The Charles Schwab Corporation (CSC) operates as a savings and loan holding company. The company provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.
Principal business subsidiaries of CSC include Charles Schwab & Co., Inc. (CS&Co), a securities broker-dealer; Charles Schwab Bank, SSB (CSB), its principal banking entity; and Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab’s proprietary mutual...
The Charles Schwab Corporation (CSC) operates as a savings and loan holding company. The company provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.
Principal business subsidiaries of CSC include Charles Schwab & Co., Inc. (CS&Co), a securities broker-dealer; Charles Schwab Bank, SSB (CSB), its principal banking entity; and Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab’s proprietary mutual funds (Schwab Funds) and for the company’s exchange-traded funds (Schwab ETFs).
In May 2024, the company completed the final client account conversions to CS&Co from the Ameritrade broker-dealers, TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. (TDAC).
The company provides financial services to individuals and institutional clients through two segments – Investor Services and Advisor Services.
The Investor Services segment provides retail brokerage, investment advisory, and banking and trust services to individual investors, and retirement plan and business services, as well as other corporate brokerage services, to businesses and their employees.
The Advisor Services segment provides custodial, trading, banking and trust, and support services to independent registered investment advisors (RIAs), independent retirement advisors, and recordkeepers.
Business Strategy
This strategy emphasizes placing clients’ perspectives, needs, and desires at the forefront. Because investing plays a fundamental role in building financial security, the company strives to deliver a better investing experience for its clients – individual investors and the people and institutions who serve them – by disrupting longstanding industry practices on their behalf and providing superior service.
Products and Services
The company offers a broad range of products and services through intuitive end-to-end solutions, including robust digital capabilities, to address the company’s clients’ varying investment and financial needs. Examples of these offerings include the following:
Brokerage – an array of full-feature brokerage accounts with equity and fixed income trading, margin lending, options trading, futures and forex trading, and cash management capabilities, including certificates of deposit;
Mutual funds – third-party mutual funds through the Mutual Fund Marketplace, including no-transaction-fee (NTF) mutual funds through the Mutual Fund OneSource service, which also includes proprietary mutual funds, plus mutual fund trading and clearing services to broker-dealers;
Exchange-traded funds (ETFs) – an extensive offering of ETFs, including both proprietary and third-party ETFs;
Managed investing solutions – managed portfolios of both proprietary and third-party mutual funds and ETFs, separately managed accounts, customized personal advice for tailored portfolios, specialized planning, and full-time portfolio management;
Alternative investments – access to a variety of third-party alternative investments, such as private equity and real estate on the company’s alternative investment platforms – Schwab Alternative Investment OneSource and Schwab Alternative Investment Marketplace;
Banking – checking and savings accounts, first lien residential real estate mortgage loans (First Mortgages), home equity lines of credit (HELOCs), and pledged asset lines (PALs); and
Trust – trust custody services, personal trust reporting services, and administrative trustee services.
These investing products and services are made available through two business segments – Investor Services and Advisor Services. The company’s major sources of revenues are generated by both of the reportable segments, based on their respective levels of client assets and activity. Revenue is attributable to a reportable segment based on which segment has the primary responsibility for serving the client.
Investor Services
The company has expanded offerings over time in response to client needs, aiming to provide a compelling and often disruptive solution in the marketplace. The Investor Services segment includes the following business units: Retail Investor; Workplace Financial Services, which includes Retirement Plan Services, Retirement Business Services (formerly part of Advisor Services), Stock Plan Services, and Designated Brokerage Services; Mutual Fund Clearing Services; and Off-Platform Sales.
Through the Retail Investor business unit, the company offers individual investors access to a broad set of products, tools, education, trading, and advisory solutions. The company provides advice and guidance through various relationship models. And the company offers award-winning and 24/7 service to all its clients, regardless of asset levels, via a multi-channel service delivery model, which includes online, mobile, telephone, and branch support.
At the core of its offer is the company’s broad set of relationship models that help personalize the investing journey for its clients and offer them the choice of where, when, and how they do business with it. Financial Consultants, Active Trader Financial Consultants, and Wealth Consultants in its branches and regional centers focus on building client relationships. The company also has a range of roles to support clients with a broad set of specialized needs, including financial planning, managed investing, trading, trust, equity compensation, and lending. Additionally, the company has teams focused on supporting the advice and education needs of all its clients and corporate plan participants irrespective of asset levels at it. To better meet the differentiated needs of its more affluent clients, the company offers Schwab Private Client Services for clients with $1 million – $10 million and Schwab Private Wealth Services for clients with $10 million or more in total assets. Clients enrolled in these offerings have access to a dedicated relationship and service team, specialists, expedited processing, pricing discounts and product access.
The company’s advisory solutions span a broad range of discretionary and non-discretionary choices, with minimum investments starting as low as $5,000, making it accessible to a broad set of investors. The company’s premier advisory solution, Schwab Wealth Advisory, features a personal advice relationship with a dedicated Wealth Advisor, supported by a team of wealth management professionals who provide individualized service, financial planning, a customized investment strategy developed in collaboration with the client, and ongoing guidance and execution. The company offers referrals to independent RIAs in the Schwab Advisor Network for clients seeking personalized portfolio management, financial planning, and wealth management solutions. The company provides investors access to professional investment management in a diversified account that is invested exclusively in either mutual funds or ETFs through the Schwab Managed Portfolios and the Windhaven Investment Management Strategies, or equity securities and ETFs through the ThomasPartners Investment Management Strategies. Through Wasmer Schroeder Strategies, more than 20 fixed income strategies and separately managed account offerings are available to retail clients, including two positive impact strategies, a multi-sector income strategy, and ultra-short-term U.S. Treasury ladder strategies. The company also refers investors who want to utilize a specific third-party money manager to direct a portion of their investment assets to the Schwab Managed Account program. Schwab Personalized Indexing allows clients to own individual stocks that reflect the characteristics of an index in a professionally managed solution, enabling greater customization and tax efficiency. Schwab Intelligent Portfolios is available for clients who are looking to have their assets professionally managed via a fully automated online investment advisory service. Schwab Intelligent Portfolios Premium, a hybrid advisory service, offers clients an advisory service which combines its robo-advice technology with unlimited guidance provided by a C ERTIFIED F INANCIAL P LANNER to make financial and investment planning more accessible to investors. Schwab Intelligent Income is a solution designed to offer a simple, modern way to generate income from existing investment portfolios.
Further, given its belief in the importance of financial planning, the company offers a broad set of planning capabilities addressing a variety of planning needs. The company’s solutions include simple, free digital retirement calculators, its complimentary digital Schwab Plan available to all Schwab clients, as well as more complex planning solutions that are delivered by a Schwab representative who takes into account a client’s personal and financial goals to build a tailored financial plan.
To meet the specific needs of trading clients, the company offers integrated web-, mobile-, and software-based trading platforms, real-time market data, access to an extensive set of tradeable products, premium research, and multi-channel access, as well as sophisticated account and trade management features, risk management tools, and dedicated service support – all at highly competitive pricing. In addition to equities, ETFs, and 24/5 trading on select securities, qualified clients can trade options, futures, and forex. In 2023, the company introduced Schwab Trading Powered by Ameritrade, which brings together the best of Schwab and Ameritrade’s trading platforms, comprehensive education, and specialized service.
The company’s international business offers clients outside the U.S. the ability to invest in U.S. markets. For clients living inside the U.S., it offers multicurrency and foreign exchange trading. For all clients, it offers trading in foreign stocks. In addition, the company serves both foreign investors and U.S. clients with preferred language needs who wish to trade or invest in U.S. dollar-based securities.
The company also offers clients a range of self-service education and support tools, providing quick and efficient access to a broad lineup of information, research, tools, and administrative services, which clients can access according to their needs. Schwab Coaching delivers online and in-person workshops, as well as live and on-demand webcasts. In addition, the company provides educational content including articles, videos, podcasts, and interactive courses covering a broad range of financial topics designed to support investors of all experience levels. Additionally, the company provides various online research and analysis tools that are designed to help clients achieve better investment outcomes. As an example of analysis tools available to clients, Schwab Equity Ratings is a quantitative model-based stock rating system that provides all clients with ratings on approximately 3,000 stocks, assigning each equity a single grade: A, B, C, D, or F. Schwab Equity Ratings International, an international ranking methodology, covers stocks of approximately 4,000 foreign companies.
Another example of expanding access to investing includes Schwab Stock Slices, a service which enables investors to purchase a single stock slice, or up to 30 different stock slices at once, from the Standard & Poor’s 500 Index (S&P 500), commission-free through its online channels. The company also offers Schwab Investing Themes, a thematic investing offer that uses proprietary research and technology to identify trends, opportunities, and relevant companies and group them into themes in which clients can invest in just a few clicks. The Schwab Trading Activity Index is a proprietary, behavior-based index created by the company, designed to indicate the sentiment of retail investors’ portfolios. It measures what investors are doing and how they are actually positioned in the markets.
Workplace Financial Services includes Retirement Plan Services, Retirement Business Services, Stock Plan Services, and Designated Brokerage Services. Retirement Plan Services offers a bundled retirement plan product for a range of plan types that provides retirement plan sponsors with extensive investment options, trustee or custodial services, and plan participant-level recordkeeping. Retirement plan design features, which increase plan efficiency and achieve plan sponsor goals, are also offered, including automatic enrollment, automatic fund mapping at conversion, and automatic contribution increases. In addition to an open architecture investment platform, the company offers a managed investing service to help plan participants work toward their retirement goals. Individuals investing for retirement through 401(k) plans can take advantage of bundled offerings of multiple investment choices, education, third-party advice, and an integrated brokerage window.
Beginning in 2024, the Investor Services segment includes the Retirement Business Services business unit within Workplace Financial Services. Retirement Business Services provides trust, custody, brokerage, and software services to independent retirement plan advisors and independent recordkeepers. Through Retirement Business Services, retirement plan assets are held at Charles Schwab Trust Bank (Trust Bank) or trusteed by a separate, independent trustee, or through brokerage accounts at CS&Co. Retirement Business Services also offers the Schwab Personal Choice Retirement Account, a self-directed brokerage offering for retirement plans. The company and independent retirement plan providers work together to serve plan sponsors, combining the consulting and administrative expertise of the administrator with its investment, technology, brokerage, trust, and custodial services.
Stock Plan Services offers equity compensation stock plan administrators full-service recordkeeping for stock plans, stock options, restricted stock, performance shares, stock appreciation rights, and a full range of participant support services that includes education and investing services to individual equity plan participants. Specialized services for executive transactions and reporting, corporate actions, grant acceptance tracking, and other services are offered to stock plan administrators to meet the needs of administering the reporting and compliance aspects of an equity compensation plan. Designated Brokerage Services supports employers’ needs for employee account surveillance (trading and reporting) through a consultative and best practices approach. Comprehensive single-custodian solutions combine technology with experienced service team members to help compliance professionals manage risk. Single-custodian solutions provide Schwab account trading data via an outbound direct data feed to industry regulated companies’ proprietary compliance solutions or third-party compliance monitoring systems.
Lastly, the company also offers Mutual Fund Clearing Services and Off-Platform Sales. Mutual Fund Clearing Services provides open-end mutual fund trading, settlement, and related transactional services to banks, brokerage firms, and trust companies. Off-Platform Sales offers proprietary mutual funds, ETFs, and collective trust funds (CTFs) outside the company and not on the Schwab platform. They are included within the Investor Services segment given their leveraging of the products and services offered to individual investors.
Advisor Services
The company supports a small group of entrepreneurial advisors who challenged the industry by creating independent firms. Through the Advisor Services segment, Schwab has become one of the largest providers of custodial, trading, banking, and support services to RIAs and their clients. In addition to focusing on superior service, the company utilizes technology to provide RIAs with a highly-developed, scalable platform for administering their clients’ assets easily and efficiently. Advisor Services sponsors and hosts a variety of national, regional, local, and virtual events designed to help RIAs of all sizes and complexities identify and implement better ways to expand and efficiently manage their practices.
RIAs who custody client accounts at Schwab may use proprietary software that provides them with up-to-date client account information as well as trading capabilities. The Advisor Services website is the core platform for RIAs to conduct daily business activities online with Schwab, including viewing and managing client account information and accessing news and market information. The website provides account servicing capabilities for RIAs, including account opening, money movement, transfer of assets, trading, checking status, and communicating with the company’s service team. The site provides multi-year archiving of statements, trade confirms, and tax reports, along with document search capabilities. The company also provides access to integrations with third-party platforms, which support a variety of advisor needs, including client relationship management, portfolio management systems, trade order management, and financial planning. As an example, the company offers Schwab Advisor Portfolio Connect, a simplified portfolio management solution that is available free of charge to advisors to manage Schwab accounts. It delivers core capabilities and features through an intuitive modern experience, without the need to download and reconcile data.
The Advisor Services website also provides interactive tools, educational content, and thought leadership for advisors turning independent. The company offers a variety of services to help RIAs grow and manage their practices, including business, technology, and operations consulting on a range of topics critical to an RIA’s success, as well as an annual RIA benchmarking study to help firms understand key business metrics relative to peers. The company also offers an array of services to help advisors establish their own independent practices through a robust prospect consulting offer. To support them throughout their transition, the company offers access to business start-up and transition consultants, technology engineers, and dedicated service teams.
Schwab provides extensive educational materials, programs, and events to RIAs seeking to expand their knowledge of industry issues and trends, as well as sharpen their individual expertise and practice management skills. The company conducts industry research on an ongoing basis, and hold a series of events and conferences every year to discuss topics of interest to RIAs, including business strategies and best practices. Schwab sponsors and hosts the annual IMPACT conference, which provides a national forum for the company, RIAs, and other industry participants to gather and share information and insights, as well as a multitude of smaller events across the country each year.
RIAs and their clients have access to the company’s broad range of products and services, including individual securities, mutual funds, ETFs, fixed income products, managed accounts, cash products, bank lending, and trust services. By functioning as the custodian, Schwab earns revenue associated with the underlying client assets, predominantly through net interest revenue and asset management and administration fees. As part of its integration of Ameritrade, the company added some of the best features from Ameritrade into its ongoing offerings. The company’s thinkpipes trading platform offers real-time charting and efficient trading and allocation, and iRebal provides customizable portfolio rebalancing – both part of the company’s ongoing offering for RIA clients.
Sources of Net Revenues
Schwab’s largest sources of net revenues are net interest revenue, asset management and administration fees, trading revenue, and bank deposit account fees. These revenue streams are supported by the combination of the company’s bank, broker-dealer, and asset management operating subsidiaries, each of which brings specific capabilities that enable it to provide clients with the products and services they are seeking.
Asset management and administration fees are primarily earned from proprietary money market mutual funds, proprietary and third-party mutual funds and ETFs, and fee-based advisory solutions.
Trading revenue includes commissions earned for executing trades for clients in certain individual equities, options, futures, fixed income securities, and certain third-party mutual funds and ETFs; order flow revenue; and principal transactions revenue earned primarily from actions to support client trading in fixed income securities.
Regulation
CSC is a savings and loan holding company and is regulated, supervised, and examined by the Board of Governors of the Federal Reserve System (Federal Reserve). CSC has elected to be treated as a Financial Holding Company (FHC) by the Federal Reserve.
CSC’s three depository institution subsidiaries are CSB, CSC’s principal depository institution subsidiary, Charles Schwab Premier Bank, SSB (CSPB), and Trust Bank. CSB and CSPB are Texas-chartered state savings banks headquartered in Westlake, Texas, and Trust Bank is a Nevada state-chartered savings bank with its main office located in Westlake, Texas. CSB and CSPB are regulated, supervised, and examined by the Federal Reserve, the Texas Department of Savings and Mortgage Lending (TDSML), the Consumer Financial Protection Bureau (CFPB), and the Federal Deposit Insurance Corporation (FDIC). Trust Bank is regulated, supervised, and examined by the Federal Reserve, the Nevada Financial Institutions Division, the CFPB, and the FDIC. CSC, CSB, CSPB, and Trust Bank are also subject to regulation and various requirements and restrictions under state and other federal laws.
The CRA requires the primary federal bank regulatory agency for each of the company’s depository institution subsidiaries to assess the subsidiary’s record in meeting the credit needs of the communities served by the bank, including low- and moderate-income neighborhoods and persons. Institutions are assigned one of four ratings (outstanding, satisfactory, needs to improve, or substantial noncompliance). In addition, CSC and various subsidiaries of the company is subject to U.S. sanctions programs administered by the Office of Foreign Assets Control. CSC and its subsidiaries that conduct financial services activities are subject to the Bank Secrecy Act of 1970 (BSA), as amended by the USA PATRIOT Act of 2001, which requires financial institutions to develop and implement programs reasonably designed to achieve compliance with these regulations.
The company and its subsidiaries are subject to the Volcker Rule, which generally prohibits proprietary trading or acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with hedge funds and private equity funds, subject to certain exemptions, in each case as the applicable terms are defined in the Volcker Rule and the implementing regulations.
The company’s principal broker-dealer subsidiary, CS&Co, is registered as a broker-dealer with the U.S. Securities and Exchange Commission (SEC or Commission), the fifty states, the District of Columbia, the U.S. Virgin Islands, and the Commonwealth of Puerto Rico. CS&Co, CSIM, and certain of its other subsidiaries are registered as investment advisors with the SEC. Charles Schwab Futures and Forex LLC (CSFF) is registered as an FCM and FDM with the Commodity Futures Trading Commission (CFTC).
Much of the regulation of broker-dealers has been delegated to SROs. CS&Co is a member of FINRA and the Municipal Securities Rulemaking Board (MSRB). In addition, CS&Co is a member of Nasdaq Stock Market, Cboe EDGX Exchange, Inc., and MEMX LLC. In addition to the SEC, the primary regulators of CS&Co are FINRA and, for municipal securities, the MSRB. The National Futures Association (NFA) is the primary regulator for CSFF’s futures, commodities, and forex trading activities.
CS&Co is subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule) and related SRO requirements. The CFTC and NFA also impose net capital requirements. The Uniform Net Capital Rule specifies minimum capital requirements intended to ensure the general financial soundness and liquidity of broker-dealers. CSC itself is not a registered broker-dealer and it is not subject to the Uniform Net Capital Rule.
The company’s principal broker-dealer subsidiary, CS&Co, is registered as a broker-dealer with the U.S. Securities and Exchange Commission (SEC or Commission), the fifty states, the District of Columbia, the U.S. Virgin Islands, and the Commonwealth of Puerto Rico. CS&Co, CSIM, and certain of its other subsidiaries are registered as investment advisors with the SEC. Charles Schwab Futures and Forex LLC (CSFF) is registered as an FCM and FDM with the Commodity Futures Trading Commission (CFTC). CS&Co is subject to cash deposit and collateral requirements with clearing houses, such as the Depository Trust & Clearing Corporation and Options Clearing Corporation, which may fluctuate significantly from time to time based upon the nature and size of clients’ trading activity and market volatility.
As a result of its operations in countries outside the U.S., the company is also subject to rules and regulations issued by certain foreign authorities, including the Financial Conduct Authority in the United Kingdom, the Securities and Futures Commission in Hong Kong, the Monetary Authority of Singapore in Singapore, and the Ministry of Finance in the People’s Republic of China.
History
The Charles Schwab Corporation was founded in 1971. The company was incorporated in 1971.
