July/August 2011

For the Love of People… Peter Schwab Reflects on His 40 Years in ABL

As an education major turned asset-based lender Peter Schwab learned his lessons well along the way. ABF Journal spent time with Schwab to find out more about the defining events of his career and the legacy he leaves behind at Wells Fargo Capital Finance. And while the deals factored heavily in his success, it’s the people he led that mattered most.

For Peter Schwab, it’s always been about the people. Make no mistake, the 40-year veteran of the ABL world and former chairman of Wells Fargo Capital Finance loved the art of the deal as well, but mostly because of the opportunity those deals represented. “My background was in education, so I’ve always liked people,” Schwab explains. “And when I came into this industry, what excited me most was dealing with different people in different industries … understanding their businesses and getting out there, one-on-one, to make a difference with them.”

And, it goes without saying, of equal importance were the people that Schwab worked with and led, initially at the Foothill organization until his retirement at Wells Fargo Capital Finance earlier this year. Schwab notes, “As I look back, we started with about 60-70 people and when I left, we had over 1,700 employees. We had very little turnover and that was the kind of thing that was important to me — building the business and building the people around the business.”

Lessons Learned Along the Way

As an education major turned asset-based lender, Schwab learned his lessons well and he recognizes the key figures who served as important influences on his professional development. “There were so many people I’ve learned from along the way and I hate to just point out a handful, but when I started in this business I really didn’t know anything,” he admits. “At the beginning of my career I had two mentors, Barry Grossman and Irwin Teich. They both taught me a lot. From Barry, I learned how to stay on top of things and a lot about collateral.

“When I went over to Aetna Business Credit, I asked Irwin for his advice on how to succeed in this business. He said simply: ‘Learn credit.’ And that’s the yin and the yang in this business — credit and collateral. And then I came to Foothill in 1983 and met John Nickoll. John is the consummate finance professional.”

Beyond credit and collateral, Schwab notes, Nickoll taught him the importance of telling it like it is. He says, “The big thing I learned from John is that everyone knows everything anyway, so don’t try and hide anything. Frankly, that was one of the ways we achieved success at Wells Fargo Capital Finance … we always opened everything up to employees. And from time to time, that shocked people when they joined our organization.” Schwab explains the same tenet applied externally as well. “When we hit rough patches and people on the outside would ask, I’d tell them we’re having a lousy quarter … why would I lie to them?”

In Schwab’s estimation, the second most valuable lesson he learned from Nickoll was how to take a loss. He remembers, “After two years with the company, I did a terrible deal and we wound up writing off a lot of money. I was devastated … I thought I’d get fired or wind up in lenders’ hell. I remember John telling me, ‘Peter, it’s a loss, so take it and move on.’”

So while the mentors were wise and their lessons enduring, Schwab advises the following: “In the end, it’s important to be yourself. I’ve seen a lot of people try to be the mentors I mentioned … they tried to be just like them and they always failed. Sure, you take their advice, but you learn to internalize it and do it your own way.”

And to prove that this is more than lofty managerial rhetoric, I asked Scott Diehl, president of the Industries Group at Wells Fargo Capital Finance and a Schwab protégé from the Foothill days, to share his thoughts on his mentor’s impact on the company. Diehl remarks: “Pete took responsibility of the company from two entrepreneurs who had strong views as to how things should work. Ultimately, he had the job of taking a top-down driven company and empowered his team members to have it be their endeavor. And the irony is that this wasn’t something he’d accomplished three or four times before at other places. He accomplished it because he cared about people and was connected to his team. Most importantly, he had leadership skills that are defined by his personality … he didn’t try to be anything different that what he was.”

Defining Events

Of the many successes, Schwab recalls: “When we sold Foothill to Norwest, it quantified all the work we did as a team — it was a huge milestone. I went to Foothill in 1983 and we had challenging times through 1986. We put together a management team and we grew the company. When we sold it at a huge multiple to Norwest in 1995, it wasn’t so much about the money; it was about the fact that someone really wanted to buy us. Foothill was founded by two guys I respected — John Nickoll and Don Gevirtz — and I was happy that we were able to sell it for them.”

Under the Wells Fargo banner, the leeway to expand through acquisitions and to operate as an independent entity continued and Schwab points to the integration of the Wachovia ABL business as the most recent of the many milestones. “We took our time on that and we did it right, and I think it’s been an outstanding accomplishment. They had their roots in Congress and we had ours in Foothill. Now we had two great asset-based lenders — plus Wells Fargo Business Credit and Wells Fargo Trade Capital, which used to be Century Business Credit — merged into one. I knew Bob Miller at Congress very well and it was important to me that the integration went well, and it did. The credit goes to the entire staff because it couldn’t have been done by one person … least of all me.”

As for the tougher times, Schwab says there haven’t been that many. He says succinctly, “There were a couple of instances … there was one company that we acquired that we tried to make too much like us. We probably should have left it alone. Some individuals weren’t able or willing to embrace a culture of openness and they couldn’t cut it. But there wasn’t too much pain … mostly growing pains more than anything else.”

Lessons for the Future: To Thine Own Self Be True

While down cycles are inevitable and the road to recovery can be filled with unexpected twists and turns, Schwab contends that the most effective course of action is the adherence to a few simple rules. He advises, “Remember your roots and try not to get too fancy with sophisticated deals. If you remember that, you’re going to make it through.

“Let’s face it, this isn’t a very gentle business — when you make mistakes, you make them big. Sometimes you have the wrong people on the wrong jobs or you book the wrong kinds of deals and you get spanked. And banks can run hot and cold when you have losses or missed budgets. To Wells Fargo’s credit, they allowed us to be a real asset-based lender … to run a business and not a product line.” For that independence, Schwab credits first Jim Campbell from his days at Norwest and later David Hoyt, who heads Wholesale Banking at Wells Fargo.

From his perspective, Schwab says there’s no secret ingredient to ensuring success in asset-based lending. In short, he says, “Do what you know to do best … all the blocking and tackling. It’s not a very sexy answer, it’s really just about remembering who you are.”

Yet Schwab asserts there’s always room for creativity and an entrepreneurial spirit. He explains, “You have to ask yourself, ‘How can we be different than other finance companies? Where can we find niches?’ Finding niches are very important but you can’t con yourself into thinking you’re bulletproof. When things get too crowded or too mainstream, you’ve got to plan your exit. You’ve also got to watch concentrations. And that’s really the balance … you want to get creative, but you don’t want to get too overzealous with something until you go through a down cycle.”

Some of the Deals, All of the People

Since it’s always been about the people and as time moves on, Schwab hopes that he’ll most be remembered for the staff he built at Wells Fargo Capital Finance. He says, “If nothing else, I want to be remembered most for the culture we built over the years … it’s very collegial and quite unique. If I had to sum it up, I’d say I remember some of the deals, but all of the people.”

Therefore, it’s no surprise that Diehl would have this to say: “Peter was so many different things, but at the end of the day, he’s a guy who loved people … he cared about them and he really had his roots in this business. He loved the deal, but he also became very interested in how organizations are built — how people can work together.”

And it’s perhaps paradoxical that Diehl explains that Schwab possessed the innate ability to allow an organization to grow by stepping aside and empowering his team. Diehl continues, “There were times he needed to be on top of everything in terms of the details, but as we got bigger, he trusted his team. A lot of people don’t do that, but Pete did a great job of adjusting his management style to fit the size and quality of the team he built. He moved from being the ‘new injection’ of the company to the guy who created change, and while he was a lot of things, he was the soul of our company.”

While the “soul” of Wells Fargo Capital Finance moved on as of the end of last year, Schwab has no concerns for the company’s future. “What I leave behind is a team comprised of people who have depth, background and who understand the industry. I leave without equivocation and I don’t worry one iota about what they will accomplish without me.”
Predictably, someone with Schwab’s curiosity and vitality finds he is just as busy in this phase of this life. Today, he continues to travel the globe with Susan, his wife of 44 years, while serving on four volunteer boards. As the “chief spoiler” he also spends as much time as he can muster with his sons and four grandchildren in Denver and Los Angeles. “It’s been a great ride and I can’t speak highly enough about John Nickoll who brought me to Foothill. I never had the vision of being president of anything. Being acquired by Norwest and then Wells Fargo were great for us. They say luck is the residue of design. I think we’ve been lucky, but we really did walk the talk…”

Stuart P. Papavassiliou is senior editor of ABF Journal.