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Meeting the challenges of change: TIAA-CREF's Bertram L. Scott discusses how the legendary financial institution responds to new environments in its quest to continue to help higher education professionals
Black Issues in Higher Education, August 26, 2004 by Frank L. Matthews
In an era in which change is very much the norm, some would argue that a no-nonsense financial institution like TIAA-CREF changes at its peril. Not so, according to Bertram L. Scott, the executive vice president for product management at TIAA-CREE one of the world's largest retirement systems and leading providers of financial services to the education and research community.
Like any viable organization, TIAA-CREF'S success and that of its clients are very much tied to strategic growth and change. Their task of "fixing what is broken and not that which is not" is of great importance to the thousands of aging, as well as new higher education and research professionals.
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Having weathered the criticism surrounding the compensation and governance issues of its chairman Herb Allison and that of companies in their portfolio, TIAA-CREF now must plot a successful strategy based on today's economic and demographic realities.
Recently, Black Issues sat down with Scott, who oversees the company's Product Management Group, which includes pensions, individual wealth management, individual protection, educational savings, institutional asset management and business development, to discuss how the company is changing to respond to their customers' demands and changing needs.
BI: How would you characterize the financial sophistication of today's higher education professionals?
BLS: My experience is that people in higher education, whether they are faculty or staff or administrators, are very interested in what is going on in their personal lives, about retirement. They have time to research, because the sheer nature of being on a college campus creates an environment to dig deeper than 1 think the average person does in investigating things. So we get very enlightened, very bright people who ask us some questions about what we do and how we do it. So I would say, without being arrogant but understanding the marketplace, that our constituency tends to be more informed than the general marketplace. That puts greater pressure on us to perform and to react when appropriate.
BI: What about those who may not be as sophisticated?
BLS: I think we have to serve them as well as those that are well informed. I think the way we go about putting together retirement plans, the range of investment options, the advice we give them, the fact that we have people who come to campus to talk to the administrators about the retirement plans, it sets us apart from everybody else. We are one of the only companies that serve those kinds of institutions, when you think about it. You don't see our competitors on those campuses. We serve them because that's our mission, whether you are a historically Black college or you are one of the Ivy Leaguers. It's our mission to serve higher education. We never step away from that mission.
BI: How are the demographics of higher education professionals and the longevity of people in general driving the decision making?
BLS: First of all, we have customers who have been with us for a number of years, as you know. What we have to be mindful of is that the population on campus is aging. We are going to have a bubble of individuals who will be retiring, hopefully, in the next 10 to 20 years, which means that our payout phase will be increasing dramatically. We have to bring new people into this organization at the same clip as we have people starting to retire, or the franchise could be challenged. So we are spending lots of time focused on new entries, keeping our relationships with institutions in a way that we have not done before, talking about endowment plans and working with them in a much more robust way than we've ever done. If you think about higher education 85 years ago, we were really the only company that served them. Today, that's not the case. You've got everyone trying to, particularly for those large institutions, clamoring for a piece of the market share. If we were still what I would say a monopolistic organization, we wouldn't have to worry about the competition in the same way, or if we were retaining our market share in the same way, we wouldn't have to worry. But the competition has found us, and we have to react to that.
BI: There was a lot out there about your social equity agenda and your historical, some would say, paternalistic role toward your clients and customers. Is your standing still intact?
BLS: I think it is. We still stand for treating people fairly and not benefiting by taking commissions and things like that to help people make clear decisions about their investment strategies. I think we stand in front of most of the marketplace in those areas, and I think that translates to a good social positioning for the marketplace that we serve.
BI: How do you communicate that? From what I see, there are still some anxieties out there as more people get closer to retirement. What is your time frame?
BLS: That is a great question. I think, first of all, time will take care of that. Actions speak much louder than words. We are still TIAA-CREF, and I think if you look at the way we've reorganized, our recommitment to the core of what we are, which is higher education faculty, you should be able to see that we've not really changed who we are. We've reduced expenses so that we can get a better return for our participants, we've focused our business so that we are principally in higher education, K-12, which are the areas we have been in before. We've improved our client funding; we don't take commissions. We're developing an objective advice. We will be introducing third-party funds through our platforms so that people will say that TIAA-CREF is here to serve us, they have no hidden agenda. And I think that will just take time. People have perceptions, and if they see any evidence of that perception, they then take that and run with it.
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