Vanguard vows ‘to bring more choice’ to superannuation sector

Vanguard, one of the world’s largest funds managers, has received regulatory approval to launch a suite of superannuation products in the local market.

Vanguard chief executive Daniel Shrimski: ‘We are going to bring more choice to the market with our offer.’ Picture: NCA NewsWire / Luis Enrique Ascui

Vanguard, one of the world’s largest funds managers, has received regulatory approval to launch a suite of superannuation products in the local market.

Vanguard’s local chief executive, Daniel Shrimski, said the company – which manages more than $11 trillion globally – planned to use its strong connections with the financial planning network in Australia to market its products.

More than 60 per cent of financial advisers in Australia currently deal with Vanguard, which has operated locally for 26 years, managing more than $100bn.

While Vanguard’s superannuation products will be available to a broad range of potential members, Mr Shrimski confirmed the fund manager was also targeting wealthier clients.

Vanguard’s approval from the Australian Prudential Regulation Authority was the first new super licence issued in many years.

“Our journey is just beginning,” Mr Shrimski said in an interview. “We think the simplicity, the low cost and the (investment) expertise that we will provide will resonate,” he added.

He said working with financial advisers “would be a big part of how we plan to scale the offer”.

Mr Shrimski said Vanguard had a strong footprint among retail investors in Australia, where it had 30 per cent of the exchange-traded fund market.

“We will be looking to our personal investor base,” he said. “We have tens of thousands of clients on the platform who we will be working with where it makes sense to offer superannuation.”

While the fund manager is best known for its low-cost index funds, Mr Shrimski said the super fund offer would be “more fund-based but we think ETFs will certainly be a part of the longer-term solution”. The arrival of Vanguard into the $3 trillion local market will be a potential challenge to the major players, particularly the industry funds that dominate it.

But the market will be watching to see how well Vanguard can use its size to offer lower costs than established funds. Mr Shrimski said Vanguard would offer both MySuper funds as well as a range of Choice products. He said its entry into the market was coming at a time when Australians were becoming more engaged with their super, which for many was their second largest investment after the family home.

“We are going to bring more choice to the market with our offer,” he said. “As members start to engage (with their super), our offer will resonate.”

Mr Shrimski said Vanguard would be marketing its power to use its scale to hold down costs. “As more Australians get engaged with their superannuation – their second largest asset – they realise how important it is to invest in a fund which works for them and where cost matters,” he said.

Vanguard has an Australian based staff of about 800 people, including a superannuation team of 80. Its super fund is being overseen by a board chaired by former Herbert Smith Freehills partner Peggy O’Neal and chief executive Michael Lovett.

Mr Shrimski said the company saw itself marketing a suite of Vanguard products from ETFs and other investment options to superannuation funds.

“We are focused on creating a ‘one Vanguard’ experience,” he said. “By launching superannuation, we are going to be able to support Australians with the superannuation and non-superannuation side of their investments and making sure it is seamless.” He said Vanguard planned to back the launch of its super product with an advertising and brand-awareness campaign.

“On the retail side, our brand is growing (in Australia),” he said.

“We have been doing a lot more brand promotion over the past 12 to 18 months and we will continue to do that. In the US, we have a very strong brand.”

He said the firm had made “great strides” in its brand recognition in Australia but it now needed to expand this beyond the financial adviser market.

Mr Shrimski said Vanguard did not plan to offer financial advice in its own right despite being involved in the advice business in the US and the UK. He said it was a strong supporter of the Australian financial adviser network. Vanguard believed Australians needed to have more financial advice and had made a submission to the federal government-appointed Quality of Advice Review, which this week released draft proposals for reforming the sector.

“We think more Australians need advice, given the benefit it provides,” Mr Shrimski said. “We believe the market would be better off with advice being provided to more Australians.”