Rick Wurster is 'ideally prepared,' for CEO role, says Charles R. 'Chuck' Schwab -- he practically runs the company, advances the business model and actually lives in Texas
The president and CEO-in-waiting has all but Walt Bettinger reporting to him, and spearheads huge initiatives in alts, banking, private banking and proprietary investments
9 min read
Brooke's Note: Schwab plays its cards close to the vest. But when it makes a move, it's typically decisive and often has the imprimatur of its founder, Chuck. Switching horses at CEO is being cast as a Walt Bettinger resolve based upon his advancing age, and of course that's the main thing. But we also know that Chuck is a very big fan of Rick Wurster and that Wurster has been entrusted with so much already. He already leads all the initiatives Schwab is taking to grow and evolve, including banking, ultra-high-net-worth private banking, alternative investments, and direct indexing. So Chuck, whose last known mega move was to zero out commissions five years ago – with a lurch toward freemium – may now be playing his monetization card with a touch more deliberation than he's letting on. Bettinger is grand, smiling, and headed for a co-chair position as a post-TD Ameritrade merger hero. But the era of Rick Wurster is here, and expect more rapid-fire moves as Schwab fights to get a payoff for all those new assets gathered in the wake of fee zeroing – and get its share price where it likely belongs.
Charles R. “Chuck” Schwab has spoken glowingly about incoming CEO Rick Wurster, and he's not hedging – either in praise or power conferred -- about the man who is replacing CEO Walter Bettinger in less than three months,
“Moving forward, Rick Wurster is ideally prepared to assume the duties as our next CEO. He possesses all the attributes to be a successful CEO, and he has the full confidence and support of myself and the Board,” said the co-chairman and founder of The Charles Schwab Corp.
Chuck and his board added a board seat and a CEO seat to Wurster's curricula vitae but also left him holding the reins as president, which suggests he'll maintain a very hands-on role in the company.
Still, the news rocked the RIA world because it landed seemingly out of nowhere, even if it was clearly in the cards with Wurster's undisguised grooming for the job.
Bettinger cited his approaching 65th birthday as a personal deadline, but he is still 63. He will be 64 by the time he retires as CEO. Wurster is 51.
“I am fortunate to continue to work with Walt in my new role and am humbled by the confidence that Walt, Chuck, the Schwab Board of Directors, and our dedicated employees have placed in me,” Wurster said in a release.
“[Bettinger] has earned the right to determine the timing of his retirement as CEO, and I am delighted that he will continue to serve as executive co-chairman of the Board of Directors with me,” said Chuck Schwab.
Time and timing
Don't let Wurster's low profile distract from his high impact, says Andrew Besheer, principal of his own consulting shop.
“I think his profile has been lower – again, industry giants cast long shadows – but I also think that he’s been pretty intimately involved in the whole process of the TD Ameritrade conversion and managing through all of that noise and that should have given RIA constituents a bit of a preview and some more exposure to him," Besheer says.
“He might be a little less of an industry personality going forward than either Chuck or Walt, but I don’t think that necessarily is an issue with that business as long as there’s a steady hand on the helm,” he adds.
The exact timing of the Wurster/Bettinger transition was likely an interplay of board leanings and the current CEO's predilections, says a former Schwabbie who asked not to be named.
“I am not surprised by the Walt news at all. It was just a matter of time and timing,” the source says.
Walt Bettinger sheds 'president' title and Bernie Clark gets new boss as Schwab appoints Rick Wurster as president and No. 2 in charge
“I guess if there is anything I was surprised about it’s the speed between the announcement and end-of-year timeline. It’s likely the board is interested in a tilling of the soil sooner than later. But I have no doubt Walt had the final say.”
Bettinger's accomplishments are extensive over his 16-year career (see sidebar), but there's no question he's bowing out a little over a year after the biggest financial crisis in Schwab's history.
Under a cloud
In March a year ago, the company's stock was rocked by a huge selloff when its bank unit surfaced in the middle of an interest rate squeeze that ultimately sank four other major banks.
The Fed's nine rapid-fire rate hikes, from 0.25% to 5.5%, drove underwater roughly $28 billion in Schwab bond holdings out of $367 billion in deposits at year-end 2022. Schwab shares plummeted 31%.
To their credit, Bettinger and Chuck Schwab acted quickly, issuing a note assuring investors there was a “near zero chance” Schwab would have to sell the bonds.
Regulators ultimately concluded the crashed banks – Silicon Valley, Signature Bank, Citizen's, and First Republic – as well as Schwab Bank, had assumed too much risk amid rising expenses and the sudden interest rate shift – a management oversight.
Depressed stock
Bettinger and Schwab stopped the share hemorrhage on Wall Street, but more bad news followed.
Walt Bettinger's Legacy
|
Story Timeline
Shortly after the bank debacle, the company announced an increase in short-term borrowing by $3.1 billion in the second quarter of that year. Analysts saw the move as a “significant drag” on earnings.
Analysts also took a dim view of Bettinger's plan to offload risk on TD Bank in Toronto to reduce the size of Schwab's bank. See: Wall Street hammers Charles Schwab Corp. shares and blasts management 'execution' after Tuesday's surprise unveiling of budding mega-outsource deal with its biggest shareholder, TD Bank
More than half of Schwab’s overall revenue in 2023 came from the difference it paid on customer bank deposits and the amount it made from reinvesting the money in higher-yielding investments.
Schwab's stock has also been slow to recover. It was trading at $93.16 in March 2022; It closed today (Oct. 4) at $64.75.
Over Bettinger's tenure, Schwab stock increased about 400%, but investors could have done better in an S&P 500 index fund. The S&P rose 441.11% over the same time.
Charles Schwab Corp. files SEC paperwork to make good on Rick Wurster push for investor revolution in mass customization --with 40 basis points of monetization
Whether the bank crisis weighed on Bettinger's departure – earlier than his planned 65th birthday – is unknown.
But Wurster will present a fresh face to Wall Street without the baggage.
“Wall Street gets impatient with a fixture at the top for too long,” says the ex-Schwab employee.
New initiatives
As Wurster takes over, Schwab's existing business model, hence earnings growth, and share price remain under pressure.
Despite a low profile, the new CEO has very much been at the epicenter of Schwab's efforts to find green pastures.
He previously promised that Schwab would deliver an alternative investment offering under its brand by year-end 2024. See: Charles Schwab & Co. makes iCapital its exclusive alts partner as Rick Wurster tells Wall Street that in 2024 his firm will roll out alternative investments to high rollers
Alts are widely considered to be a sky-is-the-limit frontier for the wealth management industry, the way AI is for technology companies.
Wurster could also build on Schwab's success with high-net-worth investors – and leap to the ultrahigh net worth world of Northern Trust and U.S. Trust, which it once owned. See: Charles Schwab Corp. will take the fight for ultra-high-net-worth clients to Northern Trust, J.P. Morgan and Goldman Sachs-- in part through RIAs -- 17 years after a similar effort proved 'premature'
Wurster is also the lead on launching a big Schwab banking strategy – discount loans through RIA channels.
“We feel confident that when the lending environment improves, we're going to be there,” Wurster said in July to analysts.
"We anticipate that will be among the easiest and fastest pledged asset line experience in the industry. We'll do the same in retail.”
Wurster – whose career has centered on asset management – is perhaps most watched for what he will do in that area.
Analysts think he could make Schwab far more of an asset management company – with passive, active, and direct indexing expansions. See: Charles Schwab Corp. files SEC paperwork to make good on Rick Wurster push for investor revolution in mass customization --with 40 basis points of monetization
Boston background
Wurster has a very different background from Bettinger, who grew up on a farm in Ohio and began his own pension business at age 22.
Wurster took a different path and wasn't in wealth management until he joined Schwab.
He was raised in the Boston area, graduated from Villanova University, and earned a master's degree from Dartmouth. He started his career at McKinsey and Co. in 2000 and left in 2005 for Wellington Management before joining Schwab in 2016.
At Schwab, he started as CEO of Windhaven Investment Management and ThomasPartners Inc. Then, he began leapfrogging others in the company.
He became CEO of Schwab Investment Advisory Inc. in 2018 and head of Schwab Asset Management Solutions in 2019. Later, in 2019, he was named CEO of Schwab Investment Management before he was named president in 2021.
Rely on RIABiz? Tell Google.
Naming us a preferred source puts our reporting first in your Top Stories and AI Overviews. Takes one click, and only you see the difference.