In 2006, Schade was a middle-markets manager at Merrill Lynch, and he kept noticing unusual transactions involving people in the financial services industry—even within his own company. They didn’t seem right. They were talking dollar signs. He kept seeing the burning Pinto.
“Our team came to the crossroads of either joining the party and selling commission-loaded bonds or going the other direction,” Schade says. “Xavier taught me the ethical decision was to go the opposite direction, so I’m one of the few in the firm who never got involved in the toxic bond stuff that ended the careers of a number of people.”
Schade, a 1996 finance graduate, survived the financial crisis that led to failures of the largest investment banks including Lehman Brothers and Bear Stearns and the near collapse of the American financial system. But it wasn’t easy. Or fun.
In 2006, in the Dayton offices of Merrill Lynch where Schade’s team managed their clients’ investment portfolios, he was seeing behavior industry-wide he’d never seen before, and it worried him. He saw financial advisors making risky investment decisions with their clients’ money that earned them huge commissions. He saw new mortgage programs with lots of unusual fees and bond trading that netted large commissions buried deep inside.
“They were doing things for their own desires and not in the best interests of their clients,” he says. “There were rating agencies that wanted to give a safe rating to bonds that were unsafe so they could get the fees, and brokers that wanted to sell safe bonds that weren’t safe so they could get more commissions.
“Whether it’s the firm or the mortgage underwriter or the greedy insurance company or bank, everybody at one point or another allowed greed to look in the opposite direction of ethics and that’s what brought on this crisis. There was a personal decision at almost every level all the way through.
“We made the opposite choice. I remember coming into my chairman’s office and saying there are excessive commissions in these bonds, and we’re never going to do a trade in this product, whereas nearly every other person in the marketplace industry-wide were buying these bonds.”
He was scolded for not participating, but he stuck to his principles and when the dust settled, he and everyone on his team were still employed while others were losing their jobs.
“Not us. We were loyal to our clients and they to us.”
Those few years were lonely for Schade as he stood by his ethical decision. But he was buoyed by memories of the class on ethics and the case of the Ford Pinto. The car’s defective gas tank would explode if struck from behind, but Ford decided it was cheaper not to fix the tanks—even if it meant some people would die as a result.
“That really affected me,” he says. “I’m sitting in that class wondering if any of that is going to have an effect on my career. Not only did it impact it, it saved my career. I tie it all back to ethics. The decisions we made [at Merrill Lynch] before it got bad were made because of the ethics class. The message was that you have to have the courage and the confidence to make unpopular decisions at times.”
Schade, now a senior vice president and financial advisor at Merrill Lynch, shares his experiences at Xavier, He’s served on the President’s Advisory Council for about 10 years and speaks to students in the Williams College of Business about his industry and his experience.
“I’m willing to discuss it because it is ethically the right thing to do,” he says. “I want people to understand what happened so we don’t have it happen again.”
He also contributes to his family’s scholarship so others can attend Xavier and learn the same lessons he learned.
“Because I went to Xavier, I feel like I’ve had a lifetime of rewards for the education they provided me, and I want that exact same thing for others,” he says, “and I can do that with the scholarship fund. I will do everything I can to support the University for the rest of my life.”