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GIANT VANGUARD MUST SCALE THE DEFAULT SUPER MOUNTAIN

Originally published on Australian Financial Review on 3 October 2020

[Adapted from Australian Financial Review ]

Advocates for low fees are cheering Vanguard’s push into superannuation, but point to anti- competitive policy settings, vested interests and a culture of consumer apathy that even the world’s second-largest fund manager may struggle to disrupt.

The $9 trillion, Pennsylvania headquartered behemoth is escalating its ‘‘ambitious plan’’ to launch a prudentially regulated super fund, forfeiting up to $100 billion in contracts from big super funds and sending a message it would prefer to compete with them instead.

Vanguard’s retreat from the business of managing money on behalf of institutional clients, revealed by The Australian Financial Review on Thursday, has been welcomed by analysts and observers in the financial services industry who support downward pressure on fees. ...

‘‘If Vanguard were serious about taking large chunks of industry funds’ market share, they would have to go default or employer-nominated super, and becoming successful at that would be a major challenge,’’ said Robert Talevski, founder of Activus Investment Advisors, an influential consultant to super funds and institutional investors.

‘‘So I don’t think the industry funds have much to worry about with respect to losing a meaningful market share to Vanguard – but it will be interesting to see how the industry funds respond.’’