Charles Schwab Founder: Public Thinks Broker-Dealers are Used-Car Salesmen
Charles Schwab, the eponymous founder of the firm which bears his name, believes the brokerage industry should take seriously its responsibility and truly look after the best interests of clients.
Around 80% to 90% of the investing public need the help of a professional in making investment decisions, according to Schwab, who started the San Francisco-based company in 1971, The Charles Schwab Corporation.
The “advice portion” of what the investing public needs worries Schwab, he says, referring to the quality of advice investors are getting – especially elderly and so-called mom and pop investors.
“The responsibility we have over these people is all important,” Schwab said Tuesday at Sifma’s annual meeting in Washington, D.C.
Schwab noted that many investors are vulnerable and it would be easy for them to “go down the incorrect path.”
He worries that many investors are not being properly looked after by their investment professionals.
“What does fiduciary really mean? What is good advice?” Schwab asked, noting that these are likely the same questions many investors are still asking.
Schwab said the brokerage industry must not squander their client’s trust and must not act in any way that would reinforce negative stereotypes.
“The general public still thinks we’re a bunch of used-car salesmen,” Schwab said.
He qualified his remark by saying he has nothing against used-car salesmen, but they are known to try and quickly sell the cars on their lots.
“We have to keep the eye on the big ball, the millions of investors out there with 401(k) plans,” Schwab said.
With all the investment options, products, fee structures – among other things – “we have put on the individual a huge responsibility” to make decisions that are crucial for their financial future, according to Schwab.
“People are desperate for solid, truthful, ethical, positive outcomes of decisions,” he said.
Schwab has been chairman of The Charles Schwab Corporation since its inception and served as its CEO for most of its history until October 2008.