
up an emergency fund, and all these things that are
the basic tenets of financial planning. But when you're in
your early twenties you don't necessarily focus on These are
things that I actually, twenty eight years later, have benefited
(45:35):
from because the magic of compounding was a very real
thing that I was able to take advantage of before
perhaps many of my peers who were working at different
companies where that wasn't such a strong focus, but at
Vanguard such a strong focus.
Speaker 2 (45:49):
Well, thank you, Karen for being so generous with your time.
We have been speaking with Karen reci formally of the
Vanguard Group, now on the board of Harbor. If you
enjoy this conversation, well, be sure and check out any
of the five hundred and fifty we've done. You can
find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find
(46:12):
your favorite podcast. And be sure and check out my
new book How Not to Invest The ideas, numbers and
behaviors that destroy wealth and how to avoid them How
Not to Invest at your favorite bookstore today. I would
be remiss if I did not thank the Crack staff
that helps you put these conversations together each week. John
(46:33):
Wasserman is my audio engineer. Anna Luke is my producer.
Sean Russo is my researcher. I'm Barry Rickols. You've been
listening to Masters in Business on Bloomberg Radio.
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