Vanguard bets AI will revolutionize its $9 trillion business
Vanguard executives shared their vision for the future over breakfast.
I just attended a breakfast hosted by the Vanguard executives steering the legacy investment firm into the AI era.
Over croissants and sparkling water, global chief information officer Nitin Tandon and managing director Matt Benchener explained their ambitions to roll out a hyper-personalized ChatGPT-style tool to millions of clients next year.
As is, 95% of all client interactions are digital. Vanguard’s 2,500 customer service employees handle most of that.
The new bot — trained in-house on millions of clients’ proprietary data — will ultimately replace most of those 2,500 jobs, which Tandon told me have historically been high-turnover positions.
“Today’s chat feature is a live chat with customer support, but next year it will integrate Generative AI, so clients will soon be chatting with an AI model as the first interaction,” he said during the breakfast.
In 2021, the year before ChatGPT debuted, Benchener said the company’s platform saw 43 hours of downtime.
It’s engineers have since bolstered its infrastructure with AI. This year, Vanguard is on track for about 20 minutes of total downtime.
A 99% reduction.
The fact that Vanguard — a 50-year-old institution that moves far slower than the tech companies making headlines — is contorting its longstanding business model around AI should squash all skepticism around the technology.
To be clear, what’s coming is more than just another app.
The executives gave us a demo of an AI-powered platform that will actively “nudge” clients into being better investors, capturing stronger portfolio returns.
The bot is meant to act like a financial coach that never sleeps, tailored to every dollar and stock you own across retirement and brokerage accounts.
“We think advanced AI is going to be like an invisible hand, which impacts every aspect of client experiences,” Tandon said. “It will impact everything from how they interact with us all the way to the returns they get.”
“Like Jarvis from Iron Man,” he added.
If this goes as planned, the implications are seismic.
Should this new AI successfully “nudge” a fraction of Vanguard’s millions of cash-heavy clients into the market, it would unleash billions of dollars in fresh capital effectively overnight.
That would not only amplify Vanguard’s scale but potentially ripple across global asset prices.
And because 97% of Vanguard employees already use AI regularly, with half of them using it daily, according to Benchener, the firm seems likely to pair the external upside with massive internal productivity gains.
For a company as established as Vanguard to suddenly see faster coding, quicker compliance checks and leaner operations, the repercussions run deeper than a one-off modernization gimmick.
My sense is every other financial firm is actively working on their own versions of the same product.
Innovation begets innovation.
Who could justify doing anything else? The equation is not complex.
Companies that fail to embrace AI simply risk oblivion.
Phil Rosen
Co-founder & Editor-in-Chief, Opening Bell Daily
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This is both exciting and concerning. What model is their AI tool learning on, I wonder? The feedback loop could be massive.