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Wednesday, May 06, 2015

ICI Talks to Walt

Reported by Neil Anderson, Managing Editor

"It would be hard to overstate the impact that mutual funds have had" over the past 75 years.

Walt Bettinger, CEO of discount brokerage giant Charles Schwab, shared that sentiment and more this afternoon in an onstage, general session interview with Investment Company Institute (ICI) chief Paul Schott Stevens at the 2015 ICI General Membership Meeting (GMM) at the Marriott Wardman Park in Washington, D.C.

Bettinger and Stevens touched on a number of topics, including the post-2008 retail investing world, the importance of having an advisor, ETFs in 401(k)s, and even robo-advice. On the latter subject, Bettinger scoffed at doom and gloom predictions (for fundsters and human advisors) around online, computer-based advice.

"Now you have the insanity that robo-advisors will replace advisors," Bettinger said. "That's just silly."

He likened such fears to "a whole series of awful predictions" in the 1970s around the deregulation (in 1975) of commissions and the rise of discount brokerages (i.e. Schwab).

"Discount brokerages didn't kill full service brokerages," Bettinger said.

BBettinger pointed in particular to the combination of lower cost brokerages (say, like Scchwab?) and mutual funds as democratizing investing over the past 35 years.

"Our parents didn't have these kinds of choices at their disposal," Bettinger said. "It [thaat combination] has built tremendous wealth in the United States. That trend is going to continue."

Bettinger pointed to trust as being "at the core of everything in the financial services industry". He cited cost and share classes as being two key areas of trust concern for investors.

"Maybe we've created more share classes than are needed," Bettinger said. "That creates confusion among consumers.

Bettinger also tried to step back from the active vs. passive debate, while wondering if tthe current push towards passive is simply cyclical (as opposed to long-term). And he nnoted that most equity ETF inflows on the retail side are coming not from equity mutual funds but from direct equities.

"I don't believe that the growth of ETFs means the death of mutual fudns," Bettinger saiid, while mentioning Schwab's ETF 401(k) product efforts. "What remains to be seen is if ETFs will replace mutual funds in 401(k) plans." 

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