Why Vanguard won’t let rivals on its platform

But despite being regulated as an “Investor Directed Portfolio Service” like broad platforms Netwealth and Hub24, and charging brokerage on transactions into ASX-listed securities, the platform does not include any of the funds or ETFs provided by competitors.

Personal Investor’s narrow focus on its own in-house products and a few select stocks has drawn criticism from some young traders on social media platform Reddit. But Mr Gopal said Vanguard’s decision to limit the scope of the platform is not just about driving flows into its funds.

“We certainly don’t want to be seen as a broker,” he said. “We want Vanguard to be a very safe place to invest, this is not a product supermarket … I don’t think a product supermarket is always a good idea. Just because something can be traded doesn’t mean it should be.”

While many competitor platforms market themselves as objective technology providers providing wide access to markets at low costs, as a fund manager with a fiduciary duty, Vanguard believes it needs to make a judgment call on the kinds of investments it provides access to.

That means not only forgoing risky but popular investments such as contracts for difference (CFDs) and cryptocurrencies – which Mr Gopal has previously said are more akin to baseball cards than a serious asset class – but also the ETF products of competitors.

“We would consider a more open architecture platform but any products would need to meet the test of how Vanguard would develop its own products,” he said.

“Since Vanguard doesn’t do very niche or dramatic products it is unlikely that we would introduce a competitor product [like that].”

Those strict “product design principles” distinguish Vanguard, a global pioneer of passive index investing, from rivals in the heated $130 billion local ETF market.

‘Dead against poor habits’

Record fund flows are being deployed by retail investors in niche and thematic ETFs such as those invested in cryptocurrency-linked shares like bitcoin miners and exchanges and renewable energy-linked technologies like hydrogen and lithium.

Vanguard has ruled out joining competitors in the race to list an ETF backed directly by crypto assets, which is under way and expected to be lucrative for first movers in this new niche.

Asked to comment on the burgeoning market for so-called neo-brokers providing low-cost access to financial markets, the most prominent of which is the controversial US app Robinhood, Mr Gopal said: “Whether it’s Robinhood or anyone else – if someone’s excessively trading and reacting adversely [to markets] the enemy there is poor investment habits. That’s what we’re dead against.”

The criticism comes despite Vanguard’s products being among the most popular holdings on self-directed broking platforms such as Superhero, SelfWealth and Pearler.

About half of Personal Investor’s customers are invested in unlisted managed funds and the other half in ETFs. The platform is relatively unique in offering unlisted fund access to retail investors directly.

“We’re very agnostic about funds versus ETFs,” he said. “From our standpoint, it’s great for us to be able to see money going into both structures and these structures have their benefits, but it comes down to an investor preference.”

The launch of the Personal Investor platform, which is the subject of a national television advertising campaign, comes as part of Vanguard’s global push towards servicing individual investors and advisers instead of large institutions.

The funds management giant last year pulled the pin on its $100 billion business managing money for third-party super funds, revealed by the Financial Review. It is expected to launch its own retail super product this year and has selected administrator Grow Super for the project.

Mr Gopal said Vanguard’s super members would be able to leverage Personal Investor’s technology and view their “whole of wealth” assets on a digital portal.

Although the rate card and strategy for the Vanguard Super product has been closely guarded, market sources expect the fund to be invested largely in Vanguard products and to be among the cheapest in the market, given the company’s reputation as a low-cost provider.