Canberra’s unexpected Bogleheads break cover

In the hotly contested superannuation and financial services policy portfolio, there are few areas of genuine bipartisanship. But the often-overlooked and much-needed concept of “financial capability” is proving an exception to the rule.

On the sidelines of a busy sitting week in our nation’s capital last month, a new initiative called the Parliamentary Friends of Financial Capability was born, with support from Vanguard among others. It enjoys rare buy-in from across the aisle and will be co-chaired by Tasmanian Labor senator Richard Dowling and NSW Liberal senator Jess Collins.

Its stated purpose is to “provide a forum for parliamentarians, regulators, educators, researchers, community organisations and industry to work together to increase awareness of the role financial capability plays in everyday decision-making for Australians”. Presumably the decision to ditch the term ‘financial literacy’ is deliberate given decades of advocacy by industry leaders has largely fallen on deaf ears.

But it turns out the bipartisan interest in Vanguard extends beyond the $16 trillion asset manager’s bankrolling of personal finance policy and education.

Speaking at a function to mark the 30th anniversary of Vanguard’s entry into the Australian market in Sydney on Thursday night, Dowling disclosed a personal affinity for the storied financial institution, even going so far as to describe himself as a “full on Boglehead” – the term given to true believers in the investment philosophy espoused by Vanguard’s iconic founder Jack Bogle.

After entering the workforce sprinkling herbs and spices at KFC, a young and newly liquid Dowling went down a passive investing YouTube “rabbit-hole”.

“I stumbled across Jack Bogle, and then I just became obsessed … I was in the chat groups, and I was … telling my friends [and] parents, ‘where’s your super? Because they’re ripping you off. Do you know how over how many years that will change your retirement lifestyle?’ I was just a total convert.”

It was a stunning admission from a rising star in a political party structurally tied to the industry superannuation movement Vanguard is seeking to disrupt with its own challenger super fund.

However, any political controversy around the admission was probably offset by the fact his counterpart at the function, Shadow Assistant Treasurer Kevin Hogan, seemingly shared the sentiment.

Reflecting on his past career as a bond trader and super fund investor, the Nationals MP revealed he too had become enamoured of the view that tracking an index was a more prudent way to manage money than paying high fees to active managers.

“We had a lot of … sexy presentations about people who said ‘we can give you alpha … and you need to pay these high fees to get that’,” Hogan said. “I bought that for a couple of years, but you know, eventually over time, it just became more apparent to me that you know outperforming the index was exceptionally difficult, and I think almost impossible over the long term.”

In Hogan’s case at least the benchmark-aware philosophy is arguably aligned with the policy thinking underlying the Coalition Morrison government’s super fund performance test.

But showing his hand as a Boglehead is still relatively controversial, given the Coalition’s historic ties to the financial Establishment, which has largely viewed the Vanguard-enabled retail revolution in asset management with distaste.

In some ways, it is fitting that Vanguard has confounded the traditional orthodoxy in Canberra, given it has never fit neatly in Australia’s relentless super wars. While it is a supporter of wealth creation and close to the financial advice community, on the other hand its mutual-like ownership structure and low-cost ethos make it culturally more akin to profit-to-member fund in some ways.

Either way, it should be pleased that after choosing Australia as its first flirtation with global expansion three decades ago, it has clearly had in impact in the country’s halls of power, even if ever so slightly tongue in cheek.

Before the birthday self-congratulations get out of hand, however, Senator Dowling also offered a warning.

“They used to say when … the taxi driver’s giving you a stock tip, it’s time to sell, not buy. I got in a taxi not that long ago, and [the driver] said [he told his] son to get into the [Vanguard Global Growth ETF].
“So, the taxi drivers are now recommending Vanguard.”

Perhaps a powerful ally in the push for financial capability.

Additional reporting by Samira Sarraf.