Five questions for Vanguard's new president
24 July 2017 | Topical insights
Twenty-six years ago, Tim Buckley joined Vanguard after graduating from Harvard University. His first job, and the auspicious start of his Vanguard career, was serving as assistant to then-CEO John C. Bogle.
Mr Buckley went on to lead three Vanguard divisions (Information Technology, Retail and Investment Management), during which time he worked closely with Vanguard CEO Bill McNabb and former CEO Jack Brennan. His career path provided a unique opportunity to gain critical knowledge and understanding of all facets of Vanguard's business and operations. Mr Buckley's leadership experience, along with a strong track record of developing teams and talent; a global mindset; and a commitment to serving clients made him the ideal choice to be named Vanguard president by Vanguard's board of directors effective 13 July and to succeed Mr McNabb as CEO in January.
We sat down with Tim to ask five questions about Vanguard and his future role.
On 1 January, you become Vanguard's CEO – the fourth in the company's 42-year history. What are your initial thoughts on taking on this new role?
The first thought that comes to mind – "an awesome responsibility". An awesome responsibility that Vanguard has to help millions of investors retire better, put their kids through college and achieve other financial goals. The second thought is "thankful". Thankful for the mentoring Jack and Bill provided. Thankful that Vanguard has a structure that keeps us perfectly aligned with our clients and an unambiguous mission to give each one of those clients – whether an individual, financial adviser or institution – the best chance for investment success.
Vanguard is operating from a position of real strength today. Where does Vanguard go from here? What are the big opportunities?
One could argue that no company has been more successful than Vanguard in lowering the cost and complexity of investing around the world. And we are just getting started. There is more to do and new ways to do it.
We recognise that we serve a diverse set of clients with different needs, goals and aspirations. We've invested considerable resources into helping financial advisers, for example, help their clients through thoughtfully constructed portfolios of low-cost Vanguard funds and exchange-traded funds. We are working with sponsors of retirement plans, large and small, on better plan design and behavioural "nudging" to ensure that their participants have sound investment programmes and are saving at sufficient levels. We are effectively serving as chief investment officer for hundreds of endowments and foundations. And we have brought our low-cost investing approach to new markets in the UK, Europe, Canada and the Asia-Pacific region.
We will continue to change how the world invests – from changing how investors think about costs, to how they receive advice, to how they interact with their portfolios.
In what ways might Vanguard change under your leadership?
Let's start with what will not change. There are Vanguard constants: Our structure, our investment principles, our client-focused culture and our commitment to our employees, or "crew". Those are bedrock to who we are and how we operate.
That said, our clients should not only expect change, but demand change. We are a company that was built on innovation and a company that has capitalised on innovation. Consider that Vanguard, at the time of our founding, managed zero assets in-house and offered only actively managed funds sold by brokers to individual investors in the United States. Today, we manage nearly £3 trillion internally and offer a broad range of index and active funds to investors of all sizes and sophistication, in more countries than I can count.
Since Vanguard introduced the first index fund for individuals, to our early adoption of the internet, to our target-date and ETF offerings, we have been thoughtful innovators. Our clients will continue to see change in the form of product and service innovation, adoption of technology and a considerable reinvestment into our business and infrastructure – all with the aim of enhancing client experiences and outcomes.
What are the challenges as you see them?
One of the early lessons in my career is that the financial markets will humble you. We've enjoyed a long stretch of positive returns since the global financial crisis, so we have to be ready to navigate some rough waters ahead. (Pardon the nautical reference, but it comes with serving on HMS Vanguard for two-plus decades.) We can't be lulled into complacency by the low volatility and generous performance across asset classes. I can assure you: This is not "the new normal".
With asset classes fully priced, we should also be prepared for a lower return environment. In such an environment, it is critical that clients keep their costs low and stay disciplined. When returns are low, it is always tempting to chase the promise of return from some new approach. All too often these approaches are a fool's errand. It is far better to stick with what the markets give you and minimise costs and taxes. Fortunately, Vanguard is better equipped than ever to encourage disciplined investing with our direct investors, to reinforce the right behaviour with retirement scheme participants and to help advisers keep their clients on track.
You've spent your entire career at Vanguard. What's kept you at the company all of these years?
It is many things, but our mission rises to the top. It is a chance to make a difference. As the son of a heart surgeon, I was taught to either save lives or help people live better lives. We certainly do the latter.
Alignment is another. I sleep well at night because I don't have to worry about putting my clients' dreams at risk to enrich outside shareholders.
Growth. I am charged up every day to face new challenges and help my team grow and develop. That is rewarding. The people aspect of leadership has always motivated me and inspired me not only to come to work every day, but to come to work with purpose.
Finally, some of the most principled, dynamic, motivated people I know work at Vanguard. I am lucky to have them as colleagues and so many as friends.
Thanks, Tim. We wish you well.
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