Leadership in Finance: Vanguard’s Tom Higgins

Financial reporting never stops for the CFO of the investment firm's funds group.

Tom Higgins is on constant deadline. As the CFO of Vanguard’s Fund Financial Services, he oversees the daily accounting of each of the firm’s more than 150 funds, whose net asset value gets publicly reported at the end of each business day. In addition, FFS, which has 325 employees, is responsible for providing periodic financial statements on each fund, which have varying year-ends. “Twelve months out of the year, we’re doing a financial report for a group of funds,” Higgins lamented in a recent interview with CFO.com.

Still, Higgins doesn’t appear to mind, as he has spent his entire career in the same industry and most of it at the same firm. After spending most of the first 10 years of his career auditing investment companies for Price Waterhouse, Higgins joined Vanguard more than 20 years ago and assumed his current title last year. His group also deals with the funds’ taxation, compliance requirements, securities lending, and treasury functions. He will talk about how Vanguard has been working to restore confidence in money market funds and securities lending at the CFO Core Concerns Conference in Boston on June 15-17.

In this edited version of an interview with CFO.com, Higgins describes his career and his position as one of the privately held investment firm’s three finance chiefs.

How does your role fit into Vanguard?

We have two sets of entities. There’s the corporate group of entities under Vanguard Group Inc., which is a sort of parent company. And then there’s the mutual funds. We’ve got more than 150 mutual funds as well as other investment pools. I was always the treasurer of those funds, responsible for the group we call Funds Financial Services, or FFS, and reported to Vanguard’s CFO. Vanguard’s the name of the company we work for, Vanguard’s the company that pays us.

Nobody works directly for the funds. We used to have one CFO, Ralph Packard, who was on the corporate side. When he retired last year, they split his role into two, basically. Richard Carpenter became Vanguard Group’s CFO, and they gave me the title of CFO of the funds, but essentially my job is unchanged. When Packard retired after 20 years with the firm, they decided that the funds are a big enough business now that we need two CFOs. We report to Glenn Reed, managing director of the Strategy and Finance Group.

Do you interact with Richard Carpenter?

Absolutely. He’s a guy I’ve known for 30 years or so, we have a great relationship. There’s a lot of back and forth between the corporate side and the fund side. What makes us different from everybody else in the mutual fund business is that the funds really own Vanguard. It’s a “mutual” mutual-fund company.

[Our competitors] are organized so that their corporate entity is owned either by a private group of investors or a public company. In our case, the corporate entity is actually owned by the funds. The funds are self-administered, we have our own transfer agent, we have our own accounting areas. All that stuff is basically done for the funds by a company that the funds own. The funds end up paying all of Vanguard expenses, so his side sets the expense ratios of our funds and then we accrue those on the funds’ books every day. And we provide the cash he needs to run Vanguard’s ongoing operating expenses. Those are the two principle interactions between the two groups.


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