Former Vanguard CEO McNabb joins venture capital firm Venrock to guide advisor fintech investments

Financial Advisors


Former Vanguard Group CEO William McNabb has joined venture capital firm Venrock as an exclusive advisor to guide the firm’s future investments in wealth management technology.

Venrock grew out of successful investments made into technology by the Rockefeller family office in the 1930s and has been a force in venture capital since it officially launched in 1969, including being an early investor in companies like Apple and Intel. The company turned its attention to wealth management in 2011 as an early backer of Personal Capital, which in 2020 sold to Empower Retirement in a deal valued at $1 billion.

Now the company has set its sights on advisor-facing technology. Venrock is a lead backer of digital custodian Altruist, which has raised a total of $290 million and acquired Shareholders Service Group to quickly become a significant player in the independent advisor custody business, and Vanilla, an estate planning fintech launched by financial advisor and serial entrepreneur Steven Lockshin.

McNabb also invested in both companies and serves on their boards. Now he is making his ties to Venrock official and will be working closely with Nick Beim, a partner at Venrock focused on fintech, to identify future opportunities in advisor technology.

“I’ve really enjoyed working with Nick in particular and I’ve learned a ton from them. We seem like we’re a good compliment to each other in terms of skill sets,” McNabb told InvestmentNews. “He understands the fintech world in particular more than anybody I’ve ever met.”

McNabb joined Vanguard in 1986 and was named CEO in 2008. Under his leadership, Vanguard more than tripled in size, to $4.4 trillion in assets under management in 2017, when he announced he would step down. Today, the company is the second largest asset management firm in the world with $7.2 trillion in AUM.

During his tenure, McNabb pushed Vanguard to embrace new technology. The firm was an early entrant into the automated investing market when it launched Personal Advisor Services in 2015, and in 2016 McNabb urged advisors to embrace robo-advisor technology. Vanguard’s robo now manages $119 million, the most of any automated investing product on the market.

“I’ve been really blessed,” McNabb said when asked about his career, adding that he was a “baby” in the industry when he was interviewed personally by Vanguard founder John Bogle. “I got a chance to live with an iconic founder and transformational leader in John Brennan, Vanguard’s second CEO, and see what it was like to take something from inception to a dominant player. We changed the market. Our presence has made mutual fund investing very different.”

He hopes to do something similar in advisor technology by joining Venrock. The goal isn’t to back something that generates a five- or 10-time return on the investment, but rather build something that can have a significant impact on the wealth management sector, McNabb said.

Venrock’s history is full of stakes in early-stage startups that grow into significant players over time, Beim said. For example, Personal Capital is now the second-largest robo-advisor in terms of AUM behind Vanguard’s, according to Robo Advisor Pros.

There is still a lot of opportunity to build technology companies that focus on helping advisors, Beim said.

“As I look at the wealth management industry today, I think of it as an underserved market from technology perspective,” he said. “The industry is dominated by legacy platforms and point solutions, putting the burden of making it work together on the advisors — a burden most would rather not have. It’s difficult to find an RIA today, or anyone in the industry, that would feel great about their tech stack.”

Altruist, which is looking to disrupt the custodian marketplace place long dominated by Charles Schwab Advisor Services, Fidelity Institutional and BNY Mellon Pershing, is an example. Building a digital custodian is difficult and costly but has a chance to finally solve the integration problem for advisors, Beim said.

There is still a need for more robust financial planning tool sets, McNabb added. And now that the advisor industry has shifted away from commissions and the overall cost of investing has declined — two trends that Vanguard played a significant role in advancing — advisors are looking for new ways to maintain good returns for themselves by becoming more efficient and offering more services.

“It feels to me that there’s still a lot of opportunity for technology in particular to help on that front,” McNabb said.

While they aren’t ready officially announce Venrock’s next investment in advisor fintech, Beim teased that the company works in “a really interesting part of the wealth management market that is a huge part of the investment world that just hasn’t seen a lot of innovation.”

Since retiring from Vanguard, McNabb has spent his time teaching at Wharton Business School and working in the nonprofit world. He also sits on the boards of IBM, United Healthcare and Axiom in addition to Altruist and Vanilla.

Those companies already had significant momentum by the time he got involved, he said. By joining Venrock, McNabb is looking to get more involved in the earliest stages of a company’s development.

“Ideas that are maybe in the pre-investment stage,” he said. “Going back to the early days of a company, it’s a lot of fun.”



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