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December 21, 2012 at 07:00 PM
The last time Walt Bettinger sat down for an interview with Investment Advisor during a Schwab Impact conference, it was 2008 and the financial crisis was front and center. Four years later, that specific crisis has passed, but there are still serious challenges faced by advisors and their clients. In an exclusive interview on Nov. 14 with Charles Schwab CEO Bettinger and Bernie Clark, who runs the RIA platform at Schwab, we explored the challenges faced by advisors and Schwab’s role on behalf of its affiliated RIAs and the entire independent advisor movement.
When asked about the independent RIA model and Schwab’s commitment to RIAs, Bettinger was forthright and disarmingly honest. “We think the advisor model is simply a better mousetrap. We think that as we move into a world that is more and more transparent, with more and more informed consumers, the independent advisor model […] will continue to gather steam.” What of Schwab’s commitment to RIAs? “The best way to endorse [the RIA model] is the fact that it is our strategy in the affluent space,” Bettinger stressed. “Schwab has had a few missteps over the years into that space, the most famous of which I won’t name, but its initials are UST,” he said, referring to Schwab’s acquisition of U.S. Trust in 2000. Schwab sold U.S. Trust to Bank of America for $3.3 billion in early 2007. “I’m proud to be part of the management team that corrected that situation,” Bettinger said, “because we believe in the advisor model.”
That belief, Bettinger suggested, is reflected in his own time and energy commitment to Schwab RIAs. “The best part of my job is traveling to see clients,” Bettinger said. “I meet with advisors on a regular basis throughout the year.” Moreover, spending that time with advisors and advisor prospects reflects Schwab’s own fiduciary standard of seeing its business “through clients’ eyes.” He’s not immune to some modest chest-thumping on behalf of the RIA business, however: “by 2X we are the biggest, and by at least that same amount I’d say we’re the best at serving them.”
What specifically is Schwab doing to grow its business, and how will it support its RIAs and the entire independent advisor business? For Bettinger and Clark, the key concepts are advocacy, innovation, consistency, confidence, referrals and maintaining Schwab’s culture as a “challenger brand.”
Fiduciary and SRO
For Bernie Clark, the battle lines drawn around a bill introduced this year by Rep. Spencer Bachus suggests where Schwab’s advocacy efforts are needed in Washington. That bill, which would have designated FINRA as the self-regulatory organization for RIAs, is an instance, Clark said, of interested parties “trying to dance around the concept of bringing what has become an independent industry back into the main fold.” The largest proponents of that bill were SIFMA and “other organizations that would potentially benefit” from FINRA becoming the SRO for RIAs. “The Investment Adviser Association,” in the person of IAA executive director David Tittsworth, “was the lone representative testifying on behalf of the RIA industry for not having an SRO and for not having FINRA be the SRO. There were three representatives from the wirehouse side” who testified; there’s “something inherently wrong with that,” he said. In discussions with legislators on the issue, Schwab realized “they didn’t have the concept; so they need contextual education.”
