The big news this week was that American behemoth Vanguard will be setting up shop in Canada. For those that don’t know, Vanguard manages almost $2 trillion in assets and is known for having rock bottom costs, owing to it’s unique structure whereby the unit holders own the fund. I wrote about them, and even commented on their Canadian launch in 2009. I was off by about a year! :)
So a press release was sent out and the overall response from journalists and bloggers was that they were frustrated that specifics weren’t detailed. We don’t know what products or services will come, and the company has indicated that they won’t release that information until the regulatory filings for said products are made later in the summer. They did hint that they would focus on products for use in the advisory channel which has some people guessing that it will be a mutual fund launch to start.
I have no inside information, but given the hint about advisor based distribution to start, I thought I would take a look at the Vanguard United Kingdom launch to perhaps figure out their modus operandi for launching into a new country with an advisor focus. With some exceptions, if expansion into a new territory works, you just wash, rinse and repeat.
Take a look, from the Vanguard United Kingdom website:
Vanguard in the UK
Vanguard aims to offer the highest value investment products and services in the UK, just as we do in other parts of the world. In line with this mission, we launched our initial line up of index funds in June 2009. We have a range of other more diverse investment products in the pipeline, but the Vanguard Group’s long history of success with index funds makes them the most logical first step in the UK.
Low cost and transparent
In order to keep costs low and transparency high, we don’t pay commission. Instead, we work with fee-based investment professionals who appreciate Vanguard’s cost-based investment approach.
Our product offering
Our initial offering in the UK consists of a range of index-tracking mutual funds that are distributed primarily through platforms used by fee-based advisers. This means we work with the increasing number of IFAs (Independent Financial Advisers) who are moving away from a commission-based to a fee-based model. We also work with wealth managers, family offices and institutions.
Vanguard has had considerable success in this sector in recent years in the US as the demand for fee-based advice grows. We believe a similar trend is emerging in the UK driven by both regulatory action and customer demand.
Investing in our funds
Retail investors can access our funds using fund supermarkets, which sell our products alongside other providers. We do accept direct investments with a minimum investment of £100,000 per fund – a limit which does not apply when investing via fund supermarkets. We do not offer investments advice so if you need help making your investment decision or if you are unsure if our products or services are suitable or appropriate for you, you should contact a financial adviser.
Vanguard launched locally domiciled ETFs in Australia in May of 2009, while their fund offering had been there for many years prior. I’m not suggesting a Canadian based ETF offering is years away though. The world has changed quite a bit and ETFs are de rigueur.