MM Profile: Tom Rampulla
Vanguard’s UK managing director believes the company’s no-load approach will attract advisers looking for value when they move to fee-based business after the RDR Interview by Rachael Adams
Home is where the heart is for Vanguard UK managing director Tom Rampulla. “When I joined Vanguard in 1988, it was for no reason other than I wanted to go back to Pennsylvania,” he says. “I thought I would be there for a year but 23 years later and here I am.”
After studying finance and economics at university, subjects Rampulla selected because they “sounded reasonable”, he went to Manhattan to work for portfolio management software company Shaw Data Services.
“It was a tough time to get a job so I went to New York and found one that seemed close to what I wanted to do. It was basic but it familiarised me with portfolio management, which was helpful when I moved to Vanguard.”
The introduction to Vanguard came by way of a friend. “In 1988, one of my friends started working at Vanguard and said I should come on board. I was not sure what they did but it was a way for me to move back home.”
He started as a mutual fund accountant, then moved into fixed income and then joined Vanguard’s institutional sales team. “I turned the job down at first but then I decided to try it. I loved it. I did not have the attention span to be a fixed-income manager.”
After selling to Fortune 100 companies in South-west America for a few years, Rampulla helped Vanguard launch its financial adviser proposition in 2002, which was new to the company.
“We never made any effort to grow that market.” This was partly because Vanguard founder Jack Bogle spent years telling investors they should opt for simplicity and did not need financial advisers and partly because Vanguard’s failure to pay commission discouraged advisers.
“But things started to change in the US in the late 1990s. Although not regulatory, there was a drive towards fee-based propositions. We decided exchange traded funds were a way to get into the adviser market without offering commission.”
Vanguard’s ETF business now has $170bn assets under management.
By 2008, Vanguard saw the fee bias similarly emerging in the UK. “Because of the way we distributed, we had not taken a run at the UK. However, ahead of the retail distribution review, we saw fee-based advice growing in popularity.”
He was given the task of bringing Vanguard’s client-centred, low-cost offering to London, which is now the company’s European hub.
Although the corporate structure of the UK company is different from the US arm in that it is not mutually owned, Rampulla says the ethos is the same. “Our focus is the end investor and we are very transparent.”
Rampulla says Vanguard UK has outstripped expectations. He says: “We have already got 85 employees and we are looking to have 110 by year-end. We are not a huge product organisation so we are still building our core line-up.”
The company’s five LifeStrategy funds, launched in September, are part of this core growth strategy. The five are risk-graded and were launched after advisers expressed an interest in a model portfolio product.
“Advisers are starting to focus on client relationships. A lot of them are going to start outsourcing investment under the RDR and we are well positioned to take advantage of that.”
The fact that Vanguard’s existing product range is biased towards ETFs and no-load mutual funds will also stand it in good stead come 2013, believes Rampulla. “Under a fee-based model, advisers want to lower their costs and focus on their value proposition, which is financial planning. ETFs and no-loads are cheaper and their indices give precise asset exposures, saving adviser time. I think they may become popular and this would be good for us.”
As well as being RDR-compliant in terms of remuneration and product range, Vanguard’s ethos is also RDR-friendly. “We want to help investors. That is not mutually exclusive with the bottom line, you can do both. When the RDR comes in and advisers and clients are on the same side of the table, these two aims will come together. We welcome what the regulator is trying to do.”
Rampulla says Vanguard also looks set to benefit from other regulatory changes. “We did a lot of work around segmentation in the US market. You have the self-motivated investors who will buy and sell their own securities, the people who want to be told what to do by advisers and the middle group of validators who need someone to approve what they are doing themselves.
“There is a higher percentage of self-motivated investors in the US because, historically, the state has not taken care of people as much as it has in the UK.
“American people have been saying for years that social security will not be around when they retire, so they have saved. This engagement is lacking in the UK, so there are fewer DIY investors.”
But Rampulla thinks this will change with auto-enrolment. “It uses people’s inertia in its favour. Nest says, ’If you are not going to be engaged, we are going to enrol you and keep enrolling you until you say stop’.”
But getting more people engaged is not the biggest hurdle facing the industry, says Rampulla. “There is a lot of uncertainty over the eurozone and recent IMA statistics reflect that. We would argue that we have seen shocks before, so focus on the long term and do not change your asset allocation. I think there could be a bounceback because I am a value guy but a long period of uncertain markets could slow things down.”
Another challenge Rampulla sees facing Vanguard is regulation. “The problem with any regulator is that often things get political and the industry tends to get whipsawed in the process. If regulation is good, then great, but if it is not stream-lined it is a bit of a waste and adds to cost.
“But these obstacles are not going to stop us. We are going to continue to be bullish. We want to stand as a fiduciary with investors because we are dealing with their livelihoods.”
Born: Syracuse, New York
Lives: Cobham, Surrey, with wife and children
Education: Degree in finance and economics at Bloomsberg University, MBA from Drexel University
Career: 2008-11: managing director, Vanguard Investments UK Group; 2002-08: head of financial adviser and ETF sales for financial adviser services, Vanguard; 1997-2002: sales executive, Vanguard Fiduciary Services; 1995-97: sales executive, Vanguard Institutional Sales and Marketing Group; 1991-95: portfolio manager, Vanguard Fixed Income Group; 1988-91: relationship manager, Vanguard Private Label Group; 1987-88: client service associate, Shaw Data services;
Likes: A good sense of humour
Dislikes: Pessimism, negativity
Drives: Colnago C59 bicycle
Book: The Road by Cormac McCarthy
Film: American Beauty
Album: The Joshua Tree by U2
Career ambition: Leave the woodpile higher than you found it
Life ambition: Make a positive difference, be a great husband and father
If I wasn’t doing this I would be…A sports nutritionist