‘We are going to make life hard for our competitors’

The rise in popularity of passive investing among UK investors over the past few years has been accompanied by a series of cuts to fund fees. At the same time, the fees charged for active investing, and the perceived value for money of the active management industry, have been subjected to increasing scrutiny.

Vanguard is one of the main players in the UK passive market, but further lowering of prices by providers such as Fidelity International and iShares (part of BlackRock) has made the space highly competitive.

John James, managing director for Vanguard Europe, credits the company’s structure for its ability to constantly compete on cost.

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He explains: “It comes out of our ownership structure – we’re a mutual, so all our profit goes back into lowering fees for our client. We are going to make life hard for our competitors and we are also going to make things better for the end investor. That really drives our whole culture here.

“We celebrate price lowering, we don’t celebrate paying profits to external shareholders.”

He continues: “Since we’ve been here, we’ve lowered the prices of our funds. I think our average expense ratio has come down from about 40 basis points to about 20, so we feel like we’ve had a big impact already. For us, we’re about growing size and scale, not for ego, [but] because that allows us to lower fees again.”

Does that mean more product launches from Vanguard this year? Yes, says Mr James – in fact, the firm is preparing to launch a product and service offering based on what it sees as a direct-to-consumer opportunity.

Details are scant, but he can reveal the following: “The direct-to-consumer [launch] is purely thinking there’s a percentage of the UK market that doesn’t have access to investing how they want to, and so they want to go direct. We want to make sure we’ve got something in place for that.”

Mr James took up his current role in July 2015, having headed up parts of the US and Australian business before then.

“So, eight years at Vanguard: I spent the first two years running sales and distribution for our ETFs in the US, then went and spent five years as CEO of the Australian business.

“One of the unique things about us is we generally rotate senior leaders. So in some respects, the transition here was reasonably well planned.”

CV - John James

2015 – present Managing director, Europe at Vanguard

2010 – 2015 Managing director, Australia at Vanguard

2008 – 2010 Head of broker dealer sales and distribution, Vanguard US

2004 – 2008 Chief executive, Port Adelaide Football Club

1998 – 2004 General manager of corporate solutions, MLC Australia

1994 – 1998 Regional and country (New Zealand) manager, Rothschild Australia Asset Management

He stresses, though, that he is in his current role for the long term, and that he is excited by the “growth and size” of the opportunity in the UK. With the European business at just over $100bn (£69.5bn), he says there is a “good foundation” on which to expand.

“The first thing is really [to] extend our reach across the UK,” he suggests. “We continue to build product, we continue to see great opportunities in the adviser and wealth manager segments. But we really see a great opportunity in the retirement pensions space as well, so that’s the big focus for the UK.”