Vanguard's CEO Choice Raises Questions on Firm's Future Path

The appointment of BlackRock veteran Salim Ramji as Vanguard Group’s CEO, the first outsider to be tapped for that role, is prompting questions about the investment goliath’s future direction.

Ramji, who will replace Tim Buckley on July 8, will steer an industry icon that nonetheless has faced customer service complaints, criticism over the company’s plans to raise certain brokerage fees and questions about shifting priorities.

Given Ramji’s role leading BlackRock’s iShares ETF business as the firm prepared to launch its spot bitcoin exchange-traded fund, some industry watchers also wondered whether his appointment, announced Tuesday, indicates Vanguard might soften its stance against cryptocurrency products, which it refuses to offer on its platform.

Others, however, doubt Ramji’s arrival will mark an immediate change in Vanguard’s refusal to offer investors access to bitcoin spot ETFs.

“I’m surprised that Vanguard went with an outside hire,” Daniel Sotiroff, a senior analyst at Morningstar Research Services, told ThinkAdvisor via email Wednesday. ”From my perspective, an outside hire raises questions about how Vanguard will be led in the future, specifically with regards to its investor first culture. That could be good or bad. 

“Vanguard is doing great in some areas — inflows, product development — and it’s struggling in others — client service, growth in international markets. I’d really like to see Vanguard stay on track with the former and make some adjustments to improve the latter, but we’ll have to wait and see,” Sotiroff said.

In a post Tuesday on Morningstar’s website, Sotiroff noted that Ramji inherits a firm that’s hardly struggling for assets. Vanguard managed more than $8.4 trillion from roughly 50 million clients globally at the end of March and led asset-management firms with more than $110 billion of inflows in 2023, second only to BlackRock.

Ramji will face other challenges once he settles in, Sotiroff said, noting that, in addition to customer service complaints and backlash over raised fees, “Vanguard hasn’t been immune to investors abandoning actively managed mutual funds for low-cost exchange-traded funds.” 

Out of Bogle’s Shadow

Jeff DeMaso, who edits The Independent Vanguard Adviser, wrote Wednesday that an outsider CEO may be a positive, as past CEOs have operated under the shadow of the late Vanguard founder, John C. Bogle.

“Bogle deserves his cult following, but today’s Vanguard is more of a sprawling organization than an upstart investment firm. Being able to operate with a freer hand could have its benefits,” he said.

“Plus, it’s not like Ramji, or anyone not living under a rock, is unaware of Vanguard’s culture and history. As a former consultant, I’m sure Ramji appreciates the power of a brand like Vanguard. Greg Davis, who was named President when Buckley announced his retirement, can serve as a ‘guardian’ of the firm’s culture,” DeMaso added.