Speaker 1:
Hello, welcome to another episode of ETF Innovators. My name is Valerie Grimba and I'm head of ETF Strategy at RBC Capital Markets. Today we have an esteemed guest from a top ETF provider globally. We'd like to welcome Kathy Bock, head of Vanguard Canada to the program.
Speaker 2:
Thank you,
Speaker 1:
Valerie.
Speaker 2:
Delighted to be here today. Thank you.
Speaker 1:
We're thrilled to have you. Now, Vanguard really needs no introduction. You've pretty much been around since the start of the ETF industry. Vanguard has been at the top of the leaderboard parentally as far as a u m goes and flows, and no doubt that speaks to the type of product that you've been developing and the success behind that. Now, an interesting fun fact, Kathy, is that you were part of the team that created Vanguard's very first ETF. Can you share with us a bit more about that experience and the genesis behind that?
Speaker 2:
Yes. Yeah. So look, it was just what a privilege to be a part of starting something like that at a company like Vanguard. And maybe I'll just take a little step back and talk about our founder, Jack Bogle, who really was a pioneer in Index mutual funds and was a strong advocate for investors and ETFs were really just a new structure to help provide more access to investors who might not be able to access through a mutual fund structure. And it was really about accessing broadly diversified, low cost, high quality products. And so I'm just incredibly proud to have been a part of that both in the United States and here in Canada as well about 12 years ago when we started.
Speaker 1:
Absolutely. And so you touched on Jack Bogle and his legacy that is rippled throughout the investment world, and a bit about your product lineup. Can you talk about how that kind of shapes how you look at products going forward and what the Vanguard mission is around that?
Speaker 2:
Yeah, so we're constantly looking at products that will, again, just going back to the basics, provide investors with the best chance for investment success. And so again, lowest possible price, broad diversification and products that will reach the greatest population of investors. And so above all else, for us, the investment case for a product has to be really strong. And as I said, it's got to really stand the test of time or we won't launch a product. When we think about launching product, we really think about long-term. Most investors, if you think about it, they're saving for the long-term, whether it be for something like retirement or whether it's a child's education. We're going to think about whether or not a product would endure for 10 years or 20 years and not just in the short term.
Speaker 1:
And you kind of mentioned in their asset allocation ETFs, Vanguard was the first to market here in Canada, creating that kind of one ticket solution. And so within these ETFs, you're getting a basket of Vanguard Index ETFs that are kind of weighted appropriately to a specific investor's risk tolerance. Can you talk to us about these products a bit more and why you think they've been so successful?
Speaker 2:
Yeah, absolutely. So these products are a basket of underlying vanguard passive ETFs. And so one of the great things about these is that you get our best thinking in portfolio construction all in one A one ticket solution. And when you think about it, you can have a broadly diversified global portfolio that holds, get this 25,000 securities for 22 basis points. I mean, that's a pretty amazing product innovation. So I think the ETF and in particular the asset allocation, ETF, is right up there with great product innovations in this market. Interestingly, we also see that they're very popular with advisors, and we see that advisors are using these products for certain client segments where this provides a scalable all-in-one solution for a client. And that could be an appropriate way to maximize value for someone with a little less savings. But the other way we see advisors using these is to be the core of a core satellite strategy.
So your asset allocation ET T F would be the core, and then you would surround that with more active strategies on the satellite feature of that to drive even higher returns for investors as well. So we're seeing it used in a variety of ways, and I think the flexibility of these products is terrific. And you really see that based on the assets that we've gathered in a relatively short period of time, five years in, we're at 10 billion in a U m, and the whole category in Canada has grown significantly. So that's a great outcome for investors.
Speaker 1:
Yes, I think when you get a product and there are multiple use cases for that product, different ways to chop and change, and whether it is that core satellite structure you talk to or a D I Y user can also apply it. I think that just bodes very well for the success of an E T F. Another area where Vanguard has put a lot of research and a lot of efforts is kind of looking at the value of financial advice and financial advisors. Can you tell us a little bit more about this research and what your studies are suggesting?
Speaker 2:
Yeah, absolutely. So yes, Vanguard has pioneered a concept that's known as advisors Alpha. And we initially did this work about 20 years ago, and the goal was to really quantify the value of an advisor relationship. And so it's become very widely known in the industry as a very foundational piece of research. And I think the most interesting thing about this research is that where we found the most value, it was not actually in the stock picking and not in the portfolio construction activities of the advisor, but it was actually in the holistic wealth management services that the advisor provides to an investor. And what do I mean by that? The behavioral coaching. The coaching through the moments that matter when somebody might be responding to market conditions that are temporary and they want to do something sort of irrational with their portfolio. So advisors play a big role in that behavioral coaching. They play a big role in estate planning, and they play a big role in tax management and tax loss harvesting. All of those additional services that an advisor provides provide tremendous value to a client. And interestingly, with the emergence of technology and robo-advisors, we've also updated the study and we found that investors broadly still have a preference for elements of the human advice. And so technologies an enabler, but investors by and large still have a strong preference for human led advice. So yeah, a pretty important topic for us.
Speaker 1:
We're just rounding the corner now and 2024 is drawing near. Can you comment on any of your plans or how you're thinking about the landscape going into the coming year?
Speaker 2:
Yeah, I talked a bit about enduring investment principles, and so being broadly diversified, keeping control what you can control, so be broadly diversified, keep costs as low as possible, be willing to stay in it for the long term. Those things don't change. So going into 2024, we're still focused on those same principles because we really believe that is giving investors the best chance for investment success. And so we'll continue what we're doing, getting that message out there, constructing products with that in mind, and as I said, serving up capabilities to advisors that really help them continue with that message.
Speaker 1:
Amazing. Well, thank you Kathy, so much for joining us today. We really appreciate it. Thank
Speaker 2:
You. Thank you for having us. We were delighted.
Speaker 1:
Great.