So over the past year, Schwab has gone on a massive buying spree. The timing was right. The backstory of the deal was the announcement by Schwab on October 1, , that it would no longer charge retail customers for trading shares, ETFs, or options online.
TD Ameritrade was forced to follow suit, but its share price plummeted by 25 percent, in line with a predicted fall in revenue. The deal sparked another big consolidation move in the brokerage industry. The Wall Street investment bank has shifted over the past decade toward wealth management and was anxious to expand into mass-market retail brokerage.
That will be a tall order. Only BlackRock and Vanguard have more assets under management. Scale helps in other ways, too. That potential market domination threatened to delay or even derail the merger on antitrust grounds. None of the other recent acquisitions by Schwab come close to the size and impact of the TD Ameritrade deal. In February, Schwab bought — at an undisclosed all-cash price — Wasmer Schroeder, a Naples, Florida—based fixed-income specialist. Before the acquisition, Schwab had been sending its separately managed fixed-income business for high-net-worth clients to third parties.
The deal, covering 1. Because of the pandemic, more than 95 percent of Schwab employees now work from home. Not Bettinger, who still shows up at his nearly deserted headquarters every weekday — though he often forgoes a suit and sometimes skips shaving.
Before the pandemic he flew four out of every five weeks. But over the past six months, he has taken only two business trips. Post-pandemic, Bettinger predicts he and other executives will permanently cut down on business travel. He also expects some enduring shifts in client interaction with Schwab. Because of Covid, client acceptance of digitization and advisory services has grown dramatically. When Chuck Schwab began his discount brokerage almost a half-century ago, he disparaged the advice handed out by Wall Street firms as an unnecessary expense foisted on investors.
But today, Schwab is laser-focused on fee-based advisory services, especially those linked to digitization and algorithms. Growing numbers of clients are comfortable with the notion of entrusting their investments to digital technology, as evidenced by a survey Schwab did two years ago.
When clients were asked whether they preferred robots or humans to build their financial plans and manage their portfolios, half said they favored robots. The conventional wisdom that the young are the early adopters no longer holds.
Partly because Schwab brokerage branches were closed, an avalanche of clients turned to mobile apps for inquiries and investments. The firm reports that in July the number of Schwab mobile app downloads climbed by more than percent over the previous July.
Less time spent on the phone or in person with clients translates into millions of dollars in cost savings for Schwab.
Net income dropped Boosted by digitization, asset management advisory fee income showed a slight increase in the first half of from the first six months of In June it acquired, for an undisclosed price, the technology and intellectual property of Motif, a pioneer in customized thematic portfolios and direct indexing for investors. Motif allows clients, for example, to ask for shares in ESG companies.
Or if they work for Apple or Alphabet and have stock options, they might want to forgo exposure to high-tech shares. And Motif can generate additional alpha by creating tax benefits for portfolios. On the near horizon is the expansion of digitization to help investors measure their performance against a variety of benchmarks. They want to know where they stand in relation to people their age or gender, or who live in their community. Bettinger points out that Schwab was built to withstand the crises that will inevitably arise.
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