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Vanguard veteran Jim Norris blazes an international trail

Vanguard Group Inc

Vanguard veteran Jim Norris blazes an international trail

Top executive says second largest fund group can multiply client numbers fifteen-fold

Jim Norris: ‘It seems likely that China’s asset management market will be as large in the US within my lifetime’

The competitive fire that drove Jim Norris to the 1991 World Athletics Championships in Tokyo still burns fiercely three decades later.

Mr Norris, one of a select group to run a sub-four-minute mile, admits that his pace has slowed. But there is no let-up in his efforts to expand Vanguard across the world.

As head of all of Vanguard’s non-US operations, Mr Norris oversees the international strategy of the second largest asset manager.

Vanguard’s business historically has been heavily US focused and its iron grip on costs limited the availability of resources for oversees expansion. Rival asset managers, such as BlackRock and Invesco, have made acquisitions to accelerate their growth internationally but that tactic has never been adopted by Vanguard, which resolutely prefers to pursue organic growth.

Before moving to his current role in 1998, Mr Norris led a six-month review that considered shutting Vanguard’s entire international business, which at that time managed less than $100bn and employed about 45 staff in subscale operations across Australia, Japan and Europe.

Instead Vanguard’s board accepted his recommendation that “purposeful investments” should be made and handed him the job of transforming the international business, a challenge he remembers accepting with a sense of trepidation.

“Vanguard is the only manager that does not pay anyone to sell our products. Fund sales in markets outside of the US at that time were dominated by distribution channels that relied on commissions or other opaque payments [by asset managers to financial advisers and platforms],” he says.

Fast forward to today and Vanguard’s international business has a staff of 1,433 overseeing assets of $442bn.

A mantra repeated by Vanguard’s top brass is that asset growth is “an outcome and not an objective” of its strategy. Focusing on keeping costs low so that investors retain more of their returns has helped the Pennsylvania-based manager recruit an army of 30m clients.

It intends to spread its core message worldwide with plans that will send shivers through its rivals. Mr Norris believes Vanguard can multiply its client numbers 15-fold or more, with China expected to be the main growth engine.

Vanguard Asset Management

Founded 1975

Assets under management $5.9tn (end May)

Employees 17,600

Headquarters Valley Forge, Pennsylvania

Ownership Owned by the investors in Vanguard’s funds

A new investment advisory partnership between Vanguard and Ant Group, China’s dominant mobile payments company, has signed up 200,000 clients in its first 100 days. About half the new clients were born after 1990 and the total commitments already made at $315m (Rmb2.2bn) are higher than it expected.

“It seems likely that China’s asset management market will be as large in the US within my lifetime. There are lots of impediments and risks but the impact Vanguard will have in China will be great. It is exciting to think about the 500m [potential customers] that can benefit,” says the 57-year-old father of three.

Vanguard has also applied for a public fund licence in China that will allow it to sell funds to retail investors, a process that could still take several years to complete.

Some observers have criticised Vanguard for an excessively cautious approach in China and other international markets.

But Mr Norris, who speaks in a noticeably crisp authoritative manner, dismisses such gripes.

“We are already by far the largest international manager of China A-shares. If the world thinks we have nothing going on, I don’t have any reason to tell them otherwise.”

Mr Norris and chief executive Tim Buckley both worked as assistants to Jack Bogle, Vanguard’s founder. All the senior leadership group share an evangelical belief in the mission inspired by Mr Bogle that has earned Vanguard a reputation as the “Mother Teresa of Investing”.

But Vanguard is also an aggressive price competitor and its top leaders think about objectives that can be achieved over decades. Mounting political tensions between Washington and Beijing are unlikely to deflect Vanguard in China. Neither have any plans been discussed on whether to move its Asia headquarters from Hong Kong because of the new security laws. Instead a “shift of gravity” to the mainland base in Shanghai is expected.

“China’s investment market is driven by a trading mentality. It looks like the US in the 1970s, which was dominated by retail investors buying and selling and losing money to professionals. That was the high point for active management and it is now much more difficult to deliver alpha [market-beating returns] because the US market is so much more professional. But it will not take 50 years of evolution for the Chinese market to move to where the US is today,” he says.

Big changes are also under way in Australia, where Vanguard landed in 1996 with a single executive and has since grown into the country’s second largest asset manager.

It launched a low-cost “Personal Investor” service in April that provides access to Vanguard’s managed funds, ETFs and a cash account at a cost of just 0.2 per cent of assets or a maximum of A$600 a year (excluding the fees for underling funds). Self-managed retirement savings accounts were added in June to the new service, which will also be rolled out to financial advisers. Around 6,000 new customers have signed up and 30,000 existing Australian clients will also transfer to the new platform.

Australia’s government supports consolidation across its fragmented pension system to boost efficiency and reduce costs, an agenda that is music to the ears of Mr Norris.

Jim Norris’s CV

Born 6 February 1963 Philadelphia

Total pay Not disclosed

Education

1985 BS Accounting, Saint Joseph’s University

1997 MBA University of Pennsylvania, Wharton School

Career

1987 Joined Vanguard, research assistant to Jack Bogle

1992-01 Various roles, including head of corporate strategy

2001-06 Head of institutional investor group

2008-present Managing director, Vanguard International

Vanguard plans to build a pensions business that can challenge the established superannuation funds, which rank among the largest institutional investors.

Several superannuation funds have approached Vanguard in confidence about the possibility of merging their operations but this also requires their boards to vote themselves out of jobs.

Pressed on whether Vanguard can really challenge the established players, Mr Norris says. “We wouldn’t do this if we didn’t think we couldn’t be a catalyst for real change. Australia does not need another niche pensions provider. There is real dissatisfaction among investors and we can offer real value to superannuation funds that don’t have the capacity to invest in client-focused capabilities.”

Regulatory changes in Europe, such as the introduction of the rules known as Mifid II that have improved transparency standards for fees and costs, have also boosted growth for Vanguard’s European operations.

After launching a low-cost direct-to-consumer platform for UK retail investors in 2017, Vanguard is looking at a similar initiative in Germany, taking competition with Deutsche Bank to a new level on its home turf.

Vanguard also received permission from the City of London regulator in January to provide investment advice to UK clients in a move that will turn up the heat on the fee models operated by Hargreaves Lansdown, St James’s Place and other UK wealth managers.

Mr Norris says Vanguard will drive down the cost of providing financial advice and fees for investment funds. Advances in technology have made it far easier for Vanguard to roll out this model to other European countries.

“We feel very confident that what we offer is valuable and we will bring direct to consumer offers to other countries in Europe in time,” he says. 

Having spent two of every four weeks on the road for more than a decade, Mr Norris is enjoying the novelty of working from home because of the coronavirus pandemic. He still runs between 60km and 80km a week, a practice that helps him recover from jet lag while travelling.

“Running is still a regular part of my routine although my pace has slowed,” he says. Competitors in the asset management world however, are unlikely to see any slowdown at Vanguard.

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