Vanguard & Altruist CEOs Talk Wealth Platform Deal, Prediction Markets

Vanguard Group has agreed to buy digital wealth platform Altruist, marking a strategic shift from its traditional organic growth approach to expanding its wealth management capabilities through acquisition. The deal follows Altruist’s notable impact earlier this year when it introduced a tax strategy tool that caused a sell-off in wealth management stocks. In an exclusive interview with Bloomberg’s Dani Burger, Vanguard CEO Salim Ramji and Altruist CEO Jason Wenk discussed the significance of the transaction and Vanguard’s commitment to enhancing its digital wealth offerings.

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Speaker 1: Bloomberg Audio Studios.

Speaker 2: Podcasts.

Speaker 3: Radio. News.

Speaker 4: Vanguard is buying digital wealth platform Altruist. The deal marks

Speaker 4: Vanguard's intensifying push into wealth management. And you might remember

Speaker 4: Altruist back in February. It sparked a sell-off in wealth

Speaker 4: management stocks after launching a tool aimed at creating tax strategies.

Speaker 4: So pleased to say that joining us is Vanguard CEO

Speaker 4: Salim Ramji and Altruist CEO Jason Wenk in an exclusive interview.

Speaker 2: Thank you both. So much for joining.

Speaker 4: Jason, do you enjoy the notoriety you still have for

Speaker 4: making all of your peers sell off?

Speaker 2: This is a really exciting deal.

Speaker 4: And Salim, if I can start with you, because this

Speaker 4: is a departure from Vanguard. You're known for growing organically.

Speaker 4: Why not go that method and expanding into wealth? Why

Speaker 4: does it make sense for Altruist, who you've already partnered with,

Speaker 4: to outright buy it?

Speaker 5: You know, we've been an investor in Altruist going back

Speaker 5: more than half a dozen years. So we were a

Speaker 5: minority investor kind of in the early days when Jason

Speaker 5: and his team were first getting started. And what we

Speaker 5: were impressed back then about is what we're also impressed

Speaker 5: about today. The first piece was really the mission that

Speaker 5: Jason had founded the firm around, which is making advice

Speaker 5: more accessible, more affordable, and better for many more Americans.

Speaker 5: And the second piece, which really takes us to today,

Speaker 5: is just the tenacity with which Jason and the team

Speaker 5: have really been building their business. And from a Vanguard perspective,

Speaker 5: we want to do for financial advice what we've done

Speaker 5: for the past 50 years for investments, which is really

Speaker 5: make it much more accessible to many more people. And

Speaker 5: part of this alignment around the mission, right, when Jason

Speaker 5: was talking about the mission of Altruist to me and

Speaker 5: we were comparing notes, A lot of what he was

Speaker 5: trying to do rhymed with what we were trying to do.

Speaker 1: And I think in that, it really led to this moment.

Speaker 4: Well, I'm assuming part of the mission has been this

Speaker 4: fast growth and nimbleness that Altruist has, Jason.

Speaker 2: I mean, you're in California.

Speaker 4: You're away from the hub of financial services here in

Speaker 4: New York.

Speaker 2: Why not stay independent?

Speaker 4: Why partner with a behemoth when one of the sort

Speaker 4: of bright points of Altruist had been this independent sort

Speaker 4: of flavor that you had.

Speaker 1: As a firm?

Speaker 3: Yeah, I think so. We're probably more alike than people realize.

Speaker 3: I heard Celine say that Vanguard is not a Wall

Speaker 3: Street titan. They're a titan of rural Pennsylvania. We were

Speaker 3: founded on Abbot Kinney Boulevard in Venice Beach, California, so

Speaker 3: also about the anti-Wall Street as you can get. But

Speaker 3: Altruist is a business that's designed to help independent financial advisors.

Speaker 3: Those independent advisors are often referred to as RIAs. They

Speaker 3: serve tens of millions of clients, over $ 10 trillion in assets,

Speaker 3: and we're incredibly focused on empowering those advisors to make

Speaker 3: advice better, more affordable, accessible to everybody. You'll hear a

Speaker 3: lot of, again, the rhymes with the genesis of Altruist,

Speaker 3: in many respects, was inspired by Vanguard. I've been a

Speaker 3: fan of Jack Bogle's work going back into the late 90s,

Speaker 3: early 2000s. Our mission is very similar to the Vanguard mission,

Speaker 3: to take a stand for all investors.

Speaker 1: You start to see these things.

Speaker 3: When you are an entrepreneur and you're thinking about leaving

Speaker 3: a really long-term legacy, and in our case, it's one

Speaker 3: of Again, this very mission orientation around making advice better

Speaker 3: and more affordable.

Speaker 2: And more accessible.

Speaker 3: There's no better partner I can think of. And again,

Speaker 3: this would have been likely the case when I started

Speaker 3: the company eight years ago than Vanguard.

Speaker 4: And you also very much so rhyme with a Fidelity

Speaker 4: or a Schwab, though, considering your business threats them. I mean, Salim,

Speaker 4: is this Vanguard becoming even more of a direct competitor

Speaker 4: with those?

Speaker 5: Look, if you think about the problem we're trying to solve,

Speaker 5: and it's not just Vanguard and Altruist, I think it's

Speaker 5: many firms, but I'll be particular about what we're trying

Speaker 5: to solve.

Speaker 1: It's how do you get more access to financial advice?

Speaker 5: Today, only one in five Americans have access to a

Speaker 5: fee-based financial advisor.

Speaker 1: We would like to see.

Speaker 5: That number be most Americans having access to financial advice.

Speaker 5: And even as we surveyed Vanguard's own investors just earlier

Speaker 5: this summer, what they told us, 74% of them, is

Speaker 5: they want access to some form of human financial guidance

Speaker 5: to be able to make sense of all the complexity

Speaker 5: out there. And so part of what we're trying to

Speaker 5: do is use technology to give independent advisors greater scale,

Speaker 5: greater ways.

Speaker 1: To reach more and more clients.

Speaker 5: But also use technology to help clients who may just

Speaker 5: want a second opinion or may just want some basic

Speaker 5: kind of guidance to be able to get that guidance.

Speaker 5: Because if you go back to our founding mission about

Speaker 5: helping improve the chances of people's investment success, having low-cost,

Speaker 5: high-performing products is one component of it. But another component

Speaker 5: is financial discipline.

Speaker 1: And what we've seen over.

Speaker 5: Decades is that if you've got a good fee-based financial

Speaker 5: advisor that's focused on your interests, that they can really

Speaker 5: instill that long-term discipline for an investor. And with technology,

Speaker 5: we think we can do that with greater scale.

Speaker 4: So, again, the mission is nice, but it's the business

Speaker 4: case I'm also interested in. I mean, is this you

Speaker 4: wrestling market share away from some of those competitors with

Speaker 4: this purchase?

Speaker 5: Because of Vanguard's unique structure, we're owned by our clients.

Speaker 5: We don't necessarily think like traditional companies will. And so

Speaker 5: one of the best accomplishments, I think, of Vanguard over

Speaker 5: the past 50 years, you know, it was 50 years

Speaker 5: ago this month that we launched the first index fund.

Speaker 5: And one of the best accomplishments, in my opinion, is

Speaker 5: that many more people, two-thirds of Americans today are investors,

Speaker 5: in part because we help make investing simple and more

Speaker 5: affordable and more accessible. And what we want to do

Speaker 5: is do the same thing for advice, because there is

Speaker 5: a scarcity of advisors and of fee-based advisors And there's

Speaker 5: exceptional demand, whether you take my 74%, you take other

Speaker 5: industry stats. And we think being able to marry kind

Speaker 5: of the scarcity of supply of great financial advisors with

Speaker 5: the technology that Jason and his team have built really

Speaker 5: helps us do for investors who are seeking advice, what

Speaker 5: we've done for investors over the past 50 years who

Speaker 5: just want a low-cost investment product in which to enter

Speaker 5: the markets.

Speaker 4: Well, having this sort of technology-based IRA custodian, again, I

Speaker 4: mentioned in February, it led to kind of this panic

Speaker 4: among some of the more traditional ones. Jason, what have

Speaker 4: you seen since then, like have you been this really

Speaker 4: disruptive force or is it more, you know, to the

Speaker 4: point that Sam Altman made the other week, sometimes these

Speaker 4: things are slower moving in adoption and really embracing AI

Speaker 4: in some of these forms?

Speaker 3: Well, on AI, I think that there's still a lot

Speaker 3: more opportunity. I think there's a lot more possibility than

Speaker 3: reality today. So I think Sam's probably right in that regard.

Speaker 3: As for us, I mean, we've had a fantastic year.

Speaker 3: We're still a young enough company that virtually every quarter

Speaker 3: is a new record quarter. I think the innovation is

Speaker 3: a big part of that. And in our case, because

Speaker 3: we serve advisors, advisors the last couple of decades have

Speaker 3: had very few choices. It's hard for them to run businesses.

Speaker 3: They have to make a lot of compromises. The compromises

Speaker 3: might be either I can only serve really wealthy people

Speaker 3: because I don't have enough capacity to serve more, or

Speaker 3: I have to reduce the quality of work I can

Speaker 3: do because I want to serve many.

Speaker 2: A lot of our growth is because we're.

Speaker 3: Able to bridge those kind of two conflicts and make

Speaker 3: it much easier for advisors to do their best work

Speaker 3: at scale, a lot more clients, a lot higher quality work,

Speaker 3: and to do it at a lot lower cost. So

Speaker 3: these are things that AI is a huge enabler for

Speaker 3: and technology in general can help.

Speaker 4: Just on that, how much of that does it hinge

Speaker 4: on keeping compute costs low? Because this is something that

Speaker 4: businesses have also.

Speaker 2: Had to grapple with.

Speaker 3: For us, it's not been a challenge. So, you know, compute,

Speaker 3: I think, depending on the type of work, I mean,

Speaker 3: there are some tasks that are, you know, very compute intensive.

Speaker 3: Some knowledge work will fall in there, but definitely not

Speaker 3: an issue thus far. And I don't see that being

Speaker 3: an issue in the future.

Speaker 2: Salim, I have to get into the numbers a little bit.

Speaker 4: Wall Street Journal, I know, reported that this deal valued

Speaker 4: Altris at $ 4 billion.

Speaker 2: Is that the right figure?

Speaker 5: Yeah, you know, we're not disclosing the financial terms, but

Speaker 5: what we are really quite in unison about is what

Speaker 5: do we want.

Speaker 1: The outcomes to be?

Speaker 5: And one of the outcomes is to get, to enable

Speaker 5: most investors to have access to some form of financial

Speaker 5: advice or some form of financial guidance.

Speaker 1: Over the coming decade.

Speaker 5: Because from our perspective, and it's, again, we're a different

Speaker 5: type of company because we're owned by our investors, that

Speaker 5: if we can do that and give people access to

Speaker 5: that in a high quality, low cost way that people

Speaker 5: have come to expect kind of from our funds, that

Speaker 5: what we can do is help them maintain financial discipline

Speaker 5: and ultimately we can help them achieve investment success, which

Speaker 5: is what the company was set up for.

Speaker 4: Again, given sort of the rhyming and how much you

Speaker 4: align on these sorts of things, In your mind, is

Speaker 4: this sort of a one-off?

Speaker 2: Because as I mentioned at.

Speaker 4: The start, it is very rare for Vanguard to grow inorganically.

Speaker 2: To do M & A.

Speaker 4: Or is this kind of maybe you dipping your toe

Speaker 4: in and this might be the future for Vanguard, looking

Speaker 4: at adding companies like Altruist that make sense on more frequently?

Speaker 1: Yeah, we're a very discerning buyer.

Speaker 5: And Jason was a very discerning kind of seller. And

Speaker 5: I think that there's so many unique circumstances that made

Speaker 5: this feel right to.

Speaker 1: Both of us. Some of it goes back to 2020

Speaker 1: and the.

Speaker 5: Early investments we made. Some of it was a strong

Speaker 5: sense of alignment kind of a mission. And some of

Speaker 5: it was just based on the very complementary nature of

Speaker 5: what Altruist does and what Vanguard does. We have a

Speaker 5: very loyal following amongst RIAs. We've been big supporters of

Speaker 5: them through kind of our funds, our models, our research.

Speaker 1: And so does Altruist.

Speaker 5: And so these are really ways in which we can

Speaker 5: serve that community better because we really believe that that

Speaker 5: if we can help that community of fee-based advisors scale

Speaker 5: what they can do, they can serve more investors. And ultimately,

Speaker 5: in Vanguard's kind of parlance, that's helping us take a

Speaker 5: stand for all investors and helping us kind of improve

Speaker 5: their odds of investment success.

Speaker 4: I have like just over a minute, but I would

Speaker 4: love to get both of your faults, your views on

Speaker 4: prediction markets and sort of the gamification of investment.

Speaker 2: Is that trend worry you at all, Salim?

Speaker 5: Oh, it worries me tremendously. what we're about is long-term investing.

Speaker 5: And we really see kind of different forms of whether

Speaker 5: it's sports betting, gambling, and the like as things that

Speaker 5: start to cloud between what is investing and what is

Speaker 5: ultimately speculation. Vanguard has always been about long-term investing. We're

Speaker 5: always going to be about long-term investing. And even as

Speaker 5: Jason and I talked about this kind of in some

Speaker 5: of our early days, There are very similar views that

Speaker 5: you had held kind of around just the.

Speaker 1: Bad outcomes for investors. If you start blurring these lines. Yeah.

Speaker 3: Look, we have something at Altris we call the sacred rule,

Speaker 3: which is that we will never build something that harms investors.

Speaker 3: And so I've been a very outspoken critic of prediction

Speaker 3: markets consistently. I think they're a terrible idea for most people,

Speaker 3: and I think they don't belong in financial services applications.

Speaker 2: Maybe a good way to get young clients, though.

Speaker 3: If you don't want them to have money in their future,

Speaker 3: it's probably a good idea. But again, I think if

Speaker 3: we focus on empirical, evidence-based ways to help people achieve

Speaker 3: their long-term goals, this is partly why we focus with

Speaker 3: serving these independent fiduciary advisors more.