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

BI: Do you feel as if you have kept pace with the competition in terms of flexibility and providing more funds and individual stocks, etc.?

BLS: I think for a while we did not keep pace, and what you're seeing now in this organization is understanding that that has been the case, and we need to react to that very differently than we've done before. All of the changes we have made over the last 18 months or so ,are designed to be more nimble, to react faster to our clients, and to react to what they need in the marketplace perspective.

BI: Speaking of competitors, what is CREF's biggest threat right now?

BLS: Not being well known by new people entering higher education, and not being positioned well enough to serve customers that are off on whatever market segment they happen to fall in, to serve them well The biggest challenge for us is making sure that we get our fair share of all new entrants that enter a college campus, and that we are ready to adapt to the changes that happen on the college campus-new administrators, new professors, not all tenured, lots of adjuncts, some coming from private industry versus growing up in the education system, people who don't have brand recognition of TIAA-CREF, and who have not had the benefit yet that some of the folks that retired, and retiring well, have seen.

BI: In terms of keeping the enterprise viable so that you can accomplish those goals, what new markets' do you see CREF headed toward?

BLS: One thing that I want to remind us of is that we still have great opportunities in our core market. There is market share opportunity there, there is relationship-deepening opportunity there that I think we should focus on principally. There are natural businesses that we should expand to. We are introducing a new asset management business called TIAA-CREF Asset Management business, and that organization primarily focuses on the endowment community, the defined benefit community, to begin to help them manage those assets, particularly from mid-sized institutions.

The large institutions like Harvard and Yale, they do their own asset and endowment management. But for those mid-sized, upper-tier mid-sized institutions, we have an opportunity, given our relationship with higher education and our track record as very good investment managers, to help them manage those assets, also. We're going to appeal to those institutions to see us as a firm that can help them with their endowment management or with their defined benefit plan, for both higher education and the commercial world.

BI: What about these pre-retirement medical savings type plans?

BLS: If you remember, we used to be in the health care business and we decided to get out of it a number of years ago. I think what we should be trying to do for higher education is helping them consult around those issues to help them understand the drivers of health care, to help them build solutions around health care increases, but we don't want to be in the health care business per se. I would like to see us lobby in Washington for legislative relief so that people, when they are putting aside money for retirement, can set aside some portion of their retirement money specifically for health care. Now, you can't do that in your retirement account right now, but if you could do that, that money could be on a pre-tax basis, set aside specifically for health care so that when they retire, they have enough money, hopefully, to fund their health care.