Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: You're listening to Bloomberg Business Week with Carol Masser and
Speaker 2: Tim Stenoveek on Bloomberg Radio. Schwab shares I'm just taking
Speaker 2: a look at them, shares of the Charles Schwab Corporation.
Speaker 2: They're up about one percent in today's session. Stock is
Speaker 2: trading higher after the company reported earnings earlier today this morning.
Speaker 2: It did report a surge and average daily trading volume
Speaker 2: in the fourth quarter, and that's happening as retail investors
Speaker 2: really sought to take advantage at the end of a
Speaker 2: strong year of the stock market. We did see some
Speaker 2: big moves there. Hey, to talk about the quarter and
Speaker 2: the outlook. Great for Tim and I to be back
Speaker 2: with Rick Worster. He's president and CEO of the Charles
Speaker 2: Schwab Corporation. He joins us from their headquarters in Westlake, Westlake, Texas. Rick,
Speaker 2: Great 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.
Speaker 2: Well. 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 to us a
Speaker 2: little bit more about how the quarter wrapped up and
Speaker 2: where 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 bringing together
Speaker 3: a client's financial life we're able to help them more.
Speaker 3: When we do that, they're 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 to win for us because we're
Speaker 3: doing more business with them and doing more to help
Speaker 3: 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 a
Speaker 1: rage right now, as you very well know, and you thought.
Speaker 2: We were going to warm you up.
Speaker 3: We weren't.
Speaker 2: We're just going right.
Speaker 3: In first, I distinguished between prediction markets and gambling. Being
Speaker 3: able to forecast employment or inflation and being able to
Speaker 3: take a point of view or position on those and
Speaker 3: that could somehow hedge or accentuate the positions in your
Speaker 3: investment portfolio. And I think as that those were born,
Speaker 3: I think that makes sense within the context of an
Speaker 3: investment portfolio, and we're absolutely open to having that on
Speaker 3: our platform, those types of prediction markets. At the moment,
Speaker 3: it's not high on our client's list of things they
Speaker 3: want us to innovate for them, and so we've been
Speaker 3: focused our innovations in other areas that are more interest
Speaker 3: to clients. But I distinguish that between that and sports gambling.
Speaker 3: And if you look at ninety five percent of the
Speaker 3: volume of what people call prediction markets is actually just
Speaker 3: sports gambling, and that's not something that is we're keenly
Speaker 3: interested in getting into for a very simple reason, which
Speaker 3: is our mission as a firm is to make clients
Speaker 3: better off in their financial life. And less than five
Speaker 3: percent of people who go on to one of these
Speaker 3: gambling apps take out more money than they put in
Speaker 3: in the first place. That's the complete antithesis of what
Speaker 3: we do at schwab. Our client's wealth is at an
Speaker 3: all time high, the level advice we're giving them is
Speaker 3: that an all time high, and the amount we're doing
Speaker 3: to try to help them is that an all time high.
Speaker 3: So we'll leave the sports gambling, which constitutes ninety five
Speaker 3: percent of the prediction markets volume. We'll leave that to
Speaker 3: the gambling houses, to the van duals, the DraftKings, and
Speaker 3: the robinhoods.
Speaker 1: So that's it's funny. It's interesting that you say Robinhood.
Speaker 1: We'll get back to that, because I think Robinhood would
Speaker 1: would probably like to position itself as a competitor to
Speaker 1: Charles Schwab in a lot of areas. If we stick
Speaker 1: with the ninety five percent of what you believe prediction
Speaker 1: markets of sports gambling, what is the five percent that
Speaker 1: is of interest to you that we could potentially see
Speaker 1: at one point on Schwab's platform. Give us some examples there.
Speaker 3: Well. I think if you want to take a position
Speaker 3: on what the employment report's going to be, you know,
Speaker 3: at the end of the month, or how inflation's going
Speaker 3: to print, those things could have an impact on your portfolio.
Speaker 3: If you have a big bond position, you may have
Speaker 3: interest in what's going to happen in the inflation report.
Speaker 3: And it's a simple way of taking a position based
Speaker 3: on a yes or no position, and so that could
Speaker 3: be of interest to clients. But the reason I think
Speaker 3: we see haven't seen much volume in those and the
Speaker 3: reason why ninety five percent of the volume is in
Speaker 3: sports gambling is because if you want to take a
Speaker 3: on the employment report or the inflation report, there are
Speaker 3: countless ways to do that, and financial market participants already
Speaker 3: doing that whether it's in the bond market, in the
Speaker 3: futures market, through options. There's plenty of ways to do
Speaker 3: that today, and I think that's part of the reason
Speaker 3: why the true idea of prediction markets really haven't taken off,
Speaker 3: and why the firms that offer this have pivoted to sportscambling,
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 continue 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 wealth dot Com to bring trust capabilities directly
Speaker 3: to our clients. We launched a series of new capabilities
Speaker 3: for our advisor clients and in particular really leaned into
Speaker 3: innovations around making it easier for them to work with us.
Speaker 3: All of those are things that we think are far
Speaker 3: more impactful to our clients' ability to grow their wealth
Speaker 3: than prediction markets. And when we go out and survey
Speaker 3: our clients about what they want from us, prediction markets
Speaker 3: is low on the list, so it's something we are
Speaker 3: actively looking at. I think at some point in the
Speaker 3: future we will have true prediction markets at some point,
Speaker 3: but it's just not high on our innovation list because
Speaker 3: we're firmly focused on those innovations they're going to have
Speaker 3: the most impact 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. This 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 you know, in the past
Speaker 3: decades or multiple decades, they're really wealthy have also been
Speaker 3: able to participate in those return and diversification benefits, but
Speaker 3: the everyday retail investor has not been able to. And
Speaker 3: our Forge acquisition was really about democratizing investments and alternatives.
Speaker 3: We're now going to be able to bring it to
Speaker 3: all of our investors in multiple different forms and allow
Speaker 3: them to participate in private markets the way institutions and
Speaker 3: the very wealthy have been able to. And we're thrilled
Speaker 3: to bridge that gap and excited for what that could
Speaker 3: mean for our client's wealth.
Speaker 2: Hey, Arick, one thing we got to bring your attention to.
Speaker 2: It's just a headline across the Bloomberg and we're seeing
Speaker 2: markets turn around and rally pretty substantially on it. We
Speaker 2: see a straight move up on all of the major
Speaker 2: equity averages. We're now up nearly one point two percent
Speaker 2: on the SNP and up almost one point four percent
Speaker 2: on the Nasdaq one hundred. President Trump, who's Davos and
Speaker 2: meeting with European leader, says he has so he won't
Speaker 2: impose Greenland limited terrors on February first, But the headline
Speaker 2: that really think got markets moving was that the President
Speaker 2: says he's got a framework for future deal on Greenland
Speaker 2: with NATO. And I guess I want to bring this
Speaker 2: into the conversation because I feel like when Tim and
Speaker 2: I and you were together at TWAMA Impact in Denver,
Speaker 2: it was pretty upbeat. I think about the market environment
Speaker 2: and the outlook, and there's been a lot that's happened
Speaker 2: here in twenty twenty six. It feels like volatility is back.
Speaker 2: I'm just curious, you know, have any of the assumptions
Speaker 2: about the White House and policy and changes changed in
Speaker 2: your view, And I'm just curious what you make of
Speaker 2: something like this from the President that definitely has the
Speaker 2: 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 is workable for both parties. And my guess is
Speaker 3: that 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. I'm curious crypto kind
Speaker 1: of paved the way for that, because a lot of
Speaker 1: people can trade crypto twenty four to seven. What do
Speaker 1: you think of the ability for people to trade stocks
Speaker 1: twenty four to seven well, I.
Speaker 3: Think we're very open to that and would certainly participate.
Speaker 3: We're already twenty four by five. Today. We see very
Speaker 3: little market activity or very little client activity outside of
Speaker 3: market hours. It's usually only a couple of a percent.
Speaker 3: The vast majority of trading happens within the market hours,
Speaker 3: and I think the market hours are a feature, not
Speaker 3: a bug. And what I mean by that is by
Speaker 3: limiting the marketing hours market hours, you draw people in
Speaker 3: at the same time and create a lot of liquidity
Speaker 3: so that spreads are tight and trading efficiency is very high.
Speaker 3: I think the convenience of twenty four to seven is
Speaker 3: certainly very appealing, but we need to make sure that
Speaker 3: those trades are done in a way that makes sense
Speaker 3: for clients. And you know, as we see clients trade
Speaker 3: on our twenty four by five platform, we make very
Speaker 3: certain that they trade in a way that they're recognizing
Speaker 3: the higher spreads, and we make that very clear to
Speaker 3: them and they live with that for the convenience. But
Speaker 3: we just need to be careful as we go to
Speaker 3: twenty four by seven that we don't lose the efficiency
Speaker 3: of the market and the benefits of getting everyone into
Speaker 3: the market at around the same time, which is great
Speaker 3: 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.
Speaker 2: Well. We certainly look forward to coming back to you
Speaker 2: throughout the year and checking in on it. Rick, Thank
Speaker 2: you so much. Happy New Year, Rick wester He is
Speaker 2: the Presidency of the Charles Schwab Corporation, joining us there
Speaker 2: from Texas.