Charles Schwab Corp. is the largest publicly traded brokerage business in the United States with $7.5 trillion of client assets. It is also a leading financial service provider for advisors, a top asset manager for exchange-traded funds, and one of the largest banks.
According to Michael Wong, the Director of North American Equity Research and Financial Services at Morningstar, Charles Schwab can be described as a “financial services supermarket”. He stated, “Anything that you want, you can find in Charles Schwab’s platform.”
Over the years, Charles Schwab has been instrumental in revolutionizing low-cost investing and has successfully navigated market crashes and intense competition. In 2019, they even embraced the challenge of zero-fee commissions.
Alex Fitch, Portfolio Manager for the Oakmark Select Fund and the Oakmark Equity and Income Fund, believes that being a large-scale business allows Charles Schwab to operate efficiently and reduce costs. He said, “It enables you to cut prices.”
Charles Schwab faces competition from various legacy brokers, investment banks, and financial technology companies such as Fidelity, Edward Jones, Interactive Brokers, Stifel, JPMorgan, Morgan Stanley, UBS, Robinhood, Ally Financial, and SoFi.
In 2019, Charles Schwab made a significant move by eliminating commissions for stock, ETF, and options trades, following in the footsteps of Robinhood. This decision prompted other companies to do the same and ultimately led to Charles Schwab acquiring TD Ameritrade in a $26 billion all-stock deal.
While Charles Schwab thrived during the coronavirus pandemic with the growth of retail investing, it now faces the consequences of the Federal Reserve’s aggressive interest rate hikes. This is primarily due to its substantial banking business, which generates revenue from sweep accounts.
Unfortunately, Charles Schwab declined to participate in this documentary, but watching the video above will provide more insights into how they have navigated the ever-evolving financial services market, from fees to fintech, and the risks and rewards that come with it.
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