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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: All Right, folks, if you really want to know what's

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Speaker 2: going on in the investment universe, you really want to

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Speaker 2: talk to the folks at Charles Schwab. It is a

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Speaker 2: great place to start. First of all, it's one hundred

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Speaker 2: and seventy five billion dollar market cap. Company stock is

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Speaker 2: up about twenty six percent year to date following its

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Speaker 2: recent earnings. At least eleven analysts raise their price target

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Speaker 2: on the stock after Schwab's third quarter earnings beat thanks

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Speaker 2: to a surge in retail investing activity.

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Speaker 3: And it's something we certainly want to dig into.

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Speaker 1: Yeah, let's talk about some more numbers behind the firm.

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Speaker 1: Eleven trillion dollars more than that in client assets, thirty

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Speaker 1: eight million client broadridge accounts, two point two million bank accounts,

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Speaker 1: five point six million workplace plan participant accounts, and over

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Speaker 1: sixteen thousand independent investment advisors. Thousands of them are here

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Speaker 1: at Schwab Impact twenty twenty five in Denver, Netwrick.

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Speaker 2: Wurster took over CEO in January this year, after previously

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Speaker 2: serving as president for about three years at the company.

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Speaker 2: He was head of Schwab Asset management solutions before that.

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Speaker 2: So you have been at the company company for nearly

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Speaker 2: a decade, is that right?

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Speaker 3: Yes, welcome, thank.

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Speaker 4: You, thank you, thanks for having me on, and we're

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Speaker 4: so thrilled that you made the trip to be here

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Speaker 4: in Denver at the conference.

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Speaker 2: Well, we love coming here because we really do feel

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Speaker 2: like it's good to get out of I feel like

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Speaker 2: the coasts, and I feel like it's good to talk

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Speaker 2: to the people who are actually managing tons and tons

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Speaker 2: of money on a daily basis.

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Speaker 3: Talk to us about your first year and some.

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Speaker 2: Of what's been coming at you and how you and

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Speaker 2: your team are making sense of kind of the investment

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Speaker 2: environment when things can change often on a day to

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Speaker 2: day basis.

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Speaker 4: Well, the most rewarding part of the first year has

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Speaker 4: been serving our forty six million clients. And it's been

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Speaker 4: a year in which the value of what we bring

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Speaker 4: to the table, great in person experiences, the leading digital

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Speaker 4: app the strength of our bank and wealth capabilities, where

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Speaker 4: all of those things have been necessary to help clients

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Speaker 4: navigate markets. So that's what I take most from the

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Speaker 4: first year. It's just such an incredible opportunity to serve

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Speaker 4: our clients and the sixteen thousand advisors on our platform,

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Speaker 4: many of whom are here. It's real honor to be

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Speaker 4: their partner in business.

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Speaker 1: Well, the market environment right now, we want to dive

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Speaker 1: right in there, because really this week we've heard from

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Speaker 1: different Wall Street executives that an overdue collection have weighed

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Speaker 1: on the market this week, so reduced expectations at that rate,

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Speaker 1: cuts at prolonged government shot down. Michael Berry added to

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Speaker 1: the negative tone with his disclosure of farish wagers on

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Speaker 1: talent here and Nvidia diet buyers. Though coming back into

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Speaker 1: the trades to day, retail investors have been buying dips.

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Speaker 1: How do you see today's environment from sort of a

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Speaker 1: risk reward perspective.

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Speaker 4: We try to focus our clients on the long term.

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Speaker 4: I think that owning securities and assets over long periods

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Speaker 4: of time will generally go up. It's really hard to

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Speaker 4: get the timing of markets down because you have to.

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Speaker 5: Make two correct calls.

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Speaker 4: First, you got to nail it to get out at

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Speaker 4: the right time, which is really hard. In the strength

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Speaker 4: of the kind of market we've had in the momentum,

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Speaker 4: we've had to get out at the right times incredibly hard.

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Speaker 4: And then you've got to be able to get back

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Speaker 4: in at the right time, or you miss out. I

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Speaker 4: was down in Charlotte, North Carolina, visiting with some clients

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Speaker 4: and I heard from one client who back in twenty

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Speaker 4: sixteen didn't like the presidential administration and so had sold

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Speaker 4: out of stocks. And this was back when we were

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Speaker 4: having a pullback, and they said, would now be a

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Speaker 4: good time to get back in the market, and they'd

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Speaker 4: set out a huge amount of gains over a short

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Speaker 4: term point of view. We try to have clients avoid that.

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Speaker 4: Clients can stay in the market and tolerate some volatility.

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Speaker 4: We think over the long run that gets rewarded because

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Speaker 4: it is so hard to call the markets.

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Speaker 5: Both when to get out and when to get back in.

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Speaker 2: So as you walk around the floor and you're talking

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Speaker 2: to advisors, I mean, what are they talking about, you know,

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Speaker 2: in terms of timely advice that you're getting maybe from

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Speaker 2: the advisors and what they are kind of hearing from

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Speaker 2: their clients.

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Speaker 4: I think one of the most pressing topics from investors

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Speaker 4: today is how to navigate concentrated positions. The S and

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Speaker 4: p's as its concentrated as it's ever.

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Speaker 3: Been, right, the mag seven, the big tech.

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Speaker 4: Yes, and it's created a tremendous wealth for lots of

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Speaker 4: retail investors, and now they're wondering how to diversify their

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Speaker 4: portfolio and to do so in a way to minimize

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Speaker 4: their tax burden. And there's all kinds of strategies that

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Speaker 4: they can work with their advisor on to create a

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Speaker 4: more diversity portfolio without having to pay a tremendous amount

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Speaker 4: in capital rigaan.

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Speaker 2: How hard is it, though, that when clients are like,

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Speaker 2: but why would I want to get out of Nvidia.

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Speaker 3: When I've seen what they've been doing for how many years?

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Speaker 1: Like?

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Speaker 3: How tough is that?

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Speaker 2: Because we constantly have conversations of people saying it's time

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Speaker 2: to broad nab back off the big tech, and then

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Speaker 2: it's the big.

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Speaker 3: Tech with so much momentum.

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Speaker 4: Well, you're absolutely right, and it's a really hard conversation

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Speaker 4: to have and oftentimes we don't win it, but we

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Speaker 4: want to make sure the client is cognizant of the

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Speaker 4: risk and the choice.

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Speaker 5: That they're making.

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Speaker 4: Yeah, and to be fair to those investors, they've been

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Speaker 4: right by sticking with their concentrated position for the most part,

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Speaker 4: because the names that have driven the market higher have

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Speaker 4: been the same ones here for a while, and so

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Speaker 4: many people have stuck with it, and they are sitting

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Speaker 4: on more gains and they might have anticipated.

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Speaker 1: So let's go further into the retail trader, because they've

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Speaker 1: grown about twenty percent of the US equity market today.

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Speaker 1: I'm curious about sentiment trends, like the structure of this trend.

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Speaker 1: How resilient are we tell traders in an eventual downturn? Why?

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Speaker 4: I think retail traders have been the ones leading the

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Speaker 4: market higher and have been the ones buying the dips.

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Speaker 4: And I think they were out actually in many ways,

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Speaker 4: out ahead of the institutional buyers. And so I think

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Speaker 4: you have a retail buyer that has strong hands and

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Speaker 4: we'll stick through the market.

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Speaker 5: So we'll see how it all plays out.

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Speaker 4: But markets go up and down and retail investors will

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Speaker 4: inevitably make some decisions in there that's best for them.

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Speaker 1: People here, retail investor, they think about Robinhood. For example,

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Speaker 1: your customer versus Robinhood's customer base. What are the differences there?

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Speaker 4: Well, our customer is an incredibly thoughtful group of retail investors. First,

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Speaker 4: they have access to what we think are the best

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Speaker 4: investing platforms in the industry. Number Two, they have access

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Speaker 4: to the most robust research platform. We produce thirty five

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Speaker 4: hours a week of live education and training for investors,

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Speaker 4: so they're making the most informed decisions. We also don't

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Speaker 4: make them choose a channel, not only the leading digital app,

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Speaker 4: but they can walk in and talk to someone that

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Speaker 4: can call our phone and get their I should answer

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Speaker 4: in less than thirty seconds. We have one thousand professional

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Speaker 4: traders that wake up every morning ready to answer the

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Speaker 4: phone to help our clients trade. So I think that

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Speaker 4: we bring everything we can to help our clients be successful,

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Speaker 4: and I think they are. They make thoughtful decisions that

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Speaker 4: are best for their financial life.

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Speaker 2: Now, you guys have talked about one third of your

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Speaker 2: clients are gen Z, So talk to us about how

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Speaker 2: you continue to bring them in. How do you defend

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Speaker 2: them keeping them in? What do you need to kind

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Speaker 2: of do to serve them and keep them on your platform.

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Speaker 4: So one third of our new to firm clients are

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Speaker 4: gen Z, which is between the ages of thirteen and

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Speaker 4: twenty eight.

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Speaker 5: We are having tremendous.

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Speaker 3: Sucives and that was new customers right.

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Speaker 5: New customers.

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Speaker 4: But we're having tremendous success with the young investor because

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Speaker 4: we see through their eyes, and we put all the

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Speaker 4: weight and strength of our firm behind helping them live

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Speaker 4: their best financial life and make the smartest financial decisions

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Speaker 4: for them. We don't just say hey, here's a platform,

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Speaker 4: go for it. Certainly many want to do that and

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Speaker 4: they can have at it, but we also stand behind

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Speaker 4: every one of them. If they want access to our research,

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Speaker 4: they want to talk to a professional, and in terms

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Speaker 4: of where we're finding them, it's interesting. I went to

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Speaker 4: our marketing department and I said, I don't see enough

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Speaker 4: about our advertising to young people. And they said, Rick,

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Speaker 4: it's because you're not cool and in the places where

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Speaker 4: young people go.

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Speaker 3: But where does that hurt?

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Speaker 5: It hurt a little bit.

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Speaker 4: We're the number one followed financial services company on YouTube,

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Speaker 4: We're all over TikTok, We're on all these different places

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Speaker 4: where young people are, and they're attracted to the breadth

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Speaker 4: that the Schwab value proposition and how different it is

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Speaker 4: than other offers they see in the market.

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Speaker 1: Well, speaking of what's out there in the market, go ahead.

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Speaker 3: Are you going to ask about crypto?

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Speaker 5: No?

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Speaker 1: Not yet?

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Speaker 3: Do you want to wait?

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Speaker 1: Yeah? I want to wait. I want to ask about

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Speaker 1: prediction markets. Okay, because this is something that I think

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Speaker 1: gen Z wants and polymarket is back in the US.

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Speaker 1: It is certainly related to crypto, right, Carol, What role

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Speaker 1: does schwab have in prediction markets in the future.

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Speaker 4: Well, I think prediction markets started out with financial services

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Speaker 4: companies with the best of intentions. They wanted their investors

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Speaker 4: to be able to bet on what was going to

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Speaker 4: happen with the inflation report, what's going to happen with

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Speaker 4: the job report, or what the Fed's.

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Speaker 5: Going to do.

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Speaker 4: And they realize that there's not a lot of volume

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Speaker 4: and interest in those events in the general public, and

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Speaker 4: that there's already ways in financial markets to invest around

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Speaker 4: those activities. And then the election happened and the volume

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Speaker 4: in prediction markets skyrocketed, and these companies got a windfall

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Speaker 4: of money. And then they said to themselves, well, a

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Speaker 4: presidential election only comes one every four years, how do

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Speaker 4: we generate this level of interest on more of an

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Speaker 4: ongoing basis so we can see this wind fall more regularly.

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Speaker 4: And then they migrated from things that were tangentially related

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Speaker 4: to financial markets to pure sports gambling, because every Saturday

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Speaker 4: and Sunday there's lots of activities that the nation cares

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Speaker 4: about and now I think we're in a world where

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Speaker 4: what's driving all the volume and prediction markets is pure

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Speaker 4: sports gambling.

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Speaker 1: So yes or no for Schwap getting involved.

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Speaker 5: But something we gotta keep an eye on.

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Speaker 4: You're considering it, we're not actively considering, and the reason

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Speaker 4: we're not actively considering it is our mission is to

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Speaker 4: make our clients better off their financial life. Five percent

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Speaker 4: of people and actually read this on Bloomberg very early

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Speaker 4: this morning, five percent of people that put money into

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Speaker 4: a gambling app take out more than they put in

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Speaker 4: in the first place. So gambling has proven to be

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Speaker 4: a negative contribution to your wealth. Now, it's fine if

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Speaker 4: you use it as entertainment and you're doing it in

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Speaker 4: a thoughtful way, but our mission is to make clients

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Speaker 4: better off in their financial life and enhance their wealth.

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Speaker 2: Does that then say to you that it's not a

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Speaker 2: good idea in terms of the prediction markets and kind

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Speaker 2: of mixing them with traditional investing.

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Speaker 4: From my viewpoint, we want to do everything we can

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Speaker 4: to put our clients in the best chance to grow

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Speaker 4: their wealth. And I think it's fine for people to gamble.

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Speaker 4: People are going to gamble, Hopefully they do it in

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Speaker 4: a responsible way. The thing I worry most about is

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Speaker 4: the conflation between gambling and investing. If you're a young investor,

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Speaker 4: you've got ten thousand dollars in your account, you can

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Speaker 4: move it easily between investing in a stock that over

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Speaker 4: the long run is likely to go up over the

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Speaker 4: course of your life, or you can go bet on

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Speaker 4: the Eagles game that weekend. I think that is not

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Speaker 4: the greatest thing for the retail investor.

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Speaker 2: Speaking of gambling and perhaps gamification, Crypto we're just crypto

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Speaker 2: fit into all of this for you guys.

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Speaker 4: Well, crypto has become an asset class that many people

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Speaker 4: have their full confidence and trust in and they view

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Speaker 4: it as a store of value. And on our platform

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Speaker 4: we have lots of people engaged in crypto today. In fact,

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Speaker 4: our clients own twenty percent of all the etp's crypto

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Speaker 4: ETPs in our country, So our clients are big investors

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Speaker 4: in crypto. And for most people, buying the exchange traded

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Speaker 4: product is the right way to go because they're not

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Speaker 4: looking to transact in bitcoin, they're just looking to get

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Speaker 4: exposure to the price movements now. In addition to offering

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Speaker 4: the ETP, we will in time offer spot Crypto and

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Speaker 4: We're confident that we've got clients that are sitting at

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Speaker 4: digital native firms that have been long Schwab clients that

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Speaker 4: we no want to bring those assets back to Schwaman.

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Speaker 5: We're looking forward to being able to.

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Speaker 3: Do that this year, next year.

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Speaker 1: Next year, still first out the twenty twenty ses.

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Speaker 5: That's where we're shooting focused and so far, so good.

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Speaker 4: You have an idea, I'm not going to get that specific.

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Speaker 5: I'd get slapped earlier by someone.

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Speaker 1: Well, speaking of last year, you sat in this chair,

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Speaker 1: we were in San Francisco and we had a fun

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Speaker 1: conversation about crypto. You made headlines. You said this was

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Speaker 1: a year ago. I have not bought crypto now, and

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Speaker 1: I feel silly. You also said crypto investors have been

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Speaker 1: right in that you haven't been right, So update us.

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Speaker 1: Have you bought crypto since then?

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Speaker 4: I have not bought crypto. I have nothing against crypto.

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Speaker 4: I can certainly see the case of it. If people

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Speaker 4: believe it's a store of value, it is scarce and

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Speaker 4: it could go up. I think the blockchain is something

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Speaker 4: that is likely to play a bigger part in markets,

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Speaker 4: and therefore crypto can have some value around blockchain. For me, personally,

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Speaker 4: my investments are an assets that I consider to be

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Speaker 4: productive assets or generating earnings, are generating principle or interest,

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Speaker 4: and that's where I focus my investment place.

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Speaker 1: It's interesting that you say that, because when you said

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Speaker 1: that comment to us last year in the middle of November,

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Speaker 1: bitcoin was that and we were talking about bitcoin? Was

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Speaker 1: that one hundred thousand dollars? Right now it's at about

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Speaker 1: one hundred and four thousand dollars, So you look right

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Speaker 1: by not actually getting in.

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Speaker 4: Right then possibly, and bitcoin and crypto generally is going

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Speaker 4: to go up, It's going to go down. It's volatility

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Speaker 4: is something. It's standard deviation is something like fifty percent,

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Speaker 4: So we should expect wild swings. And for the right

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Speaker 4: group of folks, they want to own it, they believe

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Speaker 4: passionately in it, and they should have it as part

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Speaker 4: of their portfolio. For some investors, it's what they want

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Speaker 4: to invest.

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Speaker 2: In, private credit, private markets. How about that in terms

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Speaker 2: of you think the role that that will play.

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Speaker 1: In our retirement those portfolios in our retirement accounts.

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Speaker 3: How do you feel about that one?

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Speaker 4: Well, you're a great private company. There's lots of great

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Speaker 4: private companies in our country that have found really well, right,

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Speaker 4: I think retail investors should be exposed to private opportunities.

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Speaker 4: We would like to bring it to market in three ways.

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Speaker 4: Number One, we access. We provide access to retail clients

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Speaker 4: to great alternatives managers and private equity, private credit, venture capital,

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Speaker 4: a lot of the names that you're familiar with. Second

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Speaker 4: thing is I think at the right time, we would

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Speaker 4: love to be able to offer passive exposure in a

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Speaker 4: fund like structure to private markets. Just like in public

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Speaker 4: markets today you can go buy you know, the S

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Speaker 4: and P five hundred eight X fund and get broad

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Speaker 4: representation of stocks. You should be able to do that

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Speaker 4: in private markets. We'd love to play a role in

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Speaker 4: that in the future. And then third, like you can

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Speaker 4: buy individual stocks if you don't want either the active

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Speaker 4: management or the passive exposure to the broad market. I

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Speaker 4: think that marketplace for single security private companies should expand

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Speaker 4: over time. And so those are the three ways we

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Speaker 4: envision the market expanding, and we want to play a

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Speaker 4: role in all three.

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Speaker 3: Do we have to wrap?

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Speaker 2: Can I get you twenty thirty seconds on elections and

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Speaker 2: changes and environments? And I think the midterms and what

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Speaker 2: might happen next time at the White House. How does

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Speaker 2: that fit into your thinking in terms of long term

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Speaker 2: strategy for the company, Because we've had a vault a

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Speaker 2: year a little bit.

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Speaker 4: Markets have thrived through all types of administrations and changes

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Speaker 4: and presidents and changes in the Senate and House and

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Speaker 4: all of that. And so our message to clients is

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Speaker 4: stay diversified and be invested, and stay invested and have

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Speaker 4: a plan for your financial life. And if you do

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Speaker 4: those things, they'll navigate different ups and downs associated with

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Speaker 4: different administrations. And that's our council to clients.

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Speaker 3: All right. So appreciate your time as always and fun

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Speaker 3: to be at your event.

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Speaker 4: I always love seeing you here and I appreciate the

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Speaker 4: commitment you both made to be here in Denver and

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Speaker 4: be a part of the Impact conference.

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Speaker 5: Thank you well.

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Speaker 1: Hopefully we'll see you next year and more between now

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Speaker 1: and then.

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Speaker 2: Yeah, exactly, Rickhurster, Presidency of Charles Schwab of course, kicking

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Speaker 2: off our coverage here at SWAB Impact twenty twenty five.

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Speaker 3: We are here in Denver, Brick again, thank you so much,