Speaker 1: This is Bloomberg Business Week from Bloomberg Radio. I'm Jason
Speaker 1: Kelly and I'm Carol Master. Welcome to the Bloomberg Business
Speaker 1: Week Extra. It's our weekly podcast bringing you an in
Speaker 1: depth interview you will not hear anywhere else. And this
Speaker 1: week it's with Charles Schwab, who really kind of blew
Speaker 1: open the online brokerage business just a few weeks ago
Speaker 1: when he decided to charge nothing for online trades. And
Speaker 1: it was great to catch up with Chuck Schwab, Carol.
Speaker 1: He's got such an amazing scope to his career and
Speaker 1: the pioneering that he started forty plus years ago definitely
Speaker 1: continuing today. Here's that conversation with Taylor Riggs and myself.
Speaker 1: All Right, so there are a few people probably in
Speaker 1: the investing world as well known and candidly as influential
Speaker 1: as Chuck Schwab. So thrilled to have him here in
Speaker 1: our studio in New York City. He's the founder, of course,
Speaker 1: of the Charles Schwab Corporation, a pioneer in many respect.
Speaker 1: Great to have you with us, well, Jason, thank you.
Speaker 1: I love to come down and see Bloomberg keeps expanding
Speaker 1: your communication capabilities. Are wonderful, wonderful for our business. Actually, well,
Speaker 1: we appreciate that. So let's talk about your business. I
Speaker 1: want to talk about your book. You've got a new
Speaker 1: book out, it's called Invested. But before we get to that,
Speaker 1: I gotta ask you about sort of the news in
Speaker 1: the industry over the last couple of weeks. Pretty exciting.
Speaker 1: So why now, what's happening? We just want to make
Speaker 1: sure our investors get the best deal possible, and that's
Speaker 1: called free, free trades. And so I've been on that
Speaker 1: pursuit that mission basically for almost forty years because I
Speaker 1: cut the commission's way back when when the regulation was permissible.
Speaker 1: And I've been on that quest for now forty years.
Speaker 1: So now we finally made it happen. Zero commission for transactions.
Speaker 1: Now you might have to pay for other thing, but
Speaker 1: for transactions, it's zero, right, So chalk, what's great for
Speaker 1: customers is free. But how does that affect your business?
Speaker 1: Some people are saying it could impact revenue by a
Speaker 1: hundred million dollars a quarter. How do you make up
Speaker 1: for that loss in revenue? Well, it's about four percent
Speaker 1: of our revenue has been lost because of that. But
Speaker 1: every time we've ever made it a better deal for
Speaker 1: our clients. We get more clients, and we will make
Speaker 1: it up in volume sort of speakcause people we have
Speaker 1: many other services. We have money market fund, we have
Speaker 1: mutual fund, we have advised accounts, we have other ways
Speaker 1: to make some money depending on what the client is
Speaker 1: looking for, uh, different levels of service and so. But
Speaker 1: trades will be free, and so we'll just hope more
Speaker 1: people will come and enjoy the benefits of SAL provides.
Speaker 1: So when you talk about volume, Chuck, that obviously means
Speaker 1: that probably scale matters. You've got a big piece of
Speaker 1: the market. Now, are we going to see some consolidation here?
Speaker 1: I think it's very possible. Well, I don't know whether
Speaker 1: it will be successful in that pursuit, but I think
Speaker 1: in the industry you're going to see more consolidation, more
Speaker 1: firms getting together. You just have to have that scale
Speaker 1: and volume. And so we're prepared to do it if
Speaker 1: if the opportunity arrives, but if not, we're perfectly happy
Speaker 1: to go alone. Chuck. Outside of volume, what do you
Speaker 1: say to critics from the street or companies like Moody's
Speaker 1: who had been taking a look at your credit writing
Speaker 1: after this decision. What else do you say to them
Speaker 1: about how you can also make up and grow despite this. Well,
Speaker 1: you can look at the past. It's pretty easy to
Speaker 1: see every time we've ever cut our commissions, it's always
Speaker 1: led to more business. It's been very consistent over many,
Speaker 1: many years. So this is not the first time we've
Speaker 1: got commission just happened to be this time to zero.
Speaker 1: Our cost in terms of running our business is extremely low.
Speaker 1: We're probably the lowest cost provider in the business. UH
Speaker 1: costs about fifteen basis points UH per dollar of asset
Speaker 1: that we have at Schwab and to run the business,
Speaker 1: that means all our web sites, all the services of
Speaker 1: branches and so forth. So we really put a lot
Speaker 1: of attention to our costs and so we're able to
Speaker 1: deliver to our clients a better value we think because
Speaker 1: of that, and so we're highly competitive and we'll continue
Speaker 1: to be competitive. We have many new ideas. Of course,
Speaker 1: technology has been really our friend in so many ways,
Speaker 1: has allowed us to be more efficient and deliver our
Speaker 1: efficiency on in terms of lower prices to our clients.
Speaker 1: All right, so you talked about sort of the history
Speaker 1: your history in this business, Jock and you lay that
Speaker 1: out so nicely in this book, and it's funny. You know.
Speaker 1: The book is called Invested, the subtitle changing Forever the
Speaker 1: way Americans invest. I've read a lot of books, and
Speaker 1: I know that often people are given to hyperbole in
Speaker 1: their titles. This actually isn't hyperbole. It did it changed things.
Speaker 1: I think it changed Wall Street dramatically for the better.
Speaker 1: I think so many people have adopted some of the
Speaker 1: same things that we put in place early on, and
Speaker 1: people thought, well, it does work, it does attract customers,
Speaker 1: do the right thing for customers, and may my goodness
Speaker 1: people come to your front door right. So, using that
Speaker 1: as a backdrop and thinking about putting this book together,
Speaker 1: I would imagine you went back and thought about those
Speaker 1: sort of catalytic moments over the course of your career,
Speaker 1: not just the founding, but some pretty interesting moments along
Speaker 1: the way, including a buyout that didn't go and that
Speaker 1: pusion didn't know the way you wanted and l b
Speaker 1: oh then following on to take it back, tell us
Speaker 1: about those moments that really stick out to you. Well,
Speaker 1: it's all laid out in the book Invested, and I
Speaker 1: had a great fun actually took two years to write
Speaker 1: the book with some a little bit of help along
Speaker 1: the way, but all the stories are my stories, and
Speaker 1: it was about starting out with four people, back in
Speaker 1: four people. How we have over twenty thousand, we have
Speaker 1: millions of customers and all that's all that great success.
Speaker 1: But the book talks about this is not a straight
Speaker 1: line up at all. There's been a lot of a
Speaker 1: lot of downs, a lot of things that we learned
Speaker 1: along the way. Took persistency and took commitment, It took
Speaker 1: passion by many, many people who helped me along the
Speaker 1: way to make a great company. And so I thought
Speaker 1: it would be worthwhile to tell people about this great
Speaker 1: entrepreneurial experience. But all so it lets my employees know
Speaker 1: what we stand for as a company, the purpose of
Speaker 1: the company, how we help customers, and why we love
Speaker 1: our customers. And also we'd like to have our our
Speaker 1: our customers themselves. Our clients read the book too, so
Speaker 1: they know our commitment. And why was taking back the
Speaker 1: independence of your company away from Bank of America so
Speaker 1: important to how Charles Swab operates today. Well, I think
Speaker 1: it's highly important that you we need to have a
Speaker 1: company of investment company like ours in place or so
Speaker 1: many of the giant firms, of these big investment banking
Speaker 1: firms that don't really think exclusively about individual investors. We do.
Speaker 1: That's all we do is think about our clients. How
Speaker 1: can we do better job, and how the new innovations
Speaker 1: using new technology to come up with new ideas, how
Speaker 1: to make their life better in terms of their financial life,
Speaker 1: and so chuck as you think about your customers right now,
Speaker 1: let's talk about them. How they're feeling right now. We're
Speaker 1: in the midst of the longest expansion economic expansion in history.
Speaker 1: I mean, people are feeling pretty good. The equity markets
Speaker 1: little volatility here and there, but generally the consumer feels good.
Speaker 1: Tell us what you learn because you see them trading
Speaker 1: every day. Well, I think our investors, you know, people
Speaker 1: who have been with us for a few years or
Speaker 1: know about the markets. They know markets go up nicely
Speaker 1: and everyone's really happy about that. They also know markets
Speaker 1: go down. Free markets go up and down. That's the
Speaker 1: fundamental thing you have to understand about investing. And after
Speaker 1: that you find out the potential from investing, how you
Speaker 1: can really change the wealth, wealth for yourself, wealth to
Speaker 1: your family, and gives you all these new opera tunities
Speaker 1: that you might have as you go through life. So
Speaker 1: you know, the only thing that really grows normally, like
Speaker 1: real growth is companies. So investing in companies is a
Speaker 1: wonderful way to go back. I always look at buildings,
Speaker 1: for instance, one building bibe and that building always remains
Speaker 1: the same. It never changes in size, it always remains
Speaker 1: the same. Stocks can grow from one Hamburger shop to
Speaker 1: ten to ten thousand. You know, one coffeemaker can take
Speaker 1: a couple of couple of coffees and all of a
Speaker 1: sudden is making millions a day. And that's but that
Speaker 1: takes place over a period of time. It's called growth,
Speaker 1: and that's what companies are able to do. Some of
Speaker 1: the great companies are even do even more growth. I'm
Speaker 1: talking about now more growth coming well. I think innovation
Speaker 1: America is profound. I live on the West Coast where
Speaker 1: so much of the new innovations pop up at times,
Speaker 1: and it's it's just it's going to continue. The Internet
Speaker 1: has been just unleashed so much capability I think, and communication,
Speaker 1: and so I think there's huge opportunities new frontiers ahead.
Speaker 1: We just have to hang on, keep our safe safety
Speaker 1: builts on and right, make the right happen. Well, and
Speaker 1: you're speaking my language giving given I'm out here in
Speaker 1: San Francisco in the midst of all of that innovation
Speaker 1: that you described. You were right, and that the markets
Speaker 1: go out, the markets go down. Investors know this. But
Speaker 1: as you look, do you get a sense that there
Speaker 1: is a special type of nervousness from investors right now
Speaker 1: that didn't exist, you know, a decade ago, two decades ago,
Speaker 1: or does this feel business as usual? It's no different
Speaker 1: today than it was ten years ago or twenty year thirty.
Speaker 1: Let me tell you, Um, you go back, it's very
Speaker 1: interesting to do this. Go back some time and read,
Speaker 1: go to the library and get some of the newspapers
Speaker 1: of ten years ago, and you'll see what I mean.
Speaker 1: There's always some issue going on, and it changes. And
Speaker 1: that's what the dynamics are of a free society. Keep changing.
Speaker 1: That the stories a little different, but there's still fear agreed,
Speaker 1: fear agreed to sort of up and down along the way.
Speaker 1: And so just understand, as investor, you've got to be
Speaker 1: a cool as a cucumber, let me tell you, And
Speaker 1: just hang in there. Make sure you're diversified don't put
Speaker 1: it everything in one little investment. Make sure you have ten,
Speaker 1: twenty or some index funds or things like that that
Speaker 1: really give you a breadth of experience and exposure to investing.
Speaker 1: And so before we let you go, I gotta ask you,
Speaker 1: what's the one thing you want to make sure people
Speaker 1: take away from this book? I think I think it's
Speaker 1: about the values that our company has and how sustainable
Speaker 1: it is. And I wish more companies were able to
Speaker 1: keep those values front and centered, not only with their employees,
Speaker 1: but let their customers know what we stand for and
Speaker 1: what they can expect. And how do you do that?
Speaker 1: How do you do that on a daily base? How
Speaker 1: do you, Chuck Chwab, I don't know I've done. I
Speaker 1: spent a lot of time in different branches throughout the country.
Speaker 1: I try to and try to instill my executives and
Speaker 1: my CEO, who has embodied Walt Benger fantastic, how we
Speaker 1: have maintained our values throughout these years. That was Charles Schwab,
Speaker 1: of course, of the firm that bears his own name.
Speaker 1: You and Taylor catching up with him, Taylor Riggs in yourself,
Speaker 1: and I think it was interesting because we have seen
Speaker 1: the world move to kind of a low rate, no
Speaker 1: rate environment when it comes to trading. He took it further,
Speaker 1: he did, and again he's always at the center of
Speaker 1: the next thing in this business. Really good to catch
Speaker 1: up with him. You've been listening to Bloomberg Business Week Extra,
Speaker 1: we shorted Tune into Bloomberg Business Week Radio Live Monday
Speaker 1: through Friday at two bum Wall Street Time on Bloomberg Radio.
Speaker 1: I'm Karl Masser and I'm Jason Kelly. This is Bloomberg