‘Set Your Priorities, Stick to Your Principles,’ Says Schwab CEO

Walt Bettinger shares his philosophies on business, life at The College of Wooster’s Wilson Lecture

09 February, 2016 by John Finn

WOOSTER, Ohio — In hindsight, starting a company at the age of 22 was “probably a foolish thing to do,” said Charles Schwab CEO Walt Bettinger, but it turned out to be the catalyst for his exceptionally successful career as a highly respected investment strategist.

Bettinger, on campus last week for the James R. Wilson Lecture in Business Economics, sat down with Bill Longbrake, chair of the Board of Trustees at The College of Wooster, for a public conversation about business, investing, leadership, and life before an overflow crowd in Lean Lecture Room of Wishart Hall.

“I guess I was pretty naïve,” said Bettinger, who founded The Hampton Company, a provider of retirement-plan services for corporations and their employees, in 1982. He started driving around in his 1976 Ford Maverick making cold calls and “getting a lot of doors slammed in my face,” but eventually his mission and his method caught on. Gradually, he built an impressive client base that would include Schwab, which eventually bought his business in 1995. Following that transaction, Bettinger was invited to join the firm, and he quickly ascended the corporate ladder, becoming CEO in October 2008, the same month that the crisis at Lehman Brothers came to light.

Transitioning from entrepreneur to executive was not without its challenges. “I had not had a performance review for 13 years because I was in business for myself,” he said. “I expected to be told how good a job I was doing, but instead I was told that I was not the best at Schwab, and that I needed to either get better or I would be let go the next year.”

Despite the stinging criticism, Bettinger appreciated the honesty with which it was delivered. “[Schwab] cared enough to be honest about the areas in which I was struggling,” he said. That honesty has become a staple at Schwab. Twice each month, Bettinger requests a BHR (Brutally Honest Report) from his managers, who tell him not only what is going well, but also, and perhaps most importantly, what is going wrong. “I want them to be honest with me and with themselves,” he said.

Honesty leads to trust, and trust builds integrity, according to Bettinger, who uses that philosophy as a foundation for doing business at Schwab. “Most successful people believe in and trust in others,” he said. “There needs to be a culture of honesty [in order to be successful].”

As for the financial crisis of 2008 and its impact on Schwab, Bettinger said, “we were fortunate during that time. We continued to follow our investment strategy, and did not get caught up in CMOs (collateralized mortgage obligations, which played a significant role to the financial collapse).”

In fact, Bettinger refers to it, not as a financial crisis, but as a crisis in leadership. “Leadership means serving others, paying attention, and understanding that what you do will have an impact on many people,” he said.

On the subject of crises, Bettinger reflected on a situation at Schwab in 2004 when his vision helped to guide the company out of rough waters. “Schwab had lost its way,” he said, “Growth had stalled, the CEO was fired, and Chuck (Schwab) came back to take his place.” So Bettinger made a risky recommendation to eliminate nuisance fees, which accounted for 20 percent of the firm’s revenue. “People were moving away from Schwab,” he said. “I suggested that if we treated our clients the way they wanted to be treated, we would be okay.” Turned out, he was right. After an initial drop in revenue, the firm rallied quickly and dramatically increased its customer base.

Today, information security is Schwab’s biggest challenge, according to Bettinger. “We get thousands of intrusion attempts every day,” he said. “We’re the largest publicly traded company in the U.S., so we’re a big target. The sophistication in tracking and protecting our client’s money is extraordinary. It’s a game of war between the bad guys and the rest of us.”

When asked what he looks for in a prospective employee, Bettinger provided some helpful advice for the students in attendance. “Just be yourself,” he said. “That’s the basis of all trust.” He also advised students about the danger of getting in too deep. “Your work will take up every moment of every day if you allow it to,” he said. “That’s why it’s so important to set your priorities and live life accordingly. You will be much happier if your personal values are aligned with those of the company you work for.”