Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Schwab shares. I'm just taking a look at them shares
Speaker 2: of the Charles Schwab Corporation. They're up about one percent
Speaker 2: in today's session. Stock is trading higher after the company
Speaker 2: reported earnings earlier today this morning. It did report a
Speaker 2: surge and average daily trading volume in the fourth quarter,
Speaker 2: and that's happening as retail investors really sought to take
Speaker 2: advantage at the end of a strong year of the
Speaker 2: stock market. We did see some big moves there. Hey,
Speaker 2: to talk about the quarter and the outlook. Great for
Speaker 2: Tim and I to be back with Rick Worster. He's
Speaker 2: president and CEO of the Charles Schwab Corporation. He joins
Speaker 2: us from their headquarters in Westlake, Westlake, Texas. Rick, Great
Speaker 2: to have you back with us.
Speaker 3: How are you. I'm doing really well. Nice to be
Speaker 3: with you, Carol and Tim. I always enjoy it. Well.
Speaker 2: We are so glad to have you back with us.
Speaker 2: It feels like twenty twenty six is often running. I'm
Speaker 2: just curious though, I want to talk about the last quarter,
Speaker 2: and you guys did note about clients conducting a lot
Speaker 2: more of their financial lives at Schwab doing different things
Speaker 2: wealth management, trading, and banking. So talk us a little
Speaker 2: bit more about how the quarter wrapped up and where
Speaker 2: you saw them engaging more.
Speaker 3: As a record quarter for us as a firm, our
Speaker 3: earning screw fifty percent year over year, our revenue was
Speaker 3: up twenty two percent year over year, and we saw
Speaker 3: net new client assets to the firm of five hundred
Speaker 3: and nineteen billion dollars on the year, including an all
Speaker 3: time record quarter in the fourth quarter of one hundred
Speaker 3: and sixty three billion dollars. And importantly, what we are
Speaker 3: seeing is a bull market for convenience, not just in
Speaker 3: financial services, but I think across most industries. The way
Speaker 3: that reflects itself for us is a desire for clients
Speaker 3: to have more of their financial life conducted with one institution,
Speaker 3: and we've been the institution for many that they're turning to.
Speaker 3: We can help them with their investing needs, we can
Speaker 3: help them with their trading needs, with their wealth needs,
Speaker 3: with their banking and lending needs, and so Brian bringing
Speaker 3: together a client's financial life, we're able to help them more.
Speaker 3: When we do that, there satisfactionally actually increases in our
Speaker 3: business growth so it's a win for them because we're
Speaker 3: bringing convenience, and then it's a win for us because
Speaker 3: we're doing more business with them and doing more to
Speaker 3: help them in their financial life.
Speaker 1: You mentioned financial lives, and you just went through a
Speaker 1: whole list of things that people do with these apps
Speaker 1: and services. What about prediction markets? Can you talk a
Speaker 1: little bit about whether you're planning on exploring options for
Speaker 1: customers When it comes to prediction markets. It's all the
Speaker 1: rage right now, as you very well know, and you.
Speaker 2: Thought we were going to warm you up, we weren't.
Speaker 2: We're just going right in.
Speaker 3: First, I distinguished between prediction markets and gambling being able
Speaker 3: to forecast employment or inflation and being able to take
Speaker 3: a point of view or position on those and that
Speaker 3: could somehow heads or accentuate the positions in your investment portfolio.
Speaker 3: And I think as that those were born, I think
Speaker 3: that makes sense within the context of an investment portfolio,
Speaker 3: and we're absolutely open to having that on our platform,
Speaker 3: those types of prediction markets. At the moment, it's not
Speaker 3: high on our client's list of things they want to
Speaker 3: innovate for them, and so we've been focused our innovations
Speaker 3: in other areas that are more interest to clients. But
Speaker 3: I distinguish that between that and sports gambling. And if
Speaker 3: you look at ninety five percent of the volume of
Speaker 3: what people call prediction markets is actually just sports gambling,
Speaker 3: and that's not something that is we're keenly interested in
Speaker 3: getting into for a very simple reason, which is our
Speaker 3: mission as a firm is to make clients better off
Speaker 3: in their financial life. And less than five percent of
Speaker 3: people who go on to one of these gambling apps
Speaker 3: take out more money than they put in in the
Speaker 3: first place. That's the complete antithesis of what we do
Speaker 3: at schwab. Our client's wealth is at an all time high,
Speaker 3: the level advice we're giving them is that an all
Speaker 3: time high, and the amount we're doing to try to
Speaker 3: help them is that an all time high. So we'll
Speaker 3: leave the sports gambling, which constitutes ninety five percent of
Speaker 3: the prediction markets volume. We'll leave that to the gambling houses,
Speaker 3: to the van Duals, the DraftKings, and the Robinhoods.
Speaker 1: So it's funny, it's interesting that you say Robinhood. We'll
Speaker 1: get back to that because I think Robinhood would probably
Speaker 1: like to position itself as a competitor to Charles Schwab
Speaker 1: in a lot of areas, if we stick with the
Speaker 1: ninety five percent of what you believe prediction markets of
Speaker 1: sports gambling, what is the five percent that is of
Speaker 1: interest to you that we could potentially see at one
Speaker 1: point on Schwab's platform, give us some examples there. Well.
Speaker 3: I think if you want to take a position on
Speaker 3: what the employment report's going to be, you know, at
Speaker 3: the end of the month, or how inflation's going to print,
Speaker 3: those things could have an impact on your portfolio. If
Speaker 3: you have a big bond position, you may have interest
Speaker 3: in what's going to happen in the inflation report, and
Speaker 3: it's a simple way of taking a position based on
Speaker 3: a yes or no position, and so that could be
Speaker 3: of interest to clients. But the reason I think we
Speaker 3: see haven't seen much volume in those and the reason
Speaker 3: why ninety five percent of the volume is in sports gambling,
Speaker 3: is because if you want to take a position on
Speaker 3: the employment report or the inflation report, there are countless
Speaker 3: ways to do that, and financial market participants already doing that,
Speaker 3: whether it's in the bond market, in the futures market
Speaker 3: through options. There's plenty of ways to do that today
Speaker 3: and I think that's part of the reason why the
Speaker 3: true idea of prediction markets really haven't taken off, and
Speaker 3: why the firms that offer this have pivoted to sports gambling,
Speaker 3: because there's a lot more interest in that than there
Speaker 3: is in taking a position on the employment or inflation report.
Speaker 2: All right, So then safe to say, Rick, if you
Speaker 2: were a betting man, I would guess that there's nothing
Speaker 2: in terms of a prediction market on the Schwab platform
Speaker 2: in the next year or so, or maybe never.
Speaker 3: Well, we've been innovating at a very fast rate. Twenty
Speaker 3: twenty five was all about how do we meet the
Speaker 3: wealth lending active trading needs of our clients, and we
Speaker 3: had significant innovations in every one of those areas. We
Speaker 3: went to twenty four by five trading for our active traders.
Speaker 3: We continued to make our mobile app even stronger for
Speaker 3: those that want to actively trade and do so via
Speaker 3: the mobile app. For our wealth clients, we launched new
Speaker 3: tax trusts and the state capabilities, including an investment we
Speaker 3: made in com to bring trust capabilities directly to our clients.
Speaker 3: We've launched a series of new capabilities for our advisor clients,
Speaker 3: and in particular really leaned into innovations around making it
Speaker 3: easier for them to work with us. All of those
Speaker 3: are things that we think are far more impactful to
Speaker 3: our clients' ability to grow their wealth than prediction markets.
Speaker 3: And when we go out and survey our clients about
Speaker 3: what they want from us, prediction markets is low on
Speaker 3: the list, So it's something we are actively looking at.
Speaker 3: I think at some point in the future we will
Speaker 3: have true prediction markets at some point, but it's just
Speaker 3: not high on our innovation list because we're firmly focused
Speaker 3: on those innovations they're going to have the most impact
Speaker 3: on our client's.
Speaker 2: Wealth, right Unlike something we talked about when we were
Speaker 2: at SWAB Impact with you in November that you had
Speaker 2: just done a deal which would give investors access to
Speaker 2: private companies, as was buying Forge Global, So I get
Speaker 2: that's more of a priority for clients.
Speaker 3: Yeah, I think you go back to the eighties when
Speaker 3: I believe it was KKR that did the first leveraged buyout.
Speaker 3: Institutions have been benefiting from the diversification and the return
Speaker 3: enhancement from alternatives investments, and in the past decades or
Speaker 3: multiple decades, they're really wealthy have also been able to
Speaker 3: participate in those return and diversification benefits, but the everyday
Speaker 3: retail investor has not been able to. And our Forge
Speaker 3: acquisition was really about democratizing investments and alternatives. We're now
Speaker 3: going to be able to bring it to all of
Speaker 3: our investors in multiple different forms and allow them to
Speaker 3: participate in private markets the way institutions and the very
Speaker 3: wealthy have been able to. And we're thrilled to bridge
Speaker 3: that gap and excited for what that could mean for
Speaker 3: our client's wealth.
Speaker 2: Hey, hey, Rick, one thing we've got to bring your
Speaker 2: attention to. It's just a headline that cross the Bloomberg,
Speaker 2: and we're seeing markets turn around and rally pretty substantially
Speaker 2: on it. We see a straight move up on all
Speaker 2: of the major equity averages. We're now up nearly one
Speaker 2: point two percent on the S and P and up
Speaker 2: almost one point four percent on the Nasdaq one hundred.
Speaker 2: President Trump, who's in Davos and meeting with European leader,
Speaker 2: says he has so you won't impose Greenland limited tariffs
Speaker 2: on February first. But the headline that really think got
Speaker 2: markets moving was that the President says he's got a
Speaker 2: framework for future deal on Greenland with NATO. And I
Speaker 2: guess I want to bring this into the conversation because
Speaker 2: I feel like when Tim and I and you were
Speaker 2: together at Tuama Impact in Denver, it was pretty upbeat.
Speaker 2: I think about the market environment and the outlook, and
Speaker 2: there's been a lot that's happened here in twenty twenty six.
Speaker 2: It feels like volatility is back. I'm just curious, you know,
Speaker 2: have any of the assumptions about the White House and
Speaker 2: policy and changes changed in your view, And I'm just
Speaker 2: curious what you make of something like this from the
Speaker 2: President that definitely has the markets moving to the upside.
Speaker 3: Yeah, I don't think any of that surprises us. We're
Speaker 3: still within you know, percent or two of all time
Speaker 3: highs and markets. I think there's going to be geopolitical
Speaker 3: noise from time to time. If you've read the book
Speaker 3: The Art of the Deal, I think it begins with
Speaker 3: starting big in your requests and then negotiating to something
Speaker 3: that that is workable for both parties. And my guess
Speaker 3: is that may be the playbook that's followed here. But
Speaker 3: for our clients, we're not seeing an undue amount of
Speaker 3: concern And this is a kind of environment in which
Speaker 3: we thrive because we're not just an investment app. We're
Speaker 3: so much more than that. We took thirty million calls
Speaker 3: from clients last year and answered them in less than
Speaker 3: thirty seconds. We're in all many local communities across this
Speaker 3: country with actual people that are there to help coach
Speaker 3: our clients and how to navigate periods like this and
Speaker 3: how to see through the noise and be diversified and
Speaker 3: stick with it for the long term so that they
Speaker 3: can build their wealth. So whatever markets and geopolitics bring,
Speaker 3: we're going to be ready for it, and it's going
Speaker 3: to help us distinguish what we stand for here at Schwab,
Speaker 3: which is helping our clients grow their wealth.
Speaker 1: You know, we had some reporting in recent days about
Speaker 1: the New York Stock Exchange exploring ways for twenty four
Speaker 1: to seven trading of certain assets, and I'm curious crypto
Speaker 1: kind of paved the way for that because a lot
Speaker 1: of people can trade crypto twenty four to seven. What
Speaker 1: do you think of the ability for people to trade
Speaker 1: stocks twenty four to seven.
Speaker 3: Well, I think we're very open to that and would
Speaker 3: certainly participate. We're already twenty four by five today. We
Speaker 3: see very little market activity or very little client activity
Speaker 3: outside of market hours. It's usually only a couple of
Speaker 3: a percent. The vast majority of trading happens within the
Speaker 3: market hours, and I think the market hours are a feature,
Speaker 3: not a bug. And what I mean by that is
Speaker 3: by limiting the marketing hours the market hours, you draw
Speaker 3: people in at the same time and create a lot
Speaker 3: of liquidity so that spreads are tight and trading efficiency
Speaker 3: is very high. I think the convenience of twenty four
Speaker 3: to seven is certainly very appealing, but we need to
Speaker 3: make sure that those trades are done in a way
Speaker 3: that makes sense for clients. And you know, as we
Speaker 3: see clients trade on our twenty four by five platform,
Speaker 3: we make very certain that they trade in a way
Speaker 3: that they're recognizing the higher spreads, and we make that
Speaker 3: very clear to them and they live with that for
Speaker 3: the convenience. But we just need to be careful as
Speaker 3: we go to twenty four by seven that we don't
Speaker 3: lose the efficiency of the market and the benefits of
Speaker 3: getting everyone into the market at around the same time,
Speaker 3: which is great for trading efficiency.
Speaker 2: Hey, Rick, super quick ten seconds. It feels optimistic this year.
Speaker 3: I think so there's a lot, you know, the economies
Speaker 3: on strong footing. Market's been up three years in a row.
Speaker 3: Unless something changes, things look pretty good. Well.
Speaker 2: We certainly look forward to coming back to you throughout
Speaker 2: the year and checking in on it. Rick, thank you
Speaker 2: so much. Happy New Year, Rick Worster. He is the
Speaker 2: Presidency of the Charles Schwab Corporation, joining us there from Texas.