Forbes  Oct 6  Comment 
“I want to get closer to people who make stuff, not people who know people who make stuff,” is a comment from a conversation I had with Ben Stuart, CMO at Surescripts, previously at American Express and Charles Schwab. “We need to be faster...
Clusterstock  Oct 3  Comment 
By Jed Horowitz NEW YORK (Reuters) - Charles Schwab Corp. is weeks away from introducing an automated investing service aimed at winning business from novice investors it does not currently serve, company officials told Reuters. The service is...
Market Intelligence Center  Oct 3  Comment 
The patented option-trade picking algorithms that power MarketIntelligenceCenter.com's Artificial Intelligence Center are highlighting two trades on Schwab (Charles) Corp (SCHW) today after it closed at $29.05 on Thursday. For more conservative...
Yahoo  Oct 2  Comment 
Investors have been withdrawing money from the Pimco Total Return Fund in record-breaking numbers, and now Charles Schwab has reportedly dropped Pimco’s flagship fund from its 10 target date funds.
Clusterstock  Sep 30  Comment 
Since the financial crisis, businesses reluctant to invest in its operations have been using much of their cash to reduce debt or are pay shareholders in the form of dividends. "The tide is turning," Charles Schwab's Liz Ann Sonders writes. "The...
Clusterstock  Sep 29  Comment 
FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors. Investors Lose More Money Trying To Anticipate Corrections, Than From Corrections Themselves (Charles Schwab)  The...
Jutia Group  Sep 24  Comment 
[Business Wire] - Schwab Advisor Services released the results from a first-of-its kind survey today examining the career paths of independent registered investment advisors and the attributes of the profession that attract talent into its ranks....
CNNMoney.com  Sep 23  Comment 
Over half a million people are on the wait list to access the stock trading app with $0 commission fees.
Benzinga  Sep 19  Comment 
Stephanie Link said CI) on Thursday. Cigna gained 1.19 percent and it closed at $95.21. Pete Najarian thinks that Metlife Inc (NYSE: MET) is going higher. The stock gained 1.10 percent on Thursday. Jon Najarian bought NetApp Inc. (NASDAQ:...
SeekingAlpha  Sep 19  Comment 
By Ben Kramer-Miller: Charles Schwab (NYSE:SCHW) is going to be giving its online trading clients access to 6 WisdomTree (NASDAQ:WETF) ETFs with no trading commissions. The funds include: The WisdomTree U. S. Dividend Growth Fund...


Charles Schwab (NASDAQ: SCHW) is one of the original brokerage firms to offer individual investors the opportunity to buy and trade equities at a discount. However, in recent years, Schwab has transformed itself from a discount broker focused on driving commissions into an asset management company, making money by charging a percentage of clients' assets as a fee for financial services. For the full year 2010, Charles Schwab reported a total revenue of $4.51B and a net income of $454M.[1][2]

Schwab used its transformation to establish a firm foothold into the mass affluent marketplace, a segment which represents 60% of the $25 trillion in U.S. retail investing assets. With this focus on mass affluent customers, Schwab has carved out a unique position between the discount and traditional brokers. The downside is that Schwab faces competition on multiple fronts, especially as it continues to expand into areas such as 401(k) management, mortgages, and full service financial consulting.

Business Overview

Investor Services (66.97% of 2010 Net Revenues)

Schwab Investor Services (SIS) provides retail brokerage and banking services to individual investors, as well as 401(k) and other retirement plan services to corporations. Its offerings range from self-directed research tools to full service financial consulting.[1]

Institutional Services (33.03% of 2010 Net Revenues)

Schwab was one of the first companies to offer services, such as trading tools and marketing support, to independent investment advisors (IAs). Schwab is currently the largest provider to independent investment advisors at more than double the market share of the next largest competitor. This customer segment accounts for approximately one quarter of revenues and earnings. This division also includes Advisor Services and Corporate and Retirement Services.

Revenue Sources

Asset management and administration fees - include mutual fund service fees and fees for other asset-based financial services provided to individual and institutional clients. Schwab earns mutual fund service fees for shareholder services, administration, investment management, and transfer agent services provided to its proprietary funds, and recordkeeping and shareholder services provided to third-party funds.

Net Interest Revenue

Net interest revenue is the difference between interest earned on interest-earning assets and interest paid on funding sources. Net interest revenue is affected by changes in the volume and mix of these assets and liabilities, as well as by fluctuations in interest rates and portfolio management strategies.

Trading Revenue

Trading revenue includes commission and principal transaction revenues. Commission revenues are affected by the number of revenue trades executed and the average revenue earned per revenue trade. Principal transaction revenues are primarily comprised of revenues from client fixed income securities trading activity. Factors that influence principal transaction revenues include the volume of client trades, market price volatility, and competitive pressures.

Trends and Forces

Interest rates effect on SCHW's revenue drivers: fees and commissions

Schwab, like all asset management firms, generates revenue on assets by charging fees and gaining interest on the money it manages. Revenues based on commissions are susceptible to swings in the stock market, which are linked to general economic conditions. In a bearish market, the trading volume is relatively low and this in turn decreases revenue from commissions. On the flip side, an upturn in the market will increase trading volumes and hence commission revenue for Schwab. In periods of economic uncertainty, trading volumes can spike significantly, reflecting investors' apprehension about the future of the economy. Commission revenues are a function of trading volume and price per trade. The key volume driver measured by brokerage firms is daily average revenue trades, or DARTs. Commissions will become increasingly important to drive revenue due to mounting pressures from other discount brokers and retail banks. Given that fees and commissions account for the largest portion of revenue for its overall business and that those revenues are decreasing, Schwab has continued to emphasize "upselling" higher margin products, such as its own mutual funds, comprehensive financial consulting, and 401(k) management.

Mass Affluent Customers

The primary drivers of asset accumulation are the number of total clients and average assets per client. Schwab has leveraged both drivers in recent years by going after the mass affluent investors, an important customer segment that represents about 60% of the $25 trillion in U.S. retail investing assets. Mass affluent clients have between $100k and $1 million in investable assets and it will be important for Schwab to continue to pursue them in order to grow its asset base. Currently, Schwab holds about $120k for its average retail client and has aggressively marketed to this segment.

Schwab continues to make money from trading commissions and, increasingly, asset management by serving two major customer segments: individual investors and independent investment advisors (IAs).

Asset Accumulation

Schwab makes money primarily from two sources: assets and trades. While Schwab has historically been a discount brokerage firm focused on generating revenue from trade commissions, the company has gone through a fundamental shift.[3] This change places Schwab closer to the traditional brokerage firms focused on asset accumulation than the discount brokers that depend heavily on commissions from trade.

Equity Market Volatility

Market volatility and cycles affect Schwab's business as it does all brokerage firms. However, Schwab's shift to asset management allows it to be relatively less exposed to declines in transactions compared pure to discount brokers in case of a slowdown in the equity markets.

Competitive Landscape

Charles Schwab's largest competitors are:

SCHW competes against smaller brokers such as ETFC, AMTD, and RJF.

One recent trend that may have a significant impact on all discount brokers is the entrance of retail banks Bank of America (BAC) and Wells Fargo (WFC), both of which announced fee-free trading in late 2006. While these banks do not have robust trading offerings compared to discount brokers, Bank of America and Wells Fargo have a strong foothold in the financial services marketplace; Bank of America alone has banking relationships with 50 million—or half—of all households in the U.S..

Schwab leads the niche institutional market with its Schwab Advisor Network. Its closest competitors are Fidelity and TD Ameritrade.


  1. 1.0 1.1 Charles Schwab 2010 Annual Report
  2. Charles Schwab 4th Quarter Report, 01/19/2010
  3. stock:Charles_Schwab_(SCHW)/Filing/10-K/2010/F46736067#toc19890_28 10-K, Consolidated Statement of Income, page 42
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