He spoke with In The Vanguard about his new position with FINRA, the financial markets, and his enduring allegiance to the everyday investor.

For people who aren’t familiar with FINRA, can you talk a little bit about what it does?

FINRA’s an interesting organization. Unlike most other regulators, it is privately funded—by members, securities firms, and fees on transactions in the markets. It oversees most of the cross-market surveillance of behaviors as well. FINRA has a very succinct mission: investor protection and market integrity. It has a strong, institutional commitment to investors that is also core to Vanguard.

Importantly, FINRA plays a crucial role for Vanguard’s clients because it oversees the markets and retail-oriented sales practices. That’s, of course, also vitally important for the broader investing public. FINRA does a very good job protecting investors and ensuring that markets are liquid and fair.

What are your duties with FINRA?

As lead governor and now chair, I’ve been working with the CEO and the board to ensure that the governance of FINRA is as strong as it can be. One of the most enjoyable parts of my role is to continue working closely with our new CEO, Robert Cook, who brings great talent, passion, and experience to this role.

Serving on the FINRA board is a great way to continue supporting one of the reasons Vanguard is so special—commitment to the client’s well-being. Like Vanguard, FINRA is, in its bones, committed to the well-being of everyday investors. It’s very gratifying work from my standpoint because you come back to its effect on tens of millions of people. That’s what FINRA is about.

What are your views on the recovery of the financial markets and the economy? What about the challenges regulators face in maintaining liquid and fair markets?

The recovery from the bottom of the recession in 2009 is remarkable in many ways. You could look at it and say, as some people do, that it’s artificial because interest rates are low. Or you can look at it and say it’s a normal recovery, because ours is the most resilient economy in the world. I choose to think it’s a probably a combination. Investors who stayed the course have been served very well, as have those whose portfolios remain balanced.

That’s one of the messages we continually have to get out as an industry—that investing is a long-term endeavor, and it’s one that requires patience and perspective. Obviously, Vanguard is a champion of this mind-set.

It would be awful if people lost faith in the markets, which was a risk as we went through the financial crisis. I think regulators have done a really fine job of adjusting their oversight of markets for the current environment and for the future, so I’m very positive that our markets will remain fair and liquid.

Looking ahead, what are the greatest challenges facing investors?

I continually worry that Vanguard clients—and investors more broadly—are faced with too many headlines, too much noise, and too much focus on what happened to the stock market today or yesterday. Investment firms have a responsibility to provide investors with the timely information and helpful perspectives they need to plan for the future without adding to the clamor.

One really important example of that is firms’ perspectives on long-term return expectations. We’ve had a really good run in the markets. Are prospective returns going to be that good? What should investors expect from a balanced portfolio? I think that is one of the real challenges that investors face, since future returns are unlikely to be what you see looking backward. Are investment firms doing enough to educate and advise people to increase their savings rates and/or adjust their lifestyles, if that proves to be the case?

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