As American advisors abandoned commissions in favor of asset-based fees over the past decade, they became more sensitive to the costs they were passing on to clients and in the process, turned into better customers for Vanguard, he said. Vanguard's assets managed for U.S. advisors rose to $620 billion as of Sept. 30 from $260 billion at the end of 2007, company data show.
'Good Value'
"We were a good value proposition," Rampulla said.
In the U.K., winning over advisors is critical because the market is more advisor-driven than in the U.S., he said. "There is very little direct business."
Mutual-fund sales by intermediaries such as financial advisors and wealth managers are about six times greater than direct sales to consumers, according to the Investment Management Association, the industry's lobbying group.
Vanguard has already won converts. Alan Smith became a customer in 2010 when he and his colleagues soured on stock pickers after the global financial crisis.
"We couldn't find a compelling reason to remain exposed to active funds" said Smith, CEO of Capital Asset Management, a London-based wealth-management firm that oversees 125 million pounds, 40 percent of it with Vanguard.
James Norton, whose London-based Evolve Financial Planning Ltd. manages 200 million pounds, including Vanguard funds, said passive investing in the U.K. is growing.
Lesser Known
Index funds, known as trackers in the U.K., represent about 7 percent of the British market for mutual funds, according to the Investment Management Association, about half their share in the U.S.
"When advisors aren't getting paid commission, I think more of them will take a look at the likes of Vanguard," Norton said in a telephone interview.