Asset Management Giant Vanguard Carves Out New Wealth Management Division

Vanguard, the $10 trillion asset management juggernaut, invented the index fund, but lately it’s trying to reinvent itself. 

On Monday, the firm said it will move its $900 billion wealth management business into its own division, marking the biggest restructuring at the world’s second-largest money manager in more than ten years.

Making His Mark

CEO Salim Ramji only joined Vanguard from BlackRock, the world’s largest asset manager, in July, but he has acted swiftly to remake the company and its strategy in line with his vision, moving the firm more like a speedboat than an ocean-liner sized giant with a staff of 20,000.

To that end: Vanguard has long offered wealth management services, and launched a digital advisory in 2015 that opened up services to anyone willing to make a $50,000 investment. In the years that followed, that figure crept down to $3,000. But under Ramji, the Vanguard Digital Advisor entry level was lowered all the way to $100 to open it up to a potentially massive new base of customers with less money to invest — with the Digital Advisor fee of about 0.15% maintaining the firm’s hallmark low costs. (Vanguard’s low fees are a product of its unique ownership structure: The company is owned by its funds, and the funds are owned by the investors in the funds, meaning it has no outside shareholders).

Monday’s announcement also came with a major appointment:

• To run the new division, Ramji tapped Joanna Rotenberg, a former Fidelity Investments executive who oversaw the split of its in-house wealth unit from its brokerage and then ran the wealth unit. The number of retail accounts at Fidelity rose from 30 million to 38 million during her two-year tenure.
• Part of her task at Vanguard will be to keep the asset manager competitive in a diversifying wealth management field, which has seen banks and fintechs expand their offerings and AI advances that make the “robo-advisers” of 2010 look like abacuses — PitchBook analysts predict wealthtech will be a more than $2 trillion market by 2027. 

New Year, New Vanguard: Again, Ramji works fast: The restructuring takes effect in January. In addition to Rotenberg’s appointment, Vanguard said John James, current head of the Institutional Investor Group, has been named head of Workplace & Advisor Solutions.