Hagerty: It wasn't an easy decision for us. We assessed the situation and were on the one hand very pleased that German investors overall bought more of our ETFs than ever before. However, these purchases were mainly made through other platforms and not through Vanguard Invest. When we started planning for Vanguard Invest in Germany, the environment was a bit different: there were fewer and especially more expensive platforms. That has changed in recent years, which we consider a positive development for investors. At the same time, it made less and less sense to operate our own platform. After careful consideration, we concluded that it is in the best interest of our investors to partner with other platforms instead of operating our own.

Külps: We have recently intensified these partnerships significantly; we want to make our products as widely available as possible. And we have been looking for new partners where German investors can acquire our products cost-effectively – with success.

Hagerty: We offer it in three countries: the US, UK, and Australia. Each country is different. Net Returns of investors are crucial for us: How can we help investors achieve better returns? Fees play an important role here. Fees in Germany have recently come down even further. In other markets, platform fees are still relatively high, and different markets have different structures. In the German market, it is more effective for us to work with partners.

Hagerty: It is very important to us and becoming increasingly so. For us, Germany is the fastest-growing market in Europe percentage-wise. Therefore, we have doubled our office space in Frankfurt and are expanding our team here. We are closing the office in Berlin with the termination of Vanguard Invest.

Külps: We have seen increasing growth in net inflows every year since we entered the German market in 2017. We have increased our market share in ETFs and passive investments every year. The results exceed our original plans.

Külps: We have increased our market share from 4% to 7% in assets under management in a short time, and the trend of inflows remains significantly above 7%. This is very positive. So, we are steadily gaining market share, and in a few years, our market share in Europe will be significantly higher. In Germany, we have 30 billion dollars in assets under management and more than one million retail investors saving in Vanguard funds and ETFs.

Hagerty: One reason is that the market structures are different, and we have been in the market for a much shorter time. In the US, there are more retail investors who own ETFs. In Europe, the ETF market initially developed more through institutional investors. But we are less active in this regard, as we are highly focused on the end investor. Our market share will increase as more individual investors participate in the capital markets. Our growth is also due to more private investors investing in ETFs themselves. We believe that the ETF market will continue to grow substantially over the next ten years because trading is increasingly possible online. More and more people realize the importance of low costs and broadly diversified investments. The problem is high-cost investing, whether active or passive.

Külps: We indeed have a very condensed ETF offering. We do this very consciously because we only want to bring products to the market that retail investors can use to build weatherproof portfolios in the long run, for example, for retirement. That is really our core focus. We strive to avoid catering to every need, eschew niche products, and refrain from following short-term trends.

Külps: We also launch new products, but due to our philosophy, fewer than our competitors. We recently launched new products in the areas of fixed income, ESG, and multi-asset. We have a relatively small and young product range, but it is growing satisfactorily. This year, we are likely to launch several new products.

Hagerty: We don't experiment with other people's money. Therefore, we have high barriers for new products. For most investors, investing can be confusing and complicated. We believe it doesn't have to be. Therefore, we ask ourselves, how can we proactively reduce the complexity and costs of investing so that it is more predictable for the individual investor?

Hagerty: Our fees are already low. We set them at a very competitive level at inception. You can build a decent globally diversified portfolio with ongoing costs of 0.13 or 0.14% per year with Vanguard ETFs. Our prices are very competitive, especially compared to what an end investor in Germany potentially pays for investment. According to a Vanguard study, total investment costs here are around 2.35%, which we believe is far too high, also in European comparison.

Külps: Our costs will continue to fall over time as we pass on economies of scale to our customers. We have proven this in Europe. We have lowered fees several times, and we will see what opportunities arise to further reduce costs.

Hagerty: Active ETFs are a good development because ETFs are an efficient structure. Vanguard has launched active ETFs in the US, but not yet in Europe. We always look at the strategy. If we think it is the right active strategy and an ETF is the right wrapper, then we will also issue an active ETF in Europe. This is by no means ruled out.

Külps: In the US and UK, we see a growing trend towards solutions. Financial advisors are outsourcing investment management skills to asset managers like us. We expect this trend to become stronger for us in continental Europe as well. New is that we are also expanding our model portfolio capabilities, i.e., our investment solutions, here. We are looking at how we can implement these in the German market. We have various paper model portfolios accessible through our website. And we are in the process of adapting model portfolios for individual clients, which is something we are developing and will roll out in Germany in the near future.

Hagerty: Financial advisors used to be stock pickers, then they became fund pickers. What we now see globally is that financial advisors are rather becoming financial coaches. Thus, they largely build index-oriented portfolios because they know they will get the appropriate return there. And where they can really add value is things like behavioral coaching, tax planning, or financial planning. Model portfolios will generate returns over the long term that investors expect since they are very efficient. The development is moving from the product to the portfolio.

Hagerty: Investors were used to products being sold to them. Now there is a big change: Investors are buying products on their own initiative. Investors are increasingly showing interest in and gaining a better understanding of their investments. This is why ETF savings plans have become increasingly popular.

Külps: In both Europe and Germany, we've predominantly followed traditional distribution methods. However, digitization is reshaping how financial products are distributed. The rise of ETFs and advancements in technology have introduced a new avenue for investors to access financial products at fair prices with high transparency levels. More investors are opting for ETFs and seeking market information through digital channels. While Germany is just at the onset of this shift, we view the growing accessibility to capital markets as a positive development.

Külps: It's no different with advisors. We assist advisors in providing clients with best practice advice. We're expanding our 360 Advisor Academy program, giving it a new name soon and offering more features to advisors.

Hagerty: The growth will accelerate further. European investors are increasingly realizing the importance of taking control of their financial future. As they become informed, they discover that ETFs offer great benefits with easy access, low costs, and broad diversification. With just a few clicks, they can build an efficient portfolio for themselves. Advisors, in turn, will recognize how holistic advice adds value, while end clients invest in portfolios diversified with index funds.

Külps: More and more Germans are investing in capital markets. The discipline seen in ETF savings plans convinces me that German investors are learning. But there's still much to do. Germans save a higher percentage of their net income than anyone else in Europe, yet they accumulate wealth much slower. We're great savers but not good investors. Only about 18% of the population are already invested, leaving a significant gap compared to other markets, especially the UK or the US. If we can bring more people into the capital markets and show them how the market can work for them to build long-term wealth, then I have great confidence in the potential growth of the ETF market.

Hagerty: Since entering the German market, we've been entrusted with 30 billion dollars in assets under management, despite not paying commissions. There's a shift in the market away from commissions. One reason why Germans have historically participated less in capital markets is that they didn't get a good deal: if I had to pay fees of 235 basis points per year, I might have kept my money in cash, too.

Külps: We often say it's the German culture, but I think the industry hasn't made it easy to provide customers with a good net return after fees. Costs and transparency need to improve. End investors recognize this.

Hagerty: We continue to have great ambition to assist investors in Germany and to become more well-known among them as an asset manager with a single mission: we represent the interests of all investors, and we are committed to one goal – the investment success of our clients. And our clear focus will not change.