Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 473

$10 trillion manager moves into Australian superannuation

Daniel Shrimski is Managing Director of Vanguard Australia. He joined Vanguard in 2011 and moved to the US in 2017 to become the CFO of the US Retail Investor Group, which manages over $US2 trillion in assets for more than seven million retail investors. He returned to Australia for the MD role in October 2021. Globally, Vanguard manages $10 trillion in assets for 30 million investors.

 

GH: It’s been almost a year since you became MD in Australia. You've worked and lived here before, but has anything surprised you this time around?

DS: Yes. First, the makeup of our business here is very different. I left in the beginning of 2017 when we were predominantly institutional with a financial adviser business. We have pivoted away from institutions to become a direct retail business that serves financial advisers. We’re more mature in marketing, corporate affairs, compliance and government relations as part of the move into retail.

Secondly, the acceleration and pace of growth in ETFs has been exciting. When I left, the total market was about $22 billion and now it’s about $130 billion. We're proud to be the ETF leader with about 30% of the market.

Finally, the consolidation in superannuation has surprised me, and there’s better member engagement, although I think there's a long way to go.

GH: Do you mean consolidation of industry funds?

DS: Super funds across the board, encouraged by the requirements of the APRA performance test, which should give a better chance of investment success for members.

GH: Stepping away from big institutional clients must have been a tough decision because while the margins are fine, billions of dollars was involved.

DS: Yes, it was a bold decision. We walked away from the something like $100 billion of institutional business, but we did it with a long-term focus on what’s the best chance for us to work directly with retail investors rather than through other financial institutions.

GH: Which leads to Vanguard Personal Investor (PI), your direct offer which was launched in Australia in 2020. What's been the experience so far?

DS: Yes, two-and-a-half years into the retail journey, we have tens of thousands of new clients, although obviously this year has been tougher than we expected but the market has changed. The data suggests we’re winning market share and we’ve launched useful enhancements. We started off with individual account types, then joint accounts, SMSFs, company accounts, and there’ll be more account types in future. We have a new ‘auto invest’ feature for managed funds and we plan to launch it for ETFs. Clients can put in as little as $200 monthly or quarterly and it aligns with our long-term investing approach. We build for scale to manage hundreds of thousands of clients and independent financial advisers. We have also included a lot more educational material on our new website.

GH: Member engagement is tricky because you don’t want most retail investors checking their balances every day, worrying about every movement of a few percent. That might lead to repeated switching at the wrong time.

DS: Yes, trading every day is another story but as long as people are doing it responsibly with a long-term investment philosophy and we certainly don't believe in trying to time the market. For many people, superannuation is their second-largest asset and they should be closer to their super, such as knowing that small changes in costs can mean a lot over time.

GH: That's a good segue into Vanguard's plans in retail superannuation. How is that going and what will it look like?

DS: Well, we have some big news, you're the first external person to hear this, but we received our Registrable Superannuation Entity (RSE) licence today. It’s very exciting for the team. We've been building the superannuation offer for about two and a half years and it's a massive responsibility to manage people's retirement savings. We'll make a public launch before the end of 2022. It will focus on simplicity, transparency, our investment expertise, high levels of diversification and low cost.

GH: That’s been much anticipated. It’s September now, so launch within the next three months?

DS: We think so. We will also focus on the investment experience and we've partnered with a third party that will enable us to really be nimble in employing technology and continually improving.

GH: As you know, for most younger people, it is an industry fund connected with their first workplace that captures their superannuation. Do you see Vanguard competing for that source?

DS: Longer term, absolutely yes. Incremental choice for members is a good thing, with more Australians engaged with super early. The competition will be tough but we’ve also got a great brand in the adviser space and we will leverage that as well as our PI platform.

GH: Back to your existing business, where have been the best flows for 2022 and have any funds done much better than you expected, listed or unlisted?

DS: One that has surprised me is our Australian Shares ETF, VAS. It held $2 billion when I left five years ago but now sits at $11 billion, the biggest ETF in Australia. Also, the range of diversified funds, where investors can access the entire market with a low minimum at a low cost, have done well. And international equities. They're the three main areas of growth. This will be the first year where we see ETF flows bigger than unlisted managed funds.

GH: On ETFs, some of your competitors make regular launches of thematic or niche funds but I don't see Vanguard playing in that market. Is that a conscious strategy?

DS: It definitely is. Our founder, the late Jack Bogle, always said, “Don't try to buy the needle in the haystack, buy the haystack” and in terms of launching products, that’s how we run our business. New products go through a rigorous process and we look at four different elements:

One, does it have investment merit over the long term?
Two, will clients be better off over the long term with the product?
Three, is it feasible from a legal and a regulatory standpoint?
Four, is it something where we think we have an advantage over our competitors?

When you look at those four, and you run some of the thematics and cryptos through it, they don't stack up. Crypto is more speculation in a largely unregulated space and it's something we've steered clear of.

GH: And often, the thematics are launched at the peak of their popularity to catch a demand wave, such as the crypto funds that have lost 70% of their value. If we have this conversation five years from now, how will your business look different?

DS: Our strategy is locked in for that time frame and now it’s about good execution.

First, we will work more with like-minded financial advisers, that’s a real position of strength, including technology solutions for them around things like retirement income builders. We’re also building a portal that will enable advisers to access our retail offers in superannuation and PI. We’re helping advisers with their offer, their practice management.

Second, on the direct-to-consumer side, it’s about growth and scale. We want a much louder voice in the retail investor and superannuation space.

And third, active and diversified funds will become a bigger part of our offering. It's a small but growing part of our story.

GH: Many advice businesses divide their clients into the As and Bs, the profitable high net worths, but the Cs and Ds have less to invest and are finding it difficult to access advice. Do you work with advisers across all these groups so they can service the Cs and Ds as well?

DS: Yes, and giving clients access to a low-cost personal investor offer with no platform fees is even more important as advisers are struggling with, as you say, the Cs and the Ds. We worry that advisers are leaving the industry and good advice matters for investment returns. We want advisers to be able to scale their business in terms of practice management.

GH: Final question. Do you think future investment returns will be able to match the generally good outcomes we’ve seen over the past 30 to 40 years?

DS: I don’t really have a strong view about 10-year returns but we always encourage clients to stay the course. Although we do see a 40% to 50% chance of a recession in Australia over the next couple of years, nobody knows how much of that is already priced into the market. Vanguard has been in Australia for 26 years and we’re not focussed only a few months ahead. I couldn't be more excited about the growth opportunity in the retail space in coming years as many fundamentals work in our favour.

 

Graham Hand is Editor-At-Large for Firstlinks. Daniel Shrimski is Managing Director of Vanguard Australia, a sponsor of Firstlinks. This article is for general information and does not consider the circumstances of any individual.

For articles and papers from Vanguard, please click here.

 

9 Comments
Geoff Parry
September 04, 2022

I also agree. If Vanguard offers their Super fund with a capped fee, I will seriously consider winding up my SMSF, and roll-over two accounts into the proposed Vanguard Superannuation Fund. InvestSmart and Vanguard PI ETF portfolio's are offerred on a capped fee basis.

Lisa
September 03, 2022

Sure I check my super fund frequently to see how it is performing but this doesn't mean that I am likely to panic if the value dips. Just like checking, gives me satisfaction to see my balance after all my hard work building it up and like
to monitor now I am getting closer to retirement. Another reason for frequent checking is that I want to make sure that scammers haven't got hold of it. So much money that it would be a great target and I don't have complete faith that super funds systems are that sophisticated and secure to beat the ever growing and more sophisticated scammer threat.

Dave Roberts
September 01, 2022

VAS ETF that was mentioned has fee of 0.10%. Beats Industry Fund easily.

Graham Hand
September 01, 2022

True, Dave, but you can't directly invest in VAS (as it is now) for your super. It does not (yet) exist as a super fund in its own right, although you can set up an SMSF and buy it, with more costs. The industry fund is a super fund you can invest in with the full admin support of a super fund. So whether VAS or similar is competitive AS A SUPER FUND versus industry funds remains to be seen.

Bakker
August 31, 2022

May be more a focus on net contributor returns than fees..this is where Vanguard could have a advantage. Also provide another catalyst for people to become more aware/ knowledge of their Super funds actual performance.

Joey
August 31, 2022

My industry super fund charges 0.4% for Australian equity income, 0.36% for global equities and 0.23% for listed property. Vanguard will need a sharp pencil to better this, especially since their pipeline via employers is well established.

RPAA
August 31, 2022

The problem with this Joey is that all Super funds have really under-performed so far in 2022, in fact the performance has been terrible with more potential losses happening right now. These Super funds need to move away from a % based fee and charge a fixed fee per account, maybe between $50-$70 per annum. Trust me, our members [Consumer Group of more than 50,000] are beginning to wake up to these management fee and no service nor adequate returns. More than happy to hear who agrees.

Shane
September 03, 2022


I totally agree with this!

Denial
September 15, 2022

No it doesn't. Check out you annual statements Indirect Cost Ratio. You're referring to one indirect component of the total direct and indirect costs

 

Leave a Comment:

     

RELATED ARTICLES

2024/25 super thresholds – key changes and implications

Super prospects from Australia’s most powerful CIO

Drawing more than you need to fund your super pension

banner

Most viewed in recent weeks

Where Baby Boomer wealth will end up

By 2028, all Baby Boomers will be eligible for retirement and the Baby Boomer bubble will have all but deflated. Where will this generation's money end up, and what are the implications for the wealth management industry?

Are term deposits attractive right now?

If you’re like me, you may have put money into term deposits over the past year and it’s time to decide whether to roll them over or look elsewhere. Here are the pros and cons of cash versus other assets right now.

Uncomfortable truths: The real cost of living in retirement

How useful are the retirement savings and spending targets put out by various groups such as ASFA? Not very, and it's reducing the ability of ordinary retirees to fully understand their retirement income options.

How retiree spending plummets as we age

There's been little debate on how spending changes as people progress through retirement. Yet, it's a critical issue as it can have a significant impact on the level of savings required at the point of retirement.

Meg on SMSFs: $3 million super tax coming whether we’re ready or not

A Senate Committee reported back last week with a majority recommendation to pass the $3 million super tax unaltered. It seems that the tax is coming, and this is what those affected should be doing now to prepare for it.

How much do you need to retire comfortably?

Two commonly asked questions are: 'How much do I need to retire' and 'How much can I afford to spend in retirement'? This is a guide to help you come up with your own numbers to suit your goals and needs.

Latest Updates

Economy

Is 'The Great Australian Dream' a sham?

Peter Dutton has made housing a key issue for the next election, pledging to “restore the Australian dream” of home ownership. It got me thinking about what this dream represents, how it originated, and whether it’s still relevant today.

Superannuation

Clime time: Taxing unrealised capital gains – is there a better idea?

The efficacy and fairness of establishing an unrealised gains tax regime will hopefully be hotly debated at the next election. We need better ideas on how to use the strategic and unique benefits of our massive super funds.

Retirement

How long will you live?

We are often quoted life expectancy at birth but what matters most is how long we should live as we grow older. It is surprising how short this can be for people born last century, so make the most of it.

Investment strategies

What poker can teach us about investing

So-called ‘resulting’ is what poker players call the tendency to judge a decision based on its outcome rather than its quality. It's something that happens a lot in investing, though should be avoided at all costs.

Latest from Morningstar

Should you buy and hold an Artificial Intelligence portfolio?

For those with the patience to own an investment as volatile as the AI sector, buying and holding a stock basket might make sense. However, based on internet stocks’ history, you need not rush to do so.

Strategy

The bull market in commodities may be just starting

The world is entering a higher cost environment which will hit the profits of companies in many sectors. A key beneficiary will be commodities, where supply shortages are meeting increasing demand from AI and green energy.

Shares

The challenges facing electric vehicles

Slowing demand and profit warnings from the EV manufacturers has seen analysts revise down their EV penetration forecasts. What's behind the slowdown, and are the issues a blip or something more serious?

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.