Episode 213: How Vanguard is Modernizing Finance Through Digital Innovation with Marco and Amber
Join us for an insightful episode where we explore the digital transformation journey at Vanguard with Marco De Freitas, Chief Product Officer for Vanguard's Personal Investor Business, and Amber Brestowski, Chief Product Officer for the Retirement Business.
Discover how Vanguard is modernizing client journeys, enhancing products, and building platforms that promise superior investment experiences. Marco and Amber share their strategies for leveraging AI and behavioral science to redefine client interactions, all while maintaining a strong focus on customer outcomes and innovation.
Whether you're interested in digital transformation, product management, or financial services innovation, this episode is packed with practical insights that you won't want to miss. Want to learn how Vanguard is leading the charge in transforming financial services? Tune in for the full episode.
You’ll hear us talk about:
10:32 - Aligning Strategy with Product Execution
Amber discusses the importance of aligning product strategy with business goals at Vanguard. She emphasizes setting the right incentives and problems for product teams to solve, ensuring they focus on creating superior client experiences that drive competitive advantage.
22:56 - Experimentation in Client Modernization
Amber shares how Vanguard uses a North Star approach with key OKRs to drive outcomes. She outlines strategies for engaging clients and improving retirement readiness through behavioral finance and agile experimentation.
35:05 - Balancing Innovation and Optimization
Marco talks about Vanguard's approach to innovation, stressing the importance of client-centricity and empowering teams to innovate. He explains how a portfolio approach allows for both incremental improvements and moonshot projects, fostering a culture of continuous development.
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Episode Transcript:
[00:00:00] Marco: At the core of the modernization effort was like, we need to get to that more contemporary experience. But also, for us, linking back to our mission in the end of the day we wanted that experience to work harder. For investors in making them better investors. At the core, the modernization of our client experiences is actually the delivery of our mission. We were here to make investors more successful that a lot of that has to happen through the experience. A lot of that has to happen through the data that we have about our clients of the insights that we can drive and pump that those insights through the experience.
[00:00:33] Amber: That to me, ensuring that the business strategy aligns with product strategy is all about setting the right incentives, goals, and problems to be solved at the product team level. We've talked a lot about our strategy and both of our businesses is to win against the competition. That requires the product teams to obsess about that as the problem. To me, that is key is driving that alignment from the business strategy down to the problems that could be solved and then empowering the product teams to come up with the solutions themselves. Not being prescriptive about the features.
Intro
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[00:01:05] PreRoll: Creating great products isn't just about product managers and their day to day interactions with developers. It's about how an organization supports products as a whole. The systems, the processes, and cultures in place that help companies deliver value to their customers. With the help of some boundary pushing guests and inspiration from your most pressing product questions, we'll dive into this system from every angle and help you find your way.
[00:01:34] Think like a great product leader. This is the product thinking podcast. Here's your host, Melissa Perri.
[00:01:42] Melissa Perri: Hello, and welcome to another episode of the product thinking podcast. Today, we have two exciting guests joining us to share how Vanguard, the leading asset management company has paved the way to create exceptional experiences for their customers through their digital products. Marco De Freitas is the Chief Product Officer for the Personal Investor Business at Vanguard, and Amber Brestowski is the Chief Product Officer leading the Retirement Business as well.
[00:02:05] Together, they are driving Vanguard's digital transformation, focusing on modernizing client journeys, products, and platforms for enhanced investment success. I've been closely following Vanguard's digital transformation since the very beginning, and I'm thrilled for you to hear how these two leaders are shaping product management at Vanguard to create impactful financial solutions for their clients.
[00:02:25] But before we talk to Marco and Amber, it's time for Dear Melissa. This is the segment of the show where you can ask me any of your burning product management questions.
[00:02:32] Melissa Perri: Go to dearmelissa. com and I'll answer them on one of the next episodes.
[00:02:36] Melissa: Today's episode is brought to you by Liveblocks, the platform that turns your product into a place that users want to be. With ready made collaborative features, you can supercharge your product with experiences that only top tier companies have been able to perfect. Until now. Think AI co pilots like Notion, multiplayer like Figma, comments and notifications like Linear, and even collaborative editing like Google Docs. And all of that with minimal configuration or maintenance required. Companies from all kinds of industries and stages count on Liveblocks to drive engagement and growth in their products. Join them today and give your users an experience that turns them into daily active users.
[00:03:14] Sign up for a free account today at liveblocks. io.
[00:03:18] Melissa Perri: Here's this week's question.
[00:03:19] Dear Melissa, you write a lot about product management as it pertains to product led organizations whose core business is developing and scaling tech products. However, I'm seeing a growing trend in the industry around traditional CIO led IT organizations also trying to become more product led.
[00:03:35] Even though these organizations may never build products themselves, or may build products that they never commercialize in a way that tech companies do. Do you have any insights on how these organizations should think about making this transformational change? It's interesting that you say this. I do talk a lot about SAS companies, but I actually work with more non SAS companies than anything else.
[00:03:53] So I've been part of a lot of these I T organizations that you talk about where it starts in the CIOs place. And that's because in a lot of organizations like pharmaceuticals, financials, insurance industries. Going through digital transformations, automotive, even we have these I. T. Organizations that were traditionally seen as a cost center.
[00:04:15] So they start their digital transformation usually by adopting agile because the goal here is to make software better and faster. Then they usually come along and realize that they need some kind of product thinking in there. So I've seen many CIOs kick off and start these transformations and it works out well to get it going.
[00:04:33] And the big thing that they do is they establish product management and what they get to is they realize that. When you are looking at building software that may never even be commercialized, it could be something for internal tools or software that your people use, but we're not actually selling to our customers.
[00:04:47] It's totally fine. What they do is they realize that at the same moment, you still need a strategy, right? You still need a software strategy to figure out if you're building the right things for internal users or for people who are using it inside. And The biggest mistake I see in organizations that start their digital transformation from a CIO perspective, which is not bad, is that we first look at it as a cost savings measure, but sometimes they don't grow out of that perspective, and we don't see software as a strategic advantage.
[00:05:18] So this is the biggest mistake I see. We want to make sure that when we're building software, even if it's for our own people to use, that we have a way of making our products that we sell to our end users. better, right? We should see it as a core differentiator. Let's take pharmaceuticals. For instance, a patient is never going to see the software that you build to run your clinical trials, but it's critical to your company.
[00:05:42] If you cannot run critical trials in a pharmaceutical company, you can't test your products. You can't get it out effectively. To the people who actually need it. So let's think about that. If you're building software internally for these different, clinical trial facilities to actually be able to use and run them.
[00:05:59] You have to see how that could be an advantage for you, right? Running clinical trials well, doing it more effectively, being able to make that more seamless, being able to have better results. All of that stuff could be a strategic advantage for a pharmaceutical company. Let's say you have software that allows you to do that 10 times better than your competitor.
[00:06:19] That's a competitive advantage, right? You are able to get things out the door faster to your customers. You're able to run clinical trials faster, anything like that. It could be also that maybe you set up clinical trials better. Maybe you have a software that has algorithms to actually predict that. So in that case, you still need product management, right?
[00:06:37] You still need to look at it from being product led from a software strategy. How do we. figure out how to make our products better by harnessing the efforts of software, right? That's what we're trying to do here. So no matter if you're selling financial products, if you're selling pharmaceuticals, if you're selling automotive cars, whatever, how do you use software as a strategic advantage?
[00:06:58] So there is a trend where a lot of CIOs are kicking this off because they're the ones leading the agile transformation. And then they realize Hey, one of my product managers or product owners that we have actually doing that brings us into how do we become more product led? You could still be product led with physical products, right?
[00:07:16] You can still be product led with software that you don't commercialize. The mindset that we're talking about here. is to see software as a strategic advantage to your overall business. Now, software may not be your overall business. That's okay, but you want to see it as that advantage. What could it do to make us better?
[00:07:33] That's the mindset that you need to adopt in organizations that are not traditionally SAS. And that's the part that's going to make you more successful. So I hope that answers your question. I would really start there from a digital transformation perspective. And make sure that you're honing in on why is software important for us, and how can it make us 10 times better.
[00:07:52] So that's it for Dear Melissa today. If you have questions for me, go to dearmelissa. com and let me know what they are. Now let's go talk to Marco and Amber.
[00:07:59] Welcome to the show, Amber and Marco.
[00:08:02] Amber And Marco: Hi, Melissa. We're thrilled to be here. Yes, a great opportunity to talk to you and share some thoughts.
[00:08:07] Melissa Perri: Awesome. I think a lot of our listeners are probably very familiar with Vanguard, but for those who are not, can you tell us a little bit about what company Vanguard is and what you guys do?
[00:08:18] Amber: Sure Vanguard is one of the world's largest financial services companies and we
[00:08:23] offer financial products as
[00:08:25] well as advice to millions of investors. What makes Vanguard very unique, if you compare us to other financial services or mutual fund companies is that we're client owned. And that really comes from, we were designed to support a very specific mission, which is to take a stand for all investors. to treat them fairly and to give them the best chance for investment success. So when we were structured back in the 1970s, we were structured in a way that if you own a Vanguard fund, you own the company. So essentially when our fund holders or investors win or we create value for them, we win as an enterprise.
[00:09:01] And that does change the frame of how we think about Digital product management at the company, which I'm sure we'll get into as we move through the conversation.
Amber's Career Journey
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[00:09:10] Melissa Perri: Great. And Amber, can you tell us a little bit about your career journey?
[00:09:15] Amber: Yes, sure Melissa. So I've been at Vanguard for 17 years. I currently serve as the chief product officer for our retirement business. So our 401k business here. I really came to Vanguard because of the mission I just described. If you rewind back to my childhood, I am the granddaughter of Eastern European immigrants who came to the country to participate in the coal mining industry. And so I grew up in a climate of a lot of financial instability. And a lack of financial literacy amongst my extended family, but my father was a really great saver and investor and constantly talked throughout my childhood about, preparing for retirement. And so I grew up with this, value system that was very much attached to how do you. How do you create financial security for yourself? And that's what really led me to Vanguard and ultimately led me to the retirement business here because every day in our business, we're really focused on helping Americans. Establish that sense of security. Um, well, in the retirement business, I've spent about 12 years in the 401k business. I, I played a variety of leadership roles. But
[00:10:24] all of them had the thread of client focus. So I spent some time in serving participants or employees in 401k plans. I actually ran. The team that went out and had education meetings with our 401k plan participants spent some time in running our large market sales team where I had the chance to interact with employers about their 401k benefit and consultants that serve the industry. And across those roles got really interested in the problems that we're facing employees in a 401k plan. And employers who are trying to optimize their retirement benefit and decided that I wanted to work on solving those problems. And that's what ultimately led me to leading digital project management for the organization.
[00:11:06] And I'll tell you, it's been the best job that I've had at Vanguard by far.
[00:11:10] Melissa Perri: Amber, you've been involved in the digital transformation at Vanguard too, from the beginning. What have been some of the highlights for it and what are you excited about for the future?
[00:11:19] Amber: Yeah, so I, I think for me, the highlights across our journey and, we'll share more detail throughout the conversation, but we've been on a quest to really modernize our technology stack and bring best in class digital product management principles to the firm. And the highlights to me, as I think across the past, oh, my gosh, it's probably seven years in our business that we've been at this have really been the driving better outcomes for our investors.
[00:11:42] The big problem to be solved in my part of the company is that over half Americans don't feel prepared for retirement. They don't feel they're ready to retire. And There's plenty of examples as we've been on our modernization journey of how we've been able to address that and really drive outcomes, increase American savings, improve investors, asset allocations and do that through technology.
[00:12:05] So I would say across the past 7 years, the highlights have really been the outcomes that we've been able to drive.
Marco’s career journey
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[00:12:11] Melissa Perri: Yeah, those are incredibly important outcomes. Very exciting. Marco, can you tell us a little bit about your career journey?
[00:12:17] Marco: Yeah so I've been here for about 6 years now. I lead a team called client experience and digital. So think of us as a product organization on the personal investor side. Similar role to Amber, but on the personal investor side, personal investor is where we serve our clients directly through through our platforms and and kind of crew mAmbers. This organization very focused on really driving the CX or the UX and the different platforms and channels, the also the business platforms that we have for advice for brokerage, as well as the platforms that enable our crew on the phones prior to this role, I was with TD Ameritrade now Schwab for about 10 years in similar roles there.
[00:12:59] In digital product management, as well as this client strategies and I spent prior to that. I spent about 13 years in, in management consulting, always in the wealth management brokerage space. But And I really started my career as an engineer at Alcoa the aluminum company. But so all in all, probably 25 years now of wealth management or consumer financial services in different roles, particularly in product management got here to with 6 years ago with excited about the mission as Amber just described I always an admirer of Vanguard, even not being a Vanguard, but a great opportunity to really bring all that knowledge and really appreciate it. Drive a digital transformation to really help our clients succeed in being better investors.
[00:13:43] Melissa Perri: Marco, this isn't your first digital transformation either. You've worked at these other companies as well who have gone through it. What made you excited about joining Vanguard? And what did you learn from those other digital transformations that you were excited to bring to Vanguard?
[00:13:56] Marco: just as I said I, at the time, six years ago, when I got the call for Vanguard I always saw Vanguard as this phenomenal business model that is put, that aligns the interests of investors and clients with investment interests of the firm. It is not common in the industry.
[00:14:11] Most of our competitors are either. Private companies owned by families or public companies. We are owned by our shareholders. Always admire that model and the purpose of that Vanguard set. So for themselves. So we already had a strong, really strong base. But what got me really excited was actually. I don't, observing Vanguard from the outside, I didn't think that the digital side or the experience more broadly was at the at that level that I think would be distinguished and really drives differentiation. When I got the call, and they were very interested and committed to a digital transformation, I thought this is the best platform, the best job because a great company, great set of folks committed to the task. And. A huge opportunity ahead of us. So that's what brought me here. And that has been the past 6 years has been really executing on that transformation and seeing now the results which we can talk a little bit more about. But I think if I look back TD Ameritrade, we had another transformation and then even advising clients as a consultant before a few lessons from digital transformations for me, like one of them, the first one is we call it digital transformation, but my first lesson is that it's not about digital, it's not about technology, it's actually about the people. It's about the culture that you're building. That is really the transformation. Obviously you want to transform the technology. A lot of those are. Really enabled by a deep transformation of our tech stack. But in the end of the day is about the people. It is about the talent that you have, the expertise and the culture that you are building with those people. The second lesson was, those transformation efforts, they tend to be multi year multi million or multi hundred million dollar efforts. So having a very clear sense of. What are the goals that we have for the transformation? What is the vision for this now? More of the tangible outcomes that we're trying to drive. It is important because you're going to have to always go back to those. Sometimes people can get a little, disappointed with the pace. So you're going to make mistakes along the way, or things may take a little longer. So you really have to go back to one. You have to have them very clear, but then have to always go back to them for us.
[00:16:16] It was. Transform the CX, build resilient platforms and products and then drive agility for the organization. We always came back all the OKRs, or a lot of our metrics came back to those and then maybe a couple more was in the end of the day, a transformation is also is a systemic transformation is a systemic. Change. So thinking about the operating model more broadly, it is not only about agile. It's not only about, having, bringing in a little bit
[00:16:44] more experimentation. It is all of that is actually bringing more DevSecOps is it is an end to end transformation. So thinking about it systemically and think about an operating model is critically important.
[00:16:55] And then the last one was communicating And delivering some wins and communicating along the way is critical. Setting the right level of expectations. Again, any multi year effort you have to have set clear goals and have to communicate, be very transparent of the things that are going well and the things that are not going well.
[00:17:13] And to me, if I were to piece together from different experiences, those 4 things are what makes. Transformation is successful or areas that I personally learned hard lessons along the way. But but I think those are key ingredients for success in any transformation.
[00:17:28] Melissa Perri: Totally agree with that. And what I've always liked about Vanguard too, I think along your journey with the transformation is that you really deeply care about the people in the organization. And it's that big culture shift and putting them at the center.
[00:17:39] I've seen so many other organizations, look to the outside and just say, yeah, we're going to get rid of these people and, bring new ones in, but Vanguard has always been committed to how do we level up the talent that we have and how do we ensure that our people have a path for us here, which is really cool.
[00:17:54] Totally.
[00:17:55] a core part of your digital transformation is about client modernization. What does that actually mean for Vanguard and why is it so crucial at this stage?
Modernizing Client Experience
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[00:18:06] Marco: So for us, when we look back we, when we really started in earnest and actually had an infusion of capital, we thought our client experiences needed almost we were, we needed to break with scape velocity fuel. We had a lot of efforts that were, partially nature, or they were going against this very brittle, text stack and, we're banging our heads against the wall a little bit. So we thought we needed to have that scape velocity and part of that was because, we are experienced. We're getting dated. We're and we did not have that velocity that we wanted to be to stay competitive.
[00:18:38] So we definitely like for us. At the core of the modernization effort was like, we need to modernize our client experience and get to that more contemporary experience. But also, for us, linking back to our mission in the end of the day we wanted that experience to work harder. For investors in making them better investors. At the core, like the modernization of our client experiences is actually the delivery of our mission. And I don't want to be dramatic, but it's if you believe that we were here to make investors more successful, we were here to make better, a better investors. That a lot of that has to happen through the experience. A lot of that has to happen through the data that we have about our clients of the insights that we can drive and pump that those insights through the experience. So that's why client experience was so core was yet we were falling behind number one and second.
[00:19:29] We thought that could be the differentiator for us when we actually bring that, basically The ability to nudge clients the right way. The insights, help clients make more educated decisions about investing and avoid bad decisions in the longterm that has a significant potential for value creation for our clients.
[00:19:45] And we thought we, we needed to do that. We already do that through our funds. We believe our funds deliver alpha like alpha this financial terms of excess returns. If you, so we said that our funds already do that. We are very low costs and they beat the benchmarks. More often than not we do that through our advice. So we have an advice offer, we believe we, we also generate access returns through portfolio construction, through just behavioral coaching. And then we thought we need to now deliver that alpha through the experience. So developing the right default experiences that help clients that kind of cut through the clutter of financial services, lingo and experiences, and then foster better behaviors of investing.
[00:20:25] And, we needed that. Modernization so we could really continue to. Deliver our mission through the experience as well. And so a lot of the work we have been doing has been a kind of like, all right, let's get the foundation, right? Let's get the experience layer to be best in class. And then on top of that, let's now deliver best, good, our quality, guidance to clients through nudges or through better experiences.
[00:20:50] And that's what we're calling CX Alpha. We can talk more about that, but that's a collection of nudges that really make them better. better investors, more successful investors in the long run.
[00:21:00] Amber: Yeah, really well, said, Marco. And everything Marco says applies to the retirement business. I'll just double down on that point of competitive differentiation.
[00:21:07] And I should have started with this, Melissa. I'm one of the first books that I read when I stepped into the digital product management domain was Escaping the Bill Trap. We're big fans of your work at Vanguard. And you know what, one of the important concepts that you talk about in that book is understanding how you could have set yourself apart from the competition and how you create value for clients.
[00:21:27] And, if you look across retail brokerage and, 401k plan administration, the act of running a 401k plan, these are services that can easily be commoditized. And, what we decided at Vanguard was we wanted to take a, you know, really put a stick on the ground to say We want an investor who comes to us through our retail brokerage and establish the retail brokerage or IRA account or an investor who comes to us for their 401k account ends up. Achieving better outcomes and having a better chance of success of retirement success of hitting their financial goals than our competitors.
[00:22:00] And to do that, you do need modern technology. You need the personalization that Marco is talking about you also need the ability to experiment in a very agile way.
[00:22:10] So much of our experience that we build on the retirement side is rooted in behavioral finance. So how are we, the few moments that we have investors attention, the few moments that they're looking at their account or coming to us to transact, how are we capitalizing on those moments to inspire them to take action? That requires real, Rapid agile testing around behavioral finance techniques on ways to inspire action. And you just can't do that unless you have a modern technology stack and modernize data. And so we knew that we needed our. Client experience to catch up to where we wanted to differentiate.
[00:22:45] Melissa Perri: So we talked a little bit about experimentation in here too. Can you talk a little bit about some of the specific strategies Vanguard's using to modernize its client interactions and product offerings?
Experimentation in Client Modernization
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[00:22:56] Amber: Yeah. And with this 1 I always like to talk about the outcomes that we're driving. And then I talk about the how, because I do think it's, in the retirement space, it's something we're very proud of. And I know Marco has comparable results on the personal investor side.
[00:23:09] But, 1 of the It's really important for product organizations to have a clear North star like the key OKRs that we're marching towards that really illuminate the problems that we're trying to solve. And for us, one of our biggest OKRs is our take action rate for participants.
[00:23:24] So our goal, is every time that a participant. Logs into their account that we have their attention that we're inspiring them to do 1 positive thing to improve their retirement readiness. And if you think about the retirement business, it's a business where you know, historically, it's been a business, that's been based on inertia you're many investors are automatically enrolled in their 401k plan.
[00:23:44] They're automatic. Defaulted into increases. So savings increases. So getting a participant's attention is actually quite hard. And when we, when I started leading the product organization, we would see about 60% of participants do one good thing to improve their retirement readiness. Each year we've moved that number to 72%.
[00:24:02] So we moved from 60 to 72% over the past three years and change. And if you look at. Vanguards performance in terms of driving outcomes near against our nearest competitors in the retirement space. We're outperforming. So the participants that sit on our record keeping platform are, contributing to their plan at a higher rate. There's more of them that are enrolled in their plan. Their balances are higher. allocations. So that's really the type of. Measures that we're holding our product teams accountable to, like, how are you actually driving tangible success and results? How are we moving the needle in that way?
[00:24:40] I'll call out a few key sort of design principles and features and products that we've brought to the experience. The 1st is that. In our organization, we've really expanded the aperture beyond retirement to focus on a participant's holistic set of financial needs. What we found our product teams looked at what's getting in the way of getting investors to save more for retirement.
[00:25:04] And it was often. Things that sat outside of their 401k plan, they were struggling with debt. They were struggling to understand what's my emergency savings reserve that I need to have on hand. They were worried about competing goals and objectives. They had just had a child and they needed to save for. daycare and education for their child. So we design products that attack that. We designed an entire financial wellness experience. I like to think of it as a virtual financial coach, akin to, I don't know if you're familiar with Noom, the health coaching guide, that really was designed as a contextual guide that helps the participant work through How do I remove those barriers that are in the way of my retirement?
[00:25:46] How do I set goals around them and carve out money that I could put towards my retirement plan? So really designing new products to attack the things that we're getting in the way. The other principle that we focused on and big shift as we modernize our experience has been designing products to focus on the emotion, not just the action. Really has a really interesting study that shows 73 percent of Americans rank finances as their number 1 source of stress. And 76 percent of Americans say that stress impacts their productivity at work. That's a massive challenge if you think about a 401k account provider and an employer who's providing a retirement benefit to their employees. So we started to design products to attack the emotional side of this, the very vulnerable part of someone grappling with financial challenges. So if you use that financial wellness guide or new like experience as an example, we start that experience by asking an investor how they're feeling about their finances and what are the things that are. Causing stress and then we in a very contextually oriented and personalized way start to attack those things. So it really meets the investor where they're at in our digital experience and then helps work them through a plan to remove those barriers. So this focusing on the emotion, not just the action was huge for us. And then the 3rd pillar that I'll call out
[00:27:09] is, personalization and personalization driven by AI has been a huge part of our client experience strategy. We've designed our web and mobile experiences to surface up nudges. Which show a participant what's the next best action that they could take towards their financial wellness, and allows them to take those action in ideally a single click, if not just a few clicks. And underneath that experience is technology that's learning what behavioral science technique works best with that participant. What's the next action that can drive the most value for that participant? Really leaning into data and AI to drive personalization. Has been massive for us.
[00:27:51] Marco: Maybe if I can add there Melissa, I think
[00:27:53] for Yeah, one, I think the, when we set ourselves to really transform the experience, we were staring at a website that had, 900 different pages or URLs and, different client journeys.
[00:28:07] So we had to, probably not as sexy, but we had to create a plan and approach on how do we modernize this. And move all of that to a new stack. One of the strategies that we used, it was, again, it was really more, no we defined a modernized experience this way. So we had a bit of a rubric or a criteria.
[00:28:27] So like at the UX level, this is what modernized mean. It means this, design system applied a hundred percent. It has this types of, Standards in terms of content, et cetera. When we go to the APIs, okay, that's what modernized means. You are 100 percent on modern APIs from the cloud. And this is what data modernization means.
[00:28:46] So we section our digital footprint, if you will, into, journeys, client journey. So account opening transfer of assets, placing trades, monitoring your account, and it started to within each of those apply this criteria and say, okay, what, teams or the product teams that were in there, we're using a very strong product operating model.
[00:29:07] How are you going to accomplish, moving the needle on all of those three layers of the stack in your journey. And as you do the UX layer, how do you apply some more, all the principles of design, et cetera. But so a little bit of the, this is not as the sexy part of it, but that actually what had to, we had to do to just move all that, content Say footprint of digital into the new stack.
[00:29:29] So that was one, one approach that we use. So it's really core journey modernization and similar to Amber's point, now on the more, I think, exciting part of this, as we do this, as we did this modernization, the other strategy was, how do we actually start to infuse CXL for like behavioral change?
[00:29:45] And we created a process we call behavioral change process or behavioral change design process, where we were looking for opportunities. In the client base, where we saw investors behaviors that did not align with the best, the best principles of investing. So let's make a few examples. We will look through data and analytics.
[00:30:05] We see this quote, this cohort of clients to come into Vanguard. They open the account. But they never get invested. They move the cash in, but they never go to buy the first fund. They never get into a long term product that will yield better
[00:30:19] results. And we look at them, there was like 10 billion of clients, like 100, 000 clients that never really after
[00:30:25] 90 days or even
[00:30:26] after a year never invested.
[00:30:27] We look for those pockets of, Poor investment behavior, if you are not or suboptimum investment behavior, then look through how through understanding the biases and doing deep research, how can we actually create experiences or nudges and then test and experiment with that and then expand.
[00:30:43] Those things for us were happening concurrently and also to Ambers, more yeah, developing that personalization engine and things like that. But we had to run those 2 things in parallel to really. Transform the basics, the base experience, and then layer on, I think, more value added capabilities like cX alpha or behavioral change initiatives.
Aligning Business Strategy with Product Execution
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[00:31:04] Melissa Perri: with all of these different modernization and transformation techniques that you're doing. How are you making sure that this. Transformation part really aligns with the broader goals of Vanguard and also with your customer needs.
[00:31:16] Amber: Yeah. I could start there. That to me, ensuring that the business strategy aligns with product strategy is all about setting the right incentives, goals, and problems to be solved at the product team level. We've talked a lot about our strategy and both of our businesses is to win against the competition. By helping investors become better investors just by being clients of Vanguard and creating experiences that drive that. That requires the product teams to obsess about that as the problem. So if you look across, and Marco mentioned, we're organized by product team we try to run a fully stacked agile product operating model.
[00:31:53] We're, we succeed in some ways. We're still working on evolving to complete maturity there, but. Each of the product teams, if you look at my retirement business they're measured on outcomes. So whether it's, helping the participant take the next best positive action within their journey making sure that, the participants are getting through the journeys with speed and agility each product team has a goal that's aligned on driving an outcome and getting that participant to take the positive action.
[00:32:18] To me, that is key is driving that alignment from the business strategy down to the problems that could be solved and then empowering the product teams to come up with the solutions themselves. Not being prescriptive about the features. The example I gave with, our, I call it our new, our financial wellness experience, the product teams, we said the challenge was, getting, removing financial barriers that are getting in the way of getting someone to a save, save in a retirement plan, and that's all we told them that they needed to do, and they designed that experience themselves and by empowering them to really swim upstream and obsess about the problem and not being prescriptive around features and what does this need to look like?
[00:32:54] Okay. Outcomes follow that. The survey I told you that starts the experience that asks about how someone's feeling about their finances gets it almost 80 percent completion rate. And that's a ridiculous completion rate. If you compare that to other tools that exist in the retirement industry, typically we see like a 10 to 20 percent completion rate with digital tooling.
[00:33:15] But I attribute that to the fact that team got super smart. And really got to know their clients and what was getting in the way and their mindset as they were approaching things like planning for retirement. And then they designed the digital products around those problems and the client need. So to me, that's how it has to all flow together to make sure that the teams are operating in a way that really lines up to how you're trying to differentiate and your ultimate business strategy.
[00:33:39] Marco: Yeah. And Melissa, just to add to that we also use internally o an OKR framework that that helps us align that digital transformation or even any digital work to those business goals. So it flows more top down, what we're trying to accomplish as a business, and then how do we those objectives translate key results and the key results and the problems to solve, get handed to the teams. And they are aligned to those. So I'm a big believer in empowerment, but empowerment, without alignment
[00:34:07] is chaos. So this framework help us align those teams to the right, right objectives. And then on a periodic basis we do a lot of quarterly reviews of roadmaps and
[00:34:18] Really, Discuss With the teams what the
[00:34:20] road map, four quarters out look like what are the types of
[00:34:23] outcomes?
[00:34:23] Melissa Perri: They're driving types of results a type of outputs their drive. They're achieving to achieve those outcomes So it is a constant like every quarter we have, you know Obviously the teams are themselves doing ceremonies that are more bi weekly or even monthly and then we as a leadership team You know go all the way up to my boss of this is how the portfolio is performing I think those processes You Help us constantly make sure that there is alignment and we're optimizing capital location towards the most important goals.
[00:34:53] With the types of things that we're talking about with the digital transformation and creating new products, innovation always comes up.
[00:34:59] Melissa Perri: How does Vanguard think about innovation? How do you balance innovative needs with optimizing your current products?
[00:35:05] Marco: Yeah, that's a great question. Melissa and I think. It's one of those like innovation, I think, has to be core to what we do here. And how do we actually differentiate? And, in my view maybe sometimes people think of innovation as the big innovation, like this breakthrough business model. The reality though, if you're really client centric. You should be innovating with maybe, lower capital I on the on the day to day on the purpose of the business. But I think it goes hand in hand with client centricity and goes hand in hand. How do we think about differentiation?
[00:35:37] So we are constantly. Looking for insights that enables us to innovate on the client problem and try to give the teams the space and the empowerment to go after the best solution for for the problem. Gather. A ton of feedback from clients being it through, in depth research we didn't have this capability before.
[00:35:58] We, we built it as part of the transformation, a very strong set of researchers with a lot of behavioral science backgrounds that can really. Understand the context of the problem that the clients have when facing the tasks that are trying to face, really understand the motivations and fears of those clients.
[00:36:15] So that was that's one big source of insight that leads to innovation. The other one is, of course, we're constantly looking at versus the client, with Medallia and other types of feedback loops that can really gather that feedback for us and then direct observant observe observing the performance in the operations of our products all that. I think creates the ingredients for us to be well informed and have deep insights of what's happening in the product and how the clients are consuming and their needs. And I think that is like really empowering the teams to look for solutions and drive a little bit of innovation there. But we. We think of this as a portfolio approach like, innovation doesn't happen every day so you have a good chunk of your portfolio that is driven like really Focus on improving the portfolio, improving the products. And then you have a few parts of your portfolio that actually are more, maybe moonshots or a little bit POCs that can hint to the future.
[00:37:07] I think in this world of, generative AI and a few other new technologies, we have placed a few bets in there. So we tried to balance the portfolio. We know a lot of, particularly now that we are in the middle of, still in the middle of the transformation, a lot of the portfolio has been more on getting us to parity and parity plus. And now I think over the last couple of years, we started to put some bets, but maybe, long answer to your question. It is a portfolio of approach for innovation or improvements. And we hope that some of those bets pan out, but if they don't, we're still enhancing or innovating, with on the product and then more smaller scale.
Behavioral Science in Digital Experiences
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[00:37:43] Amber: I love the concept, Marco, of like innovation with a small I. I like it because I think the other thing that we've had to do is allow ourselves to be surprised at how sometimes small. Shifts to the experience can yield massive changes in positive behavior. We talk a lot about behavioral science and, creating digital using behavioral finance.
[00:38:03] We've had some unknown unknowns that have been surprising, but impactful. One that I can think of is, we learned the import, the importance of positive reinforcement when investors are taking positive action in a really interesting way. You know what? A few years ago we sent out one of our actually it was in our digital marketing organization, sent out an email that got a ridiculous open
[00:38:26] rate.
[00:38:26] It was like a 75% open rate, and the title of the email. It was, You are awesome. And it. was sent out as a an affirmation at a boy email following one of our participants, increasing their contribution to their retirement plan. And so now in, in our digital flows, as we're nudging participants towards positive action we're affirming and rewarding that action.
[00:38:49] It's almost like badging and gamification. And that has a statistically significant impact. impact on their
[00:38:55] willingness to take the next positive action. And so it's it's small innovation. It's learning through like true, like micro experiments and then driving pretty big changes in your digital experience, which on the surface might seem small, but have a massive impact on behavior.
[00:39:10] Yeah. Yeah,
[00:39:11] Melissa Perri: That's a really cool story. I love that. I love that subject line. You are awesome. and all of a sudden, everybody opens it. It must feel really good.
[00:39:18] Amber: I don't know if it's like, it tells us that we're all a little narcissistic in our but it's attaboy messages are powerful. Yeah. Yeah,
[00:39:28] Melissa Perri: financial decisions they're making. So it's oh, you did good. What did I do? Okay, let me go check.
[00:39:32] Amber: exactly.
[00:39:33] Melissa Perri: That's great. And Marco, so you said the boogeyman word, I feel like in tech AI, let's talk about it for a minute.
[00:39:39] Amber And Marco: Okay.
[00:39:40] Melissa Perri: Imagine like somebody popping up and be like, Oh, let's talk about it.
[00:39:42] What,
[00:39:44] how has Vanguard been considering AI?
[00:39:47] And what do you see for the future of our industry
[00:39:50] Marco: using AI? What are you
[00:39:51] I have no doubt that this will be a transformation for our industry, for that matter, for any industry. I also would say, I think it would be very transformational for our craft.
[00:40:01] Marco: So as product managers, I think this would be another big area of unlock. So I think on the, maybe you start with the product management side of this, like we know we have ourselves already started to use some tools and really automating some of the product management routine. So now. On the content side using writer to help us write content. We're, Figma is coming up with some interesting concepts and tools to generate designs. You have, Product owners. Now we're piling with a few tools that, just like automatically generating stories. You're not writing stories.
[00:40:32] You're not you're writing, spending time, writing use cases. You're just or test cases should say those things are all automated. The human is to checking. And of course, our developers are using grid hub and other things. If you look at the entire life cycle of a product development, this is huge, right?
[00:40:47] This is, that's that will change a lot there. There will be a lot of automation and I hope, my, my strong believer that is going to free up our humans to probably work more on things that are very connected to emotion, connected to behavioral, nuances that may be the machine, but the automation I think is there.
[00:41:02] So you, I think will fundamentally change our, the craft of product development. Product management and also the data availability, the ability to drive insights to inform product solutions will be huge. I think in, in, in transforming our industry, maybe I'll. Pick one aspect. I think it is transformed the CX part. I think one of your guests said something. I think it's so true that in the end, CX is the product. And I do think generative AI will transform the CX how I think we're trying to dissect this a little bit, but definitely I see we, and we have a few points here. POCs, but you have a world where you have a lot of automated agents that will be performing a lot of things for us.
[00:41:42] Being in, in voice in I've replacement to the IVR or in chat bots in, in written form. I think right there, there's a significant amount of exploration and learnings and development. Like we, we are trying now we, we have. We've implemented ourselves, the core AI platform Ember too but we were trying to get those automated agents getting better and the speed at which things are improving is significant.
[00:42:06] So to the point that now agents, they are performing, they will perform transactions, with very high accuracy, great client experience, but there's a lot more to go there. But then I think it gets even more interesting when you start to think more about, all right, now, if it is a mash of agents. An agent calling another agent and you're able to orchestrate that under an architecture. Then, and you also have the ability to generate the experience to have an experience that is generative. Then it's pretty interesting because what's the role of the website then? Then the role and that, and how do you evolve there?
[00:42:39] Do you really need a mobile app? And then you have other folks like, Apple intelligence coming inside. Actually, we can. Be on top of this and create that voice experience using, the app. So I think we're in for some interesting developments in terms of how even our current CX. Get rebuilt or even potentially disintermediated by some of those new technologies. And you know, a lot of debate out there too. Even how chat DPT or any other, of those engines became become your new Google with the ability to connect now into agents within. So that is a almost like a disintermediation of Google disintermediation.
[00:43:16] Some of you access out there, so it will call each company. I think to look internally, see how you play that. But also, how do you revert back to what you do? The best, how do you, what is your core, really core value in this value stream or your key value in the value stream? But I, as any technology disruption or opportunity, in the end of the day, I think our investors, our clients win, which is great to see, I think will be more efficient, more available for them, more accurate, more insightful, as you get to the point of actually generate a big profit.
[00:43:45] Becoming or having an assistant next to you that can do many things related to investing perform the basic transactions, but be helpful to you. I think investors would would benefit from that. I think we'll be an always on. Financial coach that's down the road, but I think that's, we are, we're. Placing a few point now bets and having a lot of, proof of concepts. So just, we validate there's a huge learning curve, I think for all of us. So we're trying to place those POCs where we think the learning needs to be the highest so we can get to the next stuff. I think we're going to have to still scaffold into this and but I have no doubt we'll transform the craft and I think we'll transform the experience.
[00:44:24] Amber: Yeah, I think you nailed it, Marco. Really well said. I do believe like the browser might not be around, five years from now, maybe 10 years from now, or the app might not be around. And what I'm excited for, and you touched upon this, is I think, the challenge in our industry when it comes to helping to guide investors, to advise investors is there's too Tools like true do it yourself tools and then there's advice and I really do think is going to help bridge the gap to say there's a lot more in the middle and how everyone thinks about their finances is quite different.
[00:44:57] Everybody's on a different point in their spectrum. Everyone's, asking different questions, working through different challenges as they're planning for their variety of financial goals that they have as they're thinking about their portfolio and investments. And I just see the possibility of using a item, meet them where they're at in a personalized way that we haven't seen before. And what I'm also excited for about vanguards role in all of this is we were built as a predominantly virtual company. And we do have such great data and infrastructure from that perspective to pull on as we're, preparing ourselves for that multimodal voice and virtual assistant oriented future. Yeah but I do believe from a talent perspective, AI and data literacy is going to be more important than ever before. If you're not spending time investing in building your AI acumen now, especially in the digital product arena, you're going to be in trouble.
[00:45:49] Marco: Yeah, a hundred percent.
[00:45:50] Yeah, I think you raise a great point. So I think this,
[00:45:52] it does take personalization to
[00:45:54] a whole new level, right? In a world where. No, the
[00:45:56] clients are really generating their experiences. We joke internally at that point
[00:45:59] clients cannot complain that our experience is not great They built it, but but but it does give a whole new level of personalization in any investing. I think you touched on this. People react differently. People are motivated by different things or interactive like we, even in design do you do a, do you do a table? Do you do a pie chart?
[00:46:16] Do you do a, people absorb data and information in very different ways. I think this creates the opportunity for the ultimate personalization, which in our industry, hopefully, or in our mission, for our mission is like, Hopefully drives investors to take action in a positive way more often and with more flexibility than we have today, but absolutely will be transformational.
[00:46:35] Melissa Perri: oh, I'm excited for that too, because it sounds really cool. It's something I'm going to I can't wait to see what you guys come up with and put out there. When you reflect on the digital transformation that Vanguard has done so far, and it's been a really awesome, long road, lots of great work out there.
Tackling Digital-First Transformation Challenges
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[00:46:50] Melissa Perri: What were some of the biggest challenges that you faced in implementing a digital first, client centric approach, and how have you overcome them?
[00:46:58] Amber: Yeah, I'll start and then Marco, I'd love to, cause I think we share we, we commiserate around similar challenges. I would say particularly in the retirement business, where it is a B to C business, meaning that we're working with employers, we're working with consultants that advise those employers, and then the end investor, the shift of orientation from output and features. To outcomes and problems has been a tough shift. Particularly because, as an employer, as an institutional client, it's very easy to say we want this thing. We figured it out and we want this feature. And we want, We really wanted to create a product management organization that was empowered to solve the problem to not focus on the feature and the what in the capability and candidly, you can't competitively differentiate if you're featuring on focusing on features and capabilities.
[00:47:46] To overcome that. We've leaned really heavily into client research and data. In our organization, we have a 100 person user experience organization, a pretty robust research function, and we spend a tremendous amount of time with clients, understanding their problems, understanding how they approach the user experience, and then playing that back to our employer clients and the consultant clients that are the consultant partners that we work with. Because, everyone has a preference for design and everyone thinks, to your point, Marco, earlier, that they know how things should be built, it's the participant and investor behavior that actually matters and is, it is the truth teller. So I would say that's probably been the, one of the hardest shifts that we've experienced is getting ourselves out of this is what you should build mindset.
[00:48:33] Marco: Yeah, I totally agree with you. I think it's not only a Vanguard problem. I think it is, if you think about it, a lot of our competitors, a lot of our industries, back in the day, there was no digital, there was no website, there was no mobile. Everybody was mailing things in, then they were calling us. So it was always like the knowledge of the organization, our processes got built. In an era that was before digital technology or or I shouldn't say technology, but at least the digital channels. So it is not uncommon then that, that knowledge carries forward. And, despite people
[00:49:03] obviously trying to catch up and understand it is different than a digital native.
[00:49:07] That is like, Hey, you start from zero and you have to test your way into this, and find a product that
[00:49:12] works versus in our case. Our product has worked.
[00:49:16] or our business model has worked. You're actually now trying to teach like, yeah, but for us to be successful in digital, you need to test and learn.
[00:49:23] So it's a bit of sometimes culturally difficult, but it ends up to Amber's point creating this bias towards we know what to build and we know what best, what, how to work. So do this feature list here and we'll be successful. Then you end up with adoptions that adoption rates that don't meet the mark.
[00:49:41] And, but but I think that's the biggest challenge and I think it's probably common for other of our competitors or industry.
[00:49:48] Melissa Perri: It's a good lesson in really trying to figure out what the problem is and not just listening to whatever anybody's throwing at you from the client perspective of, fill me this, fill me that.
[00:49:57] Marco: Yeah,
Closing reflections
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[00:49:58] Melissa Perri: amber and Marco, when you reflect back on journey in this career, starting out in this industry, what would be your advice for your younger selves?
[00:50:07] Amber: Oh, that's such a great question. Very good one. I think I would tell my younger self You don't need to have all the answers Instead it's important to obsess About the problem that you're trying to solve like fall in love With the problem and then be willing to experiment fail and learn into the answers And I think as part of that if I reflect on where we started in this conversation, my background, like you have to be really passionate about the problem to have that mindset.
[00:50:36] I'm not lying when I say I wake up every morning and think about, how do we improve retirement outcomes for investors? Because it's such a core part of my value system. So I guess, Tied to that is the age old, do something you love and you won't have to work a day in your life.
[00:50:50] Cause to me that, that obsession with problems, not solutions is really, I think the unlock to true innovation.
[00:50:57] Marco: All right. That I agree. Maybe in my case, I've, reflecting a little bit, like I would first tell my young self get to know your users, get to know your customers. I think back to the discussion we just had we maybe some, make some assumptions, and when I say understand your users is like, Go deep into the different segments of your user base and understand. And a little hint. The answer is not in PowerPoint. The answer is actually talking to them. The answer is actually listening to them directly. Really going deep and expending time with users. I think it's critical. And I think early in the record ah, no I got it. I got this. Now it's a couple of reports here and there. I read this from research, the good to go. Now go there and do yourself. I think the second one is. And then when you become a product owner, nobody should know more about your product than yourself. And I think it's go deep into the understanding of your product. You may not know all the aspects of the technology, but you need to be in a position that you're the best, the most informed person about that product. And ideally you are a heavy user of that product. I actually the big, the best product owners that I have seen are the folks that use the product. And I think those that actually. Sometimes they're not that great. It's just, you have a good understanding of it, but you never placed a trade or you never really, you never played with our portfolio construction tool.
[00:52:14] How do you know? And I think a lot of people like try to get by without it and it doesn't work. I think I tell all the time for folks in UX, go talk to your clients, but you have to use the product too, because then you understand how it works. So be a user. And then I think the last thing is. I think when you're
[00:52:29] younger, prioritization sounds logical, but it's really hard to do. But I would say just be ruthless about prioritization of what you're going to build, what you're going to focus on. It's a reality unfortunately, we cannot be great at many things, at a time over time, maybe, but at a single point in time, you cannot be great at many things. And what I think you're starting. I. Take the bat that or I take the side of actually being good on a few things,
[00:52:55] developing fewer problems. Product features or product solutions, focus on fewer problems and say no to things. I think when I think my younger version here was like, yeah, I can do that and I can do that too. And I can do that too. It turns out that you can't. So that would be ruthless prioritization. I think would be my advice to myself.
[00:53:14] Melissa Perri: Fantastic advice for people out there listening. Amber and Marco, thank you so much for joining us on the podcast. If people want to connect with you or learn more about you, where can they find you
[00:53:22] Marco: I think Vanguard. com is a great place to start on the Vanguard, go to know more Vanguard and I'm on LinkedIn.
[00:53:28] Amber: Same message us on LinkedIn particularly if you're interested in coming to Vanguard to be part of our product management organization, we'd love to hear from you, but even just to exchange best practices and chat more.
[00:53:39] Melissa Perri: Amazing. And we will put the links to both Amber and Marco's profiles on our show notes at product, thinking podcast. com. Thank you so much for listening to this episode of the product thinking podcast. We'll be back next Wednesday with another amazing guest. And in the meantime, if you have any questions for me, go to dear Melissa.
[00:53:54] com and let me know what they are. We'll see you next time.