David Booth might have stepped down as CEO of Dimensional Fund Advisors LP, but the executive chairman is busy overseeing the expansion of the growing company and thinking about how to solve the fact that most Americans are not saving enough for retirement.
The expansion is more concrete. Austin, Texas-based Dimensional is building an East Coast headquarters in Charlotte, N.C., and adding up to 800 employees to the firm's current 1,200-worker base.
But the 70-year-old Mr. Booth, a pioneer of factor-based investing who co-founded Dimensional more than three decades ago, also has a dream of coming up with a better way for Americans to build a retirement nest egg.
"I think in the ideal world, you'd have defined benefit plans," he said in a May 31 interview at the Austin office. Mr. Booth said a guaranteed payment, which is the promise of a traditional defined benefit plan, ensures a better retirement as opposed to a defined contribution plan, like a 401(k), which has become the option for most workers in the U.S.
With the average American 401(k) balance around $60,000, most Americans are not prepared for retirement, he said.
Mr. Booth believes "it is incumbent" for Dimensional to come up with a solution but said he is still wresting with how that could be done.
"We're really waiting for that great, new idea that we haven't thought of yet," he said.
Mr. Booth said the ultimate idea could be a partnership between Dimensional and a technology company, using the expertise of each, in developing a yet-to-be-defined low-cost solution for retirement savings.
"We're managing the money as well as (it) can be managed, but we're not providing for the needs of the individual," he said.
Mr. Booth stepped down in late February from the CEO role at the asset management firm he co-founded with Rex Sinquefield, taking the executive chairman's role. He said the change allowed him to give up day-to-day management responsibilities and plot the firm's long-term growth. The move also answered questions about succession planning, he said.
"Now, if I fall out of an airplane, everyone knows the team that's in place that's running the show."