I'm determined to convince Vanguard to enter the Canadian mutual fund market. If Fidelity and Scudder et al can do it, then why can't Vanguard?
Some of us on Fund Library had previously sent messages to Vanguard's general e-mail address (see: We e-mailed Vanguard, but considering that our responses were coming from their front-line customer service representatives, the results weren't too encouraging.
So, in February 1999 I decided to launch a "Van Mail" campaign starting at a somewhat higher level. I sent the following by e-mail and asked that they forward it to Mr. John Brennan, Chairman and CEO:
... As you probably know Canadian residents cannot invest directly with Vanguard in the US. However ... it is possible for us to invest indirectly through various US discount brokerage supermarkets. ...
I received this response from the principal "involved in exploring new business
opportunities for Vanguard" on behalf of Mr. Brennan:
Nevertheless there are several reasons why Vanguard should have a direct presence in Canada:
- The US mutual fund supermarkets offer only a limited selection of Vanguard funds.
- There is no way for Canadians to include Vanguard funds in government sponsored tax sheltered plans like Registered Retirement Savings Plans (similar to US IRAs.) The majority of Canadian mutual fund investments are in such plans.
- The supermarkets charge transaction fees of at least $25/trade. I'm a long term buy-and-hold investor, but these fees nevertheless make monthly DCA purchases impractical.
- While there is nothing "illegal" about Canadians having investments in the US as long as we report and pay taxes on all income and capital gains, the increased complexity of record-keeping and complying with both US and Canadian tax regulations is significant.
- Vanguard currently does not offer Canadian equity or bond funds. Presumably if you had a presence here you would introduce such funds.
- Finally, I admire Vanguard's "mutual mutual" model and John Bogle's advocacy for the investor. We need the likes of Vanguard up here in Canada if for no other reason than to stop the complacency of the Canadian mutual fund industry. (The MER of the average Canadian equity fund is 2.2%!!!)
I understand that Vanguard has recently considered or is considering coming to Canada. I would be grateful if you could forward these comments to Mr. Brennan. Perhaps he too will have a "change of heart" about entering the Canadian market.
... Thank you for your thoughtful comments on the opportunities for Vanguard in
Vanguard is quite interested in offering investment programs to Canadians.
In fact, we've devoted significant time and efforts to developing this
opportunity over the last several years. There has even been some
speculation about it in the Canadian press. In the spirit of your letter,
I don't think there is a need for Mr. Brennan to have a "change of heart;"
he is sponsoring these efforts and is personally in the midst of the
discussion and decision-making. We've just not found a good way to do it.
We do have a strong philosophy of ensuring any new opportunity we tackle is
done well, so as to not damage our reputation in the U.S.; we have not yet
had enough comfort to proceed forward with several different options we've
considered. However, we continue to evaluate options and at some point may
move to establish a presence that could serve investors like yourself.
If we should establish a direct Canadian presence, we would want investors
to find our offerings very attractively priced, especially if the investor
were to not want any "advice" on investment programs. At the same time,
our research suggests that many Canadians do value such advice, just as
here in the USA. In any program we would launch to serve Canadians, our
hope would be that we could achieve significant scale, which could in turn
benefit the Canadian investors over time through an even lower MER.
We appreciate your confidence in us and hope we can better serve you in the
I sent this note to Mr. John Bogle after I read his speech Changing the Mutual Fund Industry: The Hedgehog and the Fox on receiving the Woodrow Wilson Award from his alma mater, Princeton.:
March 9, 1999
While I was hoping to get a direct response from Mr. Bogle, I received this letter from Mr. Michael Miller, Managing Director.
Mr. John Bogle, Senior Chairman
The Vanguard Group
P.O. Box 2600
Valley Forge, PA 19482-2600
Dear Mr. Bogle,
As a recent convert to indexing, I'm writing to express my gratitude to you for the decisive part that you've played in my conversion. I deeply appreciate not only your pioneering efforts to popularize indexing (by dedicating your heart to the cause, so to speak), but even more so for being an advocate for ordinary, human investors (by also dedicating to it your soul.)
As a Canadian, whom the SEC apparently wants to "protect" from becoming a Vanguard customer, I would like to ask you personally to consider the establishment of a Vanguard operation up here. God knows we need you badly in a land where not only are "low-expense" index funds a recent "innovation" -- and I fear perhaps only a temporary marketing gimmick -- but where investors are treated even more shabbily than in the US.
P.S. One answer (to the question you posed to those 300 HBS students) that immediately comes to mind is Douglas McGregor's The Human Side of Enterprise.
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