Retirementals podcast with Sean Hagerty, Vanguard Europe’s Managing Director

Abraham Okusanya speaks to Sean Hagerty, Managing Director of Vanguard Europe, in the latest episode of Retirementals. Abraham throws Sean into the deep end, asking a broad range of questions, ranging from Sean’s approach to retirement to the 10th anniversary of LifeStrategy funds and their success, and much more.

Here’s a snapshot of some of the questions and answers from the episode:

Give us an insight into Vanguard’s business in the US and how it compares to Europe.

The businesses aren’t that different, between what we always set out to do in the US and now what we are setting out to do in Europe. And that is, we primarily serve end investors. We do that either directly or mostly through financial advisers, and that’s the biggest part of our business in the US & also in Europe.

Our strategy is aligned, but we have been in the US a lot longer and have more brand there, plus the US has a gargantuan market. In Europe, it feels like how Vanguard felt to me in the US in 1997 when I joined – we are just getting going.

Vanguard’s personal financial planning recently launched in the UK. What’s the driver behind Vanguard’s foray into financial advice?

Vanguard’s real mission is not to just be a provider of cheap beta or indexing, it is about improving outcomes for investors.

We didn’t set out to revolutionise investing with indexing. We set out to say let’s revolutionise investing by trying to put the investor in the first instance – everything we do is for the investor and improving outcomes for them. It was about how do you use investment portfolios to improve outcomes. So, advice for us was just a natural extension of what we have always been doing.

What is stopping Vanguard putting everything together and offering their platform to the adviser and competing in the platform space.

Never say never, I think that as we have looked at the different components of the value chain, in the UK adviser market we think there are places where it would be natural for us to participate, and other places where it might be less natural. I would say the most important thing for us, would be to think about how to help advisers build portfolios and partner with the existing platforms, as opposed to being a platform ourselves.

Do you see the advice channel being driven closer to 70 / 80 basis point rather than 2%, which is where it is today?

If we look at all investors today and see how much they pay on average, we think what can we do to try and improve outcomes for them? We want to improve probabilities of them having success with whatever goals they have, which is often many, but for most its retirement. So by decreasing the cost from 2% down to 75/80 basis points, it significantly increases the probability that they are actually going to reach their goal over a time span of savings. The question is, what can we do to help push the industry in the right direction?

What do you think is the reason that VLS has stood the test of time?

They are emblematic of everything that Jack Bogle would have talked about during his entire career. He talked about low cost- it’s low cost, he talked about indexing – it’s an index implementation, he talked about, it’s hard to time the market – we don’t try and time the market, and he talked about time being your friend – and we have a long-term outlook here.

But what really empowered these is that approach creates good net returns, so I think the 10-year LifeStrategy 40 and LifeStrategy 60 are in the top 2% in the entire universe in terms of risk adjusted returns.

What’s in the pipeline for Vanguard?

I think there’s a few areas of interesting exploration for us. We are getting a lot of questions from advisers about ESGs, so we have a pretty active product pipeline across a bunch of categories.

And the second area on real deep research and product development is in portfolio building for advisers. What can we do to help advisers to create better NET returns for their investors? And for us its all about partnering with people.

As Vanguard Europe’s Managing Director, what does your retirement look like?

For my own retirement, it’s a well-diversified balanced portfolio, which I then forget about. Interestingly I am a client in the US with our personal adviser services, which is surprising to some.

For Sean’s full responses and additional questions asked, listen to the episode here or take a look at the Retirementals website to see what other episodes are available.