CEO role not for Schwab’s McWhinney?

The Charles Schwab Corp.’s decision last week to position Walter W. Bettinger II as the likely successor to its founder and chief executive caught some financial advisers by surprise.
FEB 26, 2007
SAN FRANCISCO — The Charles Schwab Corp.’s decision last week to position Walter W. Bettinger II as the likely successor to its founder and chief executive caught some financial advisers by surprise. Last Wednesday, the San Francisco-based discount brokerage firm elevated Mr. Bettinger, 46, who was executive vice president and head of Schwab Investor Services, to the newly created role of president and chief operating officer. The appointment makes him the front-runner in the race to succeed Charles R. Schwab, 69, who is expected to retire in about two years. The largely unknown Mr. Bettinger, who maintains that he is a “strong advocate” of Schwab’s adviser business, now sits in a seat many advisers presumed was reserved for Deborah D. McWhinney, president of Schwab Institutional. “I barely know Walt Bettinger,” said S. Timothy Kochis, president of Kochis Fitz of San Francisco, which manages $2.1 billion. “I met him once, and I know [Ms. McWhinney is] a fine executive.” Indeed, Ms. McWhinney, 51, was seen by some advisers as a possible CEO candidate. Christopher Dodds, Schwab’s chief financial officer, who last month announced plans to retire in May, also was viewed as a possible successor. Mr. Bettinger, who joined Schwab in 1995 when it acquired the retirement plan services company he founded 12 years earlier, assumes the No. 2 spot at Schwab immediately. A replacement as head of Schwab’s investor services unit has not been named. That Ms. McWhinney was passed over for Mr. Bettinger stunned some advisers. “[Ms. McWhinney] is very smart and politically savvy. I can’t believe she got beaten out here,” said Peter Labella, principal with FMA Advisory Inc., which manages $400 million from Harrisburg, Pa. “[Ms. McWhinney] is a great supporter [of advisers], and I don’t know where Walt is going.” Others have yet to give up hope. “I strongly believed Debby McWhinney would have made an outstanding president and chief operating officer, and still might get that chance,” said James Ferrare, senior vice president of Pinnacle Associates Ltd. of New York, which manages $4.8 billion. The immediate difference for advisers who keep assets under custody with Schwab is that Ms. McWhinney no longer reports directly to Mr. Schwab. Instead, she reports to Mr. Bettinger. Ms. McWhinney often has touted her direct access to Mr. Schwab as a boon to her efforts to gain tens of millions of dollars in new resources for Schwab Institutional. “This is just fine,” Ms. Mc- Whinney said of Mr. Bettinger’s appointment. As a member of Schwab’s management committee, Ms. McWhinney still will have plenty of opportunity to interact with Mr. Schwab, she said. “Chuck sits 100 feet [away] from me,” she added. Mr. Bettinger said that independent advisers can count on him. “I’m a strong advocate of the adviser business, especially in light of our divestiture” of U.S. Trust Corp. of New York, which is scheduled to close in late spring, he said. If he’s not a strong advocate, he’ll hear about it posthaste, according to Bob Palmer, a partner at Plante Moran Financial Advisors, which manages $4.5 billion from Southfield, Mich. “Actions down the road will speak louder than words, and if there’s anything detrimental [that he does], we’ll all be very strong in voicing our opinion,” he said. Mr. Bettinger’s appointment is the latest twist in a drama surrounding who will succeed Mr. Schwab. That drama began 10 years ago with the appointment of David S. Pottruck to the role of co-chief executive in an unusual power-sharing arrangement that ended when Mr. Pottruck became the sole chief executive in 2003. In July 2004, with Schwab’s profit and revenue on the decline, Mr. Pottruck was ousted, and Mr. Schwab returned from semiretirement to run the company. “Hopefully, [Mr. Schwab] learned that the co-CEO stuff never works,” Mr. Kochis said. “You can’t have two ultimate bosses.”

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