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Q-and-A with Charles Schwab CEO Walt Bettinger

Walt BettingerQuick question: Who is the CEO of Charles Schwab Corp.? If you guessed Charles Schwab, you'd be wrong. But you'd have plenty of company. Schwab started his company in 1971, but for the past five years the CEO has been Walt Bettinger.

From Schwab's San Francisco headquarters, Bettinger leads nearly 14,000 full-time employees who manage $2.2 trillion in client assets.

Bettinger spoke recently about a looming retirement crisis for Americans and he suggests "two relatively simple steps" to address the challenges facing 401(k) plans.

Fast facts:

  • CEO and president of Charles Schwab Corp., since October 2008.
  • At 22, founded The Hampton Co., providing retirement plan services to firms and their employees. Charles Schwab Corp. bought the company in 1995.
  • Graduated summa cum laude from Ohio University with a degree in finance and investments.
  • Prefers to be called Walt, not Walter.
  • Tweets under @WaltBettinger.
  • Bettinger has five children.

He says all participants in 401(k) plans "should be automatically enrolled in customized, objective, unbiased advice in how much they should save and how that money should be invested, given their personal and unique circumstances." Secondly, Bettinger says, "We need to dramatically lower the level of fees associated with the management of 401(k) accounts."

Bankrate spoke to Bettinger about his 401(k) ideas and whether individual investors can get a fair shake in the stock market.

You have a lot of ambitious ideas regarding 401(k) plans. Do you think there should be a government solution involved at all?

I do not think we need a government solution. I think we need courage across the industry --individuals like myself who have been in this business for three decades to stand up and speak with truth and objectivity about what we need to do differently. I think that is all it takes, but it has got to start.

You referenced social and financial challenges arising from underfunded retirements. Can you talk about those a little bit more? Are we experiencing those challenges already?

I think we are. And of course, there are many factors contributing to that -- demographics, improving health care. Today one of the great challenges we face as a country is we expect in a 40-year working career -- and I am using round numbers, of course -- to fund a 30-year retirement. The math just does not work. So it is part of the overall challenges that we face.

What are challenges facing pension plans and their recipients?

The challenges facing pension plans are linked exactly to why we have seen, for the most part, the demise of the pension plan. And that is, a long-term promise made in an uncertain world. You know, think of the interest rate environment today where most pension plans had interest assumptions of 7 (percent) to 9 percent earnings and it is just not realistic to attain. And it is not realistic to fund those monthly benefits funds to people far out in the future without taking enormous risk as to whether the company will have to put a lot more money in the plan. And you have seen, to a great extent, the demise of the pension program.

Would you agree that saving for retirement is most difficult for young people? And do you treat that problem differently when you are advising individuals?

What our research has shown is that one of the major reasons young people hesitate to save is because they feel even less prepared than someone who may be older to make all these decisions that we are foisting upon them. When you offer professional counsel for them that is objective and they know that they can trust, they are more willing to sign up than if they have to try to do it all on their own.

For 50 percent of the people, they have no idea what to do. For one-third (of the people), this is causing major stress in their life. Is it any wonder that a younger person, with all the other pressures they are dealing with, and without the benefit of maybe managing money ever for themselves, that they would be hesitant to put money away to something where they are clueless as to what decisions they should make?

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