TIAA-CREF CEO Roger Ferguson Answers Walton Faculty, Student Questions

Roger Ferguson, president and chief executive officer of TIAA-CREF, spoke to students, faculty and staff of the Sam M. Walton College of Business on Wednesday, Aug. 27. As a part of his visit, he took questions from the crowd of more than 300 people in the auditorium of the Donald W. Reynolds Center for Enterprise Development.

Ferguson, a former vice chairman of the Board of Governors of the U.S. Federal Reserve System, spoke on the U.S. and global economies, financial literacy and career preparation for students. He also agreed to give his response to several questions submitted by faculty members and students.

1) On a few occasions, just the talk of a potential increase in interest rates caused turbulence in the financial markets.  How does TIAA-CREF prepare for the rate increase as the U.S. economy is recovering?

First, it’s important to note that TIAA-CREF invests for the long term, through all kinds of cycles and market- moving events. So, while we make tactical adjustments to reflect a particular environment, we believe strongly that maintaining an active and engaged portfolio is the surest path towards securing long-term returns.

That being said, we believe that the market has digested the message that interest rates will rise, and that both the coming end of quantitative easing and the initial rise in the fed funds target rate are priced into markets. However, the level and speed of rate increases has yet to be determined, and this can be associated with market volatility.

2) Could another financial crisis like the one in 2008 occur in the U.S. again?    

One of the key issues to come out of the financial crisis was an increased spotlight on the importance of corporate governance. If we’re going to avoid another financial crisis, we must work to improve corporate culture.

By good corporate governance, I mean more than simply improving rules and processes. Good governance ultimately comes down to how people behave, which is driven by the “soft”-ware of governance: a company’s culture, leadership, and values. Companies can have the most extensive processes and procedures, but if they have the wrong business values and the wrong people as leaders – people who behave without transparency and integrity – they won’t have a culture that promotes doing the right thing. Good corporate governance is an important step in preventing another severe financial crisis from happening again.

3) What advice would you give to college students on their careers?

First, they should take advantage of all opportunities here on campus to build their human capital – which is the key ingredient to success. As they embark on their careers, they should adopt the mindset of the lifelong learner – someone engaged in continuous education. That’s critically important today, when globalization, technology, demographic forces, and economic challenges are reshaping our nation and our world. Success is about the ability to keep learning and to figure out what it is that really motivates you.

I also implore students to see their careers more as a climbing wall than a typical career ladder. I advise them to be open to trying different things and to take advantage of opportunities that come their way. I started out as a lawyer, and I worked in the consulting world and in the public sector before joining TIAA-CREF. My career path has been anything but straight, but I have enjoyed applying my own human capital in such a diversity of positions and organizations.

4) Studies have indicated that many Americans have not saved enough for retirement.  What advice would you give college students on how they should prepare for their retirement?

I recognize that for students, retirement seems like a very distant concept, but planning for it is a key element of achieving financial well-being in one’s life. I advise students that as they enter the workforce, they must give their financial lives – including retirement — the same attention they are giving their work and social lives. If students start saving now, with their first paycheck, they can have a huge impact on their financial wellbeing later in life. They should make it a goal to save as much as 15-20 percent of what they earn, with a growing emphasis on saving for retirement.

They must also build a solid foundation of financial knowledge – such as understanding how to use credit wisely – and have a long-term financial plan, even as they juggle more immediate demands like paying off student loan debt or buying a car. If students ignore their personal finances and retirement savings, their energy to make a difference in the world will be severely diluted. You can’t really change the world if you’re if you’re worried about your own financial future.