Transcript Vanguard Presentation

Success in taking the road less traveled….
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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About Vanguard
• Founded May 1, 1975
• One of the world's largest
investment management
companies
• Approximately $950 billion in
U.S. mutual funds (as of
December 31, 2005)
“…the client-owned investment
management company
built to put your interests first®”
• 130 domestic funds (including
variable annuity portfolios)
• 40 additional funds in
international markets
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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What are mutual funds?
“A mutual fund is simply a financial intermediary that allows a group of investors
to pool their money together with a predetermined investment objective. The
mutual fund will have a fund manager who is responsible for investing the
pooled money into specific securities (usually stocks or bonds).”
• First started in 1924 by 3 Boston executives
• Industry has grown tremendously over the years
– 55 million households
– 96 million individuals
– $7 trillion in net assets
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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John Bogle
•
Princeton Years
•
Wellington Management Company
•
Philosophy: No commissions + Low overhead = maximized
growth
•
Principle: clarity, candor and disclosure
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Growth of Vanguard
•
1929: Vanguard Wellington Fund
- Endures 1929 crash through diversification
•
1975: Vanguard begins its operations
- 28 employees, 11 funds, 1.8 billion in net assets,
•
1976: Vanguard index fund opens
•
1977: Eliminates sales commission (“loads”)
•
1990: Creates first international index funds
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Growth of Vanguard (Cont’d ….)
•
1995: Vanguard.com opens for business
•
1996: Vanguard begins offering financial planning for individuals
•
1997: Vanguard begins offering investments to investors outside
U.S
•
2003: Vanguard.com reaches 3 million registered users
•
2004: Offers one-step auto pilot program for 401(k) plans
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Appeal of Vanguard
• Commitment to low-expenses
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Appeal of Vanguard (Cont…)
• Excellent Customer Service
– Executives help man the phones during peak Call Periods
– Vanguard funds dominate Forbes "Best Buy" rankings
every year
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Class discussion
Why Price Perceived Quality is not applicable in this case?
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Vanguard’s low expenses Differentiates
itself from competition
• Reluctant to Advertise
• No mass sales force
• Prohibits frequent trading of its funds
• Passive Investing
Still has an extremely loyal, cult-like customer base
www.diehards.org
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Class discussion
Do you think that Bogle’s idea of advertisement avoidance
is good?
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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How did Vanguard manage to gain such
loyal customer base?
• Word of mouth advertising
• Believing in and sticking to its mission statement
• Publicity from books, and Bogle’s appearances in media
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Take away lessons
• Marketing can be overdone
• The Power of differentiation
• Word of mouth publicity can be very powerful
• Benefits of frugality and passing the value to the
customer
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Class discussion
Do you think there is an analogy between the
success of Wal-Mart and Vanguard?
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Competitors of Vanguard
•
Fidelity
– Founded in 1943 by Edward C. Johnson II
– Attracted crowd through their innovative ideas
– First to sell through a 800 number
•
Capital research management
– Founded in 1931 by Jonathan Bell Lovelace
– Manages US$850 billion in mutual funds and
US$300 billion for institutions
•
TIAA CREF
– Largest pension plan provider
– Launched 6 no-load mutual funds in 1997
– Minimum investment $250
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Customer base that Vanguard doesn’t
attract
• Those who do not have studied statistics & publications
• Naïve investors
• Those who are carried away by advertisements
• Those who have faith in price-quality perception
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Top ten mutual fund companies by assets,
2006 ($000)
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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Class discussion
Should Vanguard continue as is?
© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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© 2005 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corp., Distributor
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