Bettinger: Schwab layoffs could continue
Schwab, which cut about 20% of its work force after the dot-com boom ended in 2001, will continue to reduce employee count “if the environment gets meaningfully worse,'' said Walt Bettinger, who became chief executive in October.
The financial services industry’s problems have not yet reached bottom, Charles Schwab, the founder and chairman of the eponymous San Francisco-based discount-brokerage company, said Wednesday at the firm’s semiannual Business Update meeting.
“I’m not sure we’re quite there yet,” he said.
Mr. Schwab said he expects further cutbacks on Wall Street.
“On a personal level, I am really angry at some of the leadership in this industry,” he said, referring to mismanagement in firms.
Schwab, which cut about 20% of its work force after the dot-com boom ended in 2001, will continue to reduce employee count “if the environment gets meaningfully worse,” said Walt Bettinger, who became chief executive in October.
“That would only be a practical approach we take, and you should count on us doing that,” he said.
The company expects some immediate overhead savings from its move this week to combine its registered investment adviser and retirement services businesses and create centralized support units for areas such as project management and business web services.
Mr. Schwab said he has been through nine market breaks in his career but has never seen one as intense as the current one.
He said it may take 18 months before markets reverse, and then it can recover about 50% of lost value within three years.
Investors, Mr. Schwab forecast, will remain cautious for a long time, leading them to pour money into money market funds and other conservative vehicles for quite a while.
He also predicted that interest rates will continue to drop toward the zero level before rising toward more-normal rates next year.
Mr. Bettinger said the reorganization of Schwab’s institutional businesses makes strategic as well as operating sense since a large percentage of the full-service retirement plan assets it services are placed by RIAs.
“From a client lens, it makes a lot more sense to deal with them as a single Schwab,” he said.
Mr. Bettinger expressed regrets that the reorganization forced the ouster of Charles G. Goldman, a management consultant who had run the RIA business for the previous 17 months.
“Difficult decisions” have to be made in all parts of the organization, “even at the top,” Mr. Bettinger said.
Schwab hasn’t announced Mr. Goldman’s direct replacement in day-to-day operations of what the company is now calling Schwab Advisor Services, but Mr. Bettinger said that the umbrella unit housing the RIA and retirement services businesses will be run by Jim McCool, a longtime colleague at Schwab.
Mr. Schwab said his firm’s relatively diversified business model is serving it well in the current environment, while some big Wall Street competitors are struggling with “some bloody wounds.”
Mr. Bettinger said assets transferred to Schwab from retail investors are up from all rival firms, though he cautioned that the inflow from some bigger rivals won’t continue at the current pace as the firms are merged or settle into stronger capital positions.
He also said that Schwab will continue to add new products through its commercial-bank subsidiary and expects soon to offer a credit card that rebates 2% of the amount charged to the cardholder, with no limits on the total or exceptions to the offer.
Mr. Bettinger called it a market-disrupting product, similar to what he said is a high-yield checking account offered by the company.
He tried to tame concerns about credit quality at a time when consumer delinquencies are rising by saying Schwab will not hold the debt behind the card.
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