Whether markets are in bull or bear phases, or economic cycles are growing or in a recession, there are opportunities for financial advisors if they remember that trust comes first, said Charles Schwab CEO Walt Bettinger.
“Trust is everything. It’s earned over time, lost in an instance. Whether we’re in the ninth year of our bull market, or in a deep bear market like we were in the financial crisis, we always should challenge ourselves using the knowledge we have as professionals to better serve clients, not to maximize revenue generation from clients,” Bettinger said at the Morningstar Investment Conference in Chicago.
Bettinger has been CEO of Schwab since October 2008 and is credited with leading Schwab through the global financial crisis. He said two factors stand out from 2008. What helped Schwab at the time was that ahead of the crisis the firm had stayed conservative with its balance sheet, having had 70 percent of it in U.S. Treasurys. “Once we were in the middle of it, there wasn’t anything dramatic you could do,” he said.
He also credited the independent advisors who worked for Schwab, about 7,500, with helping guide their clients through the crisis.
“We were in no position to reach out to all of our clients on what was going on, but the independent investment advisor did. And you could see the results, the business they won. ... That was the power of the individual advisor,” he said.
Advisors must remember investors are no different than any other type of consumer, he said. “There’s an expectation they’re not expected to make tradeoffs—not with the experience, quality of service, timeliness or cost they pay. Any client’s last great experience is their minimum expectation going forward,” he said.
There’s also greater expectation of transparency, Bettinger said, adding that the industry needs to become more transparent. He also said the industry needs to leverage technology to create a better client experience to bring costs down. “Every dollar we don’t take is a better chance for clients to meet their goals,” he said.
Exchange-traded funds have helped with transparency and cost, and when looking at what millennial investors want, they view ETFs as the primary way to invest, he said. Among baby boomers, only about half are interested in ETFs, he added.
Regarding the role of fiduciaries and regulatory changes, Bettinger said while investors may not understand the terminology’s meaning, fundamentally they believe that their financial advisor should put the client’s interest first. Schwab agrees. “Fundamentally, we agree we do the right thing for our clients,” he said.
Robo-advisors, such as Schwab’s Intelligent Portfolios, are here to stay and advisors shouldn’t fear technology, Bettinger said. Advisors should leverage technology to offer a lower-fee product to clients, especially if the client wants a light touch or no touch versus those clients with higher needs. It’s all about giving clients a choice.