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Speaker 2: All right, well, Charles Schwab. The company recently out with earnings,
Speaker 2: the stock rolling on the news. Couple of analysts actually
Speaker 2: raising their price targets on the company following that report.
Speaker 2: Core net new assets brought to Schwab by new and
Speaker 2: existing clients came in at twenty four point six billion.
Speaker 2: Total client assets are now approaching tim ten trillion dollars.
Speaker 3: That's stock near a fifty two week high, up about
Speaker 3: sixteen percent. I gets say eighteen percent, yeah today as
Speaker 3: of today. With more on the company and the business.
Speaker 3: Joining us here at Schwab Impact is Rick Worcester. He's
Speaker 3: current president of Charles Schwab, also incoming CEO of Charles
Speaker 3: Schwab taking the ceospot comt January first. He's here with
Speaker 3: us on site in San Francisco. Good to be with
Speaker 3: you the big annual event.
Speaker 1: How are you.
Speaker 4: I'm loving it here at the event, forty five hundred
Speaker 4: people here. There's so much energy and it's all focused
Speaker 4: on helping the everyday American.
Speaker 3: So let's talk a little bit about that and start there.
Speaker 3: What are you hearing. What's the big theme you're hearing
Speaker 3: this year as you walk around?
Speaker 4: The big theme to me is always what can we
Speaker 4: collectively do to make a difference in the lives of
Speaker 4: every day investors. You mentioned the number ten trillion dollars.
Speaker 4: It's an overwhelming number, but behind every one of those dollars,
Speaker 4: it's a grandparent who's trying to help contribute to their grandkids' education.
Speaker 4: It's a family that's trying to take a nice vacation
Speaker 4: that they've been saving for. That's what matters to us.
Speaker 2: I love that you say that, because as I walk
Speaker 2: around and talk to some of the advisors, you know,
Speaker 2: there're may be a billion dollar shop, a two billion,
Speaker 2: maybe even smaller, and they're always kind of apologizing. I'm like, no,
Speaker 2: you're the guys who are managing everybody's money. I kind
Speaker 2: of love that perspective absolutely.
Speaker 4: And the thing about this community, we serve fifteen thousand advisors.
Speaker 4: They're in most communities across our countries, sitting down the
Speaker 4: table to the table with people helping them understand how
Speaker 4: to live their best financial life, and the power of
Speaker 4: that is so impressive.
Speaker 2: Rick, One thing that has come up. We did a
Speaker 2: great broadcast from here yesterday, and no doubt about it,
Speaker 2: the elections continue to come up. How are you thinking
Speaker 2: about the elections the impact that a new administration, new
Speaker 2: people running different regulatory bottle bodies. Certainly that plan to
Speaker 2: the financial industry, how it might impact Schwap.
Speaker 4: Well, there's a lot of potential change at play. We've
Speaker 4: heard a lot of proposals. It will be really interesting
Speaker 4: and important to watch how those play out. And we
Speaker 4: stand ready to do whatever we can to help the
Speaker 4: everyday investor. That's our focus.
Speaker 2: And all things change much because of a new White
Speaker 2: House and a new team. Do you anticipate from what
Speaker 2: we've heard on the campaign trail and some of the
Speaker 2: people that are being considered for positions.
Speaker 4: I certainly think that there will be change. Absolutely. I
Speaker 4: think with any administration there's change. And we've been through
Speaker 4: all sorts of presidential cycles and election cycles, and at
Speaker 4: the end of the day, what it means for us
Speaker 4: is we adapt and we do whatever we can to
Speaker 4: help the end the end client.
Speaker 3: Why are you thinking about this from a regulatory perspective?
Speaker 3: We did here today that SEC cherry Gary Gensler is
Speaker 3: going to step down by January twentieth. Certainly the crypto
Speaker 3: community cheering that. How do you look at a change
Speaker 3: in leadership at the SEC?
Speaker 4: Well, for us, our company is built on trust and
Speaker 4: has been for fifty years. Our entire industry is built
Speaker 4: on trust. If people can't trust their financial institution, the
Speaker 4: whole premise of what we do goes away. And so
Speaker 4: I think regulators play a really important role in that,
Speaker 4: and we've always had a great relationship with regulators. I
Speaker 4: think from our perspective, we want regulation that is thoughtful
Speaker 4: and makes sense for the end investor. And when that's
Speaker 4: the case, we'll do anything to support it. And we're
Speaker 4: looking forward to to seeing who the next chairman is
Speaker 4: going to be.
Speaker 2: Rick, What does it mean for crypto? And I'm curious
Speaker 2: if you guys see yourself getting into the crypto business.
Speaker 2: Here we are approaching one hundred thousand dollars. We have
Speaker 2: a president who initially maybe our president elect, who maybe
Speaker 2: wasn't so into crypto, is now very interesting.
Speaker 3: Hey got his own crypto company.
Speaker 2: What about for Schwab? What's the play here? Do you
Speaker 2: see yourself getting into it?
Speaker 4: Well, we're in the crypto business today. We have lots
Speaker 4: of different ways for clients to participate. They can buy
Speaker 4: et s today, they can buy bitcoin futures, they can
Speaker 4: buy closed end funds. I think we will get into this,
Speaker 4: into spot crypto when the regulatory environment changes, and we
Speaker 4: do anticipate that it will change, and we're getting ready
Speaker 4: for that eventuality.
Speaker 2: Is there some I don't know? Has crypto? Is it
Speaker 2: growing up in your view?
Speaker 4: I don't know. You know, it's an interesting asset class
Speaker 4: and people have really gravitated towards it. And you know,
Speaker 4: we never like to judge what people want to invest in.
Speaker 4: People on our platform, we think are very thoughtful investors,
Speaker 4: very sharp. They make decisions about what they want to
Speaker 4: invest in. And crypto has certainly caught many's attention and
Speaker 4: and they've made a lot of money doing it. I
Speaker 4: have not bought crypto, and now I feel silly. So
Speaker 4: they've been the ones making all this money.
Speaker 2: On crypto thinking about buying it now.
Speaker 4: Me personally know, but we certainly support our clients that
Speaker 4: want to do that.
Speaker 3: You know, you answered my next question, which is going
Speaker 3: to be do you own any crypto? But talk a
Speaker 3: little bit about that, because it's always interesting hearing from
Speaker 3: somebody in in your space about their views on something.
Speaker 3: What's holding you back?
Speaker 4: Well, I think what's holding me back is just a
Speaker 4: question around the true value of crypto. I you know,
Speaker 4: I like to invest in stocks, and with stocks, you
Speaker 4: there's there's cash flows you can rely upon, There's there's
Speaker 4: dividends that accrue to you. With with crypto, it's it's
Speaker 4: less certain what that will be, and it's it's less
Speaker 4: certain how to value it. So to me, on a
Speaker 4: personal level, that's what makes crypto not something that I
Speaker 4: invest in. At the same time, we encourage our investors
Speaker 4: to invest in what matters for them. And I've talked
Speaker 4: to a lot of our investors who tell me I'm
Speaker 4: completely missing the boat, and they tell me all the
Speaker 4: great things about crypto, and you know what, they've been right,
Speaker 4: not not me, because so far keeps going up.
Speaker 2: So far they've been right.
Speaker 5: We'll see.
Speaker 2: It's one we're going to continue to follow. It moves
Speaker 2: around a lot. It is a competitive space. Just this
Speaker 2: week I just want to look at my know it's
Speaker 2: Robin Hood andeing they're moving to the RIA space. I'm
Speaker 2: curious about how you were thinking about Schwab for the
Speaker 2: next fifty years as you get ready to take over
Speaker 2: as CEO and not a new thing traditional investors, they're
Speaker 2: getting older, younger investors how they want to play and
Speaker 2: have more options. So what are your thoughts about Robinhood's
Speaker 2: move and maybe what you guys need to continue to
Speaker 2: do to attract younger investors who want those more options.
Speaker 4: Well, for fifty years, our central theme has been to
Speaker 4: see through client size and do right by them, and
Speaker 4: we attract a lot of young investors to Schwab. In fact,
Speaker 4: sixty percent of our new to firm clients every year
Speaker 4: are under the age of forty. Our client base actually
Speaker 4: gets younger every year, so it's sometimes we're not thought
Speaker 4: of as that way, but we attract a lot of
Speaker 4: young investors because we have what we think is the
Speaker 4: best trading platform in the industry, and it also comes
Speaker 4: along with what we think is the best educational and
Speaker 4: training platform in the industry, and that aspect has really
Speaker 4: appealed to some of our younger.
Speaker 2: Newer investors got to ask you about the training side
Speaker 2: and talking with advisors here. I was up on the
Speaker 2: stage doing a panel on artificial intelligence, and so many
Speaker 2: people came up to me afterwards and they're like, we
Speaker 2: got to talk to Schwab because I think we need
Speaker 2: a Schwab chatbot. AI though, is impacting everything? How are
Speaker 2: you also, I don't know, acknowledging thinking about how that
Speaker 2: needs to be incorporated into what you offer up the
Speaker 2: advisory space.
Speaker 4: Yes, so that comment about wanting an AI chatbot, what
Speaker 4: they don't recognize is that actually, behind the scenes, we
Speaker 4: have built one for our client facing professionals. And so
Speaker 4: it used to be that sixty thousand times a month
Speaker 4: we would have a phone rep spend more than three
Speaker 4: minutes searching for a piece of information to answer a
Speaker 4: client question right, And now we have built an AI
Speaker 4: capability that finds that information in seconds, and so it
Speaker 4: makes a better use of the client's time and allows
Speaker 4: them to focus and go deeper on wealth issues that
Speaker 4: we could potentially help them with.
Speaker 2: But is there another level that you continue to think about? Okay,
Speaker 2: where does this go in helping advisors in terms of
Speaker 2: portfolio management are building out their businesses?
Speaker 4: I think AI will have a really big impact on
Speaker 4: our industry. I think it will do a lot to
Speaker 4: help us better serve clients, to empower our professionals to
Speaker 4: give them the right information at the right time. I
Speaker 4: think it will also allow us collectively to help serve
Speaker 4: clients that we couldn't otherwise. We have fifteen million retail clients.
Speaker 4: We can only have a person to person relationship with
Speaker 4: about ten to twenty percent of that client base. There's
Speaker 4: eighty percent that we don't get to to have that
Speaker 4: in person dialogue with, and I think AI could bridge
Speaker 4: that gap and allow us to reach more clients.
Speaker 3: Hey, before we let you go, I want to talk
Speaker 3: a little bit about the balance sheet, because you basically
Speaker 3: said you're trying to shrink the bank's balance sheet and
Speaker 3: not hold as many loans on the balance sheet. Given
Speaker 3: what happened a couple of years ago, close to two
Speaker 3: years ago with the regional banking crisis in the way
Speaker 3: you guys were brought into that, just give us an
Speaker 3: update there on what you're going to do when you
Speaker 3: become CEO.
Speaker 4: Well, I want to clarify we never said we wanted
Speaker 4: to shrink our balance sheet. What we did allude to
Speaker 4: and I think what you're referring to is on an
Speaker 4: earnings call, we said, as our balance sheet grows, we
Speaker 4: would consider using a third party bank to take on
Speaker 4: some of those deposits. That's something that could make sense
Speaker 4: for us because of the way the economics work, we
Speaker 4: have to hold capital against deposits. We can send some
Speaker 4: of those deposits to another bank and earn a better
Speaker 4: return relative to capital when we do so. So it's
Speaker 4: a tool to have in our toolbox. It's not something
Speaker 4: we're going out and doing immediately, something we're considering. We'd
Speaker 4: only do it as our balance sheet grows, and when
Speaker 4: it makes sense to do.
Speaker 2: Challenging here, certainly for Schwab with the regional bank crisis
Speaker 2: and so on and so forth. We talked about a
Speaker 2: lot on Bloomberg just got about thirty seconds. Are we
Speaker 2: pasted it? Do you feel confident or what's more to
Speaker 2: be done? In terms of the impact that we've seen
Speaker 2: in the past year.
Speaker 4: I've never been more optimistic about our business than we
Speaker 4: are today. We're number one or number two and the
Speaker 4: two fastest growing segments of the financial services landscape, and
Speaker 4: our client satisfaction scores have never been higher. Than they
Speaker 4: are today. So we're hitting on all cylinders as we
Speaker 4: roll into twenty twenty five, and I couldn't be more
Speaker 4: excit about it.
Speaker 2: Fifteen seconds. What's the most interesting thing in the investment
Speaker 2: space do you think right now?
Speaker 4: I think the engagement among clients. It's just wonderful to
Speaker 4: see how engaged they are in markets in their financial life.
Speaker 4: When people own their tomorrow, they tend to have great
Speaker 4: financial outcomes.
Speaker 2: Rick, thank you so much. I know there's a lot
Speaker 2: going on. I know this is a big event, but
Speaker 2: I'm carving out some space for us. We really appreciate it.
Speaker 4: Well. Thanks for making a commitment to be here. We
Speaker 4: love having you here.
Speaker 2: It's a great perspective that we get to come and
Speaker 2: take back to New York and kind of share with
Speaker 2: some of our other guests. Rick Weister, current president of
Speaker 2: Charles Schwab taking over CEO on January first. This is
Speaker 2: Bloomberg from Impact.
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Speaker 6: All right?
Speaker 2: As we just heared in our conversation with Rick Weister,
Speaker 2: Schwab alone has about almost potentially in dollars in assets.
Speaker 2: Those assets essentially split evenly between retail investors and advisors. Now,
Speaker 2: as for the many registered independent advisors that Schwab works
Speaker 2: with and provides more than fifteen thousand independent advisory firms
Speaker 2: with over four trillion in assets under management, and what
Speaker 2: Swab does you know? This by now provides us a
Speaker 2: variety of services. We're talking about custody of client assets, technology, trading,
Speaker 2: also banking, and a lot.
Speaker 3: More overseeing all that side of the business. John Body
Speaker 3: is head of Advisor Services and a member of Charles
Speaker 3: Schwab's executive committee. He joined us here at Impact twenty
Speaker 3: twenty four in San Francisco. How are you.
Speaker 5: I'm doing great pleasure to join you today. We are
Speaker 5: having a great time here at the conference. Lots of optimism,
Speaker 5: great vibes.
Speaker 3: Okay, well, let's talk a little bit about that, and
Speaker 3: I want to jump right into it. We got a
Speaker 3: good bit of time with you. But you have a
Speaker 3: big job overseeing all this side of the business. So
Speaker 3: I think retail investors don't really understand. But a big
Speaker 3: part of that is what happened with TDM or Trade
Speaker 3: and that purchase. Wow, at this point almost five years ago,
Speaker 3: it's amazing. Are you fully integrated? Has everything been fully
Speaker 3: brought over to Schwab.
Speaker 5: We have been through the whole process and certainly we
Speaker 5: did the conversion labor Day of last year, and since
Speaker 5: then we have been working through the opportunities for improvement,
Speaker 5: the feedback from our clients through that conversion, finding opportunities
Speaker 5: to enhance the platform for them, and so that is.
Speaker 4: In the rear view mirror now.
Speaker 3: So what is the bit what was or has been
Speaker 3: the biggest bit of feedback you've got from these clients.
Speaker 3: What changes have you made as a result of what
Speaker 3: you've heard from them?
Speaker 5: You know, we went into the acquisition with the aspiration
Speaker 5: to bring the best of both platforms together and we
Speaker 5: did that. But for advisors moving from one platform to
Speaker 5: another platform, it's changed, right, So they had to learn
Speaker 5: a new system. And while they were learning that, they
Speaker 5: gave us feedback on how the technology works for them,
Speaker 5: where we could find ease of doing business, more scale
Speaker 5: and efficiency so that they could spend more time with
Speaker 5: their investors. So they were coming at it from the
Speaker 5: right perspective in terms of wanting to be out finding
Speaker 5: time with investors as well as finding new clients to
Speaker 5: the platform JN.
Speaker 2: One thing I want to ask you is, okay, so
Speaker 2: technology things that advisors need? Did a panel here earlier
Speaker 2: about AI, and I can't tell you how many advisors
Speaker 2: came up to me and are like, oh my god,
Speaker 2: I wasn't using chat, GPT I downloaded and I've just
Speaker 2: been twenty minutes playing around with it. How is AI generative,
Speaker 2: AI LM large language models? How are you thinking about
Speaker 2: what you need to be offering up to your advisors.
Speaker 5: Yes, we are leaning into it cautiously optimistic, going at
Speaker 5: it with a good pace. Our first place of opportunity,
Speaker 5: we think, is in knowledge. There's a lot of operational
Speaker 5: experiences between us and advisors, and so if we can
Speaker 5: bring knowledge to the fingertips of our service professionals as
Speaker 5: they're working with advisors on the phone or through email
Speaker 5: or chat, we can be more precise in our answers
Speaker 5: and avoid work and not good order, which is slows
Speaker 5: down the business as a drag friction within the business.
Speaker 2: One thing, though, I got to say, is people are
Speaker 2: worried advisors are worried that they're going to be replaced
Speaker 2: by generative AI. So I know there's hype, I know
Speaker 2: there's reality, but the conversations I'm having is that, yes,
Speaker 2: some jobs are going to go away, there will be
Speaker 2: new ones created as a result. So how are you
Speaker 2: also thinking about maybe that fear among many of your clients.
Speaker 5: Well, we think, you know, as we have with lots
Speaker 5: of technology, there's a cycle to it, and certainly things
Speaker 5: that are basic or that can be automated will be
Speaker 5: great opportunities for artificial intelligence. But that will just allow
Speaker 5: people to spend opportunities and value added services in places
Speaker 5: that AI won't be able to go. And we think
Speaker 5: that investing is a relationship. Business people want to talk
Speaker 5: to a human, maybe a long time before AI could
Speaker 5: replace them.
Speaker 2: Sometimes I don't want to talk to a human. I'm
Speaker 2: just going to put it out there, but I get it, Yeah,
Speaker 2: get it. Yeah, I mean magic, Your money is personal.
Speaker 5: Yeah, investing is technical, but it's also emotional, right, Yeah,
Speaker 5: And so I'm not sure when AI will be able
Speaker 5: to handle somebody's emotions as it relates to the reaction
Speaker 5: to markets ups and downs, to be able to counsel
Speaker 5: somebody in that way. So we think that that's where
Speaker 5: the human intelligence plays a big role in the future.
Speaker 3: To what extent do you help with portfolio construction behind
Speaker 3: the scenes with the rias or is that left completely
Speaker 3: to them.
Speaker 5: Yeah, our job is a custodian to advisors to give
Speaker 5: them a platform where they can express their views on investing,
Speaker 5: whether that's through different kinds of products, ETFs, mutual funds. Certainly,
Speaker 5: alternative investments is a growing part of the portfolio today,
Speaker 5: even cryptos being discussed some between US and advisors while
Speaker 5: we're here. It's the newer part of the marketplace. And
Speaker 5: then it's the automation of investing, trading systems, rebalancing systems.
Speaker 2: That's where we can.
Speaker 5: Add value so that they can do their job of
Speaker 5: picking the investments and building the right portfolios based on
Speaker 5: the personal needs of one investor versus another investor.
Speaker 2: How much when you look at the growth that we've
Speaker 2: seen in the wealth management business and client assets coming in,
Speaker 2: how do you think about it going forward? You know,
Speaker 2: we talked about the aging population, transfer of well younger generation.
Speaker 2: What's your perspective on that?
Speaker 5: A ton of opportunity for advisors. So we see the
Speaker 5: RAA channels about a nine trillion dollar business right now.
Speaker 5: We think that by twenty thirty four it could be
Speaker 5: a twenty trillion dollar business based on math and the
Speaker 5: momentum around growth. Right now, there's thirty seven trillion dollars
Speaker 5: of investable assets sitting in the traditional advice models, and
Speaker 5: that's the market opportunity for the independent advisor who brings
Speaker 5: a fiduciary a type of advice model to the marketplace.
Speaker 5: And that's differentiating from an investor experience perspective, how much.
Speaker 3: Of your business is about getting new rias on the platform,
Speaker 3: getting them to leave other custodial platforms coming to you,
Speaker 3: versus growth of their own platforms.
Speaker 5: I'm glad you asked that it's about eighty twenty equation. Certainly,
Speaker 5: individual investors are waking up to the fiduciary model and
Speaker 5: choosing to work with independent advisors, but we see advisors
Speaker 5: in those traditional channels waking up to the business opportunity
Speaker 5: as well and exiting those channels to join the RIA space,
Speaker 5: registering with the SEC or their local state, starting their
Speaker 5: own firms, and joining the winning model. In addition to that,
Speaker 5: more recently we've seen advisors choosing not to start, but
Speaker 5: to join existing firms. In the RAA space, the joiner
Speaker 5: model is also fueling the transition or the transfer of
Speaker 5: assets from one part of the marketplace to the other
Speaker 5: part of the marketplace.
Speaker 2: What are you seeing in the advisory space. I mean,
Speaker 2: just as you said, you know, new folks coming in.
Speaker 2: But is it smaller firms that continue to dominate, or
Speaker 2: is it smaller firms combining to be bigger firms. I'm
Speaker 2: just curious about the competitive landscape.
Speaker 5: We serve fifteen thousand advisors nationwide. As you said, small
Speaker 5: firms one hundred million dollars of lasts of assets under
Speaker 5: management and firms with one hundred billion dollars of assets
Speaker 5: under management.
Speaker 6: That's the bulk, the bulk of it.
Speaker 5: It's always the eighty twenty rule, right, so have eighty
Speaker 5: percent of the assets. And as you know, M and
Speaker 5: A activity is grown in this space, and that's private
Speaker 5: equity and capital coming in to support a fast growing market,
Speaker 5: and we think that's a positive. But we also know
Speaker 5: there's a lot of fiercely independent entrepreneurs who are self
Speaker 5: capitalizing their businesses and growing as well.
Speaker 3: So consolidation in the space net good for you we
Speaker 3: think it's it's positive. Yes, what happens if these companies
Speaker 3: consolidate and then they go to a different platform though,
Speaker 3: or they're you know, they get bought by a larger
Speaker 3: company that uses a different platform.
Speaker 5: We're in We're in all parts of the market, so
Speaker 5: we can benefit whether they choose to be a small firm,
Speaker 5: a mid sized firm, or a large firm. So we
Speaker 5: can support any type of advisory firm in the marketplace.
Speaker 5: So when firms choose to come together to bring scale
Speaker 5: and efficiency to their business, we're there with them to
Speaker 5: support that. Sometimes advisors want to break away and start
Speaker 5: their own firm. We can help them launch those firms.
Speaker 3: But does their scale give them more more leverage over
Speaker 3: fees that they pay? You are they able to.
Speaker 5: Most of the fees have been ringed out of this business,
Speaker 5: so there's not much to negotiate anymore. So, you know,
Speaker 5: we're focused on aggregation the origin of stop right. Yeah,
Speaker 5: it's about going to get the markets here. In terms
Speaker 5: of assets, the monetization aspect of it is pretty worked
Speaker 5: out in the marketplace, so not a lot of discussion
Speaker 5: in that aspect of it.
Speaker 2: You know, we talked with recquerster about the election outcome, politics,
Speaker 2: who will be in charge, what kind of policies. I
Speaker 2: don't know. How does that impact you on a day
Speaker 2: day basis or longer term in terms of thinking about
Speaker 2: what you need to be doing.
Speaker 5: Yeah, we're focused on investing. That's our core competency and.
Speaker 2: Everybody says that. But election, you know, politics, it does
Speaker 2: matter in terms of policies, right, and who are the
Speaker 2: regulators and the types of things that come down. I mean,
Speaker 2: the market's initially seem like it's pro business, pro markets,
Speaker 2: but we shall see in reality.
Speaker 5: Yeah, and there's lots of different takes on that depending
Speaker 5: on which advisor you talk to. And that's the beauty
Speaker 5: of the open architecture is that there can be different
Speaker 5: perspectives and investors can find the perspective that they enjoy
Speaker 5: and invest with those folks, and advisors can move from
Speaker 5: one firm to another firm. But it is quite optimistic here,
Speaker 5: so I think everybody's looking to go forward from from
Speaker 5: from this point forward.
Speaker 2: I have to say Tim and I think loved coming
Speaker 2: to investment folks or events like this that you guys do,
Speaker 2: because you get people from all around the country. People
Speaker 2: managing you know, big offices, smaller offices, medium sized offices.
Speaker 2: You know, what is it that you are seeing in
Speaker 2: your business? What's going on? What you're hearing here on
Speaker 2: the ground that tells you about I don't know, market sentiments,
Speaker 2: market behavior. Are there more risks out there? Are there
Speaker 2: less risks? Is there a big background that you take
Speaker 2: away from here? You know?
Speaker 5: I think one of the areas of opportunity that I'm
Speaker 5: hearing advisors talk about is is the opportunity to enhance
Speaker 5: performance through tax harvesting and creating alpha by managing portfolios
Speaker 5: in a tax advantage kind of way. I think that's
Speaker 5: a place of differentiation for advisors and for the asset
Speaker 5: management community to earn opportunity with these advisors. Certainly that
Speaker 5: serves investors very well, right, So, I think that could
Speaker 5: be the next frontier in the financial services industry.
Speaker 3: Give us a prediction of what we'll be talking about
Speaker 3: if we're sitting across from each other a year from
Speaker 3: now at Schwab Impact twenty twenty five to be held in.
Speaker 2: Bor Or Tvedi. I'm just saying just an idea.
Speaker 4: If you keep it in the US, I hate to
Speaker 4: crush your dreams.
Speaker 2: But we're going to be in Denver next year.
Speaker 5: Oh yeah, yeahs fu, Yeah, and I think we're going
Speaker 5: to be talking about the momentum of the marketplace and
Speaker 5: how advisors are finding differentiation and earning more opportunity and
Speaker 5: serving more investors, helping investors reach their financial dreams. And
Speaker 5: that's what it's all about for us. And as we
Speaker 5: have that shared vision with these advisors here, do.
Speaker 2: You get all the talent you need the workers? Is
Speaker 2: that twenty seconds? Are you finding all the skills that
Speaker 2: you need in people?
Speaker 5: As you know, we are actively involved with university so
Speaker 5: we sponsor thirty five different universities nationwide and their financial
Speaker 5: planning programs.
Speaker 2: Yeah.
Speaker 5: We think advisors going to hire seventy to eighty thousand
Speaker 5: new employees in the next five years. So the talent
Speaker 5: is the fuel to growth and we're focused on it.
Speaker 2: All right, Great stuff, John, Thank you so much, glad
Speaker 2: to be here. Good that you could stop by, Baby,
Speaker 2: head of Advisor Services, a member of Charles Schwab's executive committee.
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Speaker 2: Let me drive?
Speaker 4: Oh no, no, no, no, who's going to drive?
Speaker 6: Honey?
Speaker 1: Please, I'll do the travels.
Speaker 2: Excuse me, I want to drive. It's a good question.
Speaker 1: This is the drive to the clothes dot music, Well,
Speaker 1: bunch other down on Bloomberg Radio.
Speaker 6: Tick tack?
Speaker 2: Oh is it already?
Speaker 3: Yeah, I'm this Drewer show that we're doing.
Speaker 2: I know, we feel really good and we're like a
Speaker 2: little off in terms of the market clothes.
Speaker 3: I'm always off.
Speaker 2: No, you're not. You're always on.
Speaker 3: It's like it's like lunchtime here in California, which is
Speaker 3: a great place to be by the way, when you're
Speaker 3: following the equity markets.
Speaker 4: In New York.
Speaker 3: I know, right, everything kind of ends at you know,
Speaker 3: two o'clock.
Speaker 6: Go ahead, have lunch.
Speaker 2: Yeah, it's kind of nice and markets. As we just
Speaker 2: heard from Charlie, we're just kind of rolling over our
Speaker 2: best levels of the session. When it comes to the
Speaker 2: S and P five hundred, it's the daw that's the
Speaker 2: Oprah former. I know you can debate whether or not
Speaker 2: you like the doo, but nonetheless it's up about one percent.
Speaker 2: Let's get to our drive to the closed guest. Jelina
Speaker 2: Carrer is with us. She is Managing director of Client
Speaker 2: Experience Schwab Advisors Services, works with John Batty, who was
Speaker 2: just on and she's here at Schwab Impact in San Francisco.
Speaker 2: Good to have you here.
Speaker 6: How are you? I'm great, Thanks for having me here.
Speaker 2: So tell us about some of the conversations you have
Speaker 2: with John about you know, what you're hearing from advisors,
Speaker 2: what they want, what they need, what's the churn you
Speaker 2: know back at Schwab offices about Okay, what do we
Speaker 2: need to be focusing on.
Speaker 7: I think it's a bit of a collision of sort
Speaker 7: of two things, two forces that are going to come
Speaker 7: to They're not in a scary collision, but a really
Speaker 7: good sort of combination of things. And that's technology and
Speaker 7: scale paired with personalization. And I think it's it's really
Speaker 7: interesting because there are a ton of tech solutions out there.
Speaker 6: Third party providers.
Speaker 7: There are so many solutions, yet I think advisors are
Speaker 7: asking us to think about how they harness those solutions
Speaker 7: together for their clients.
Speaker 2: What does personalization mean? I can't. I feel like we've
Speaker 2: been talking about personalization in finance for a long time,
Speaker 2: So what exactly does that mean for you on this
Speaker 2: Thursday here in San Francisco.
Speaker 7: Yeah, bit of a buzzword, right, So for us, I
Speaker 7: think it means finding the solutions for unique client needs
Speaker 7: and that's what it really means. So it comes down
Speaker 7: to not you know, I know who you are when
Speaker 7: you show up in this piece of technology or that
Speaker 7: piece of technology. It's about getting to the root of
Speaker 7: if you're an investor, you've got a solution that you
Speaker 7: need to solve a problem with a text situation, or
Speaker 7: you're inheriting some wealth, you need an answer, you need
Speaker 7: a customized solution and for how you're going to deal
Speaker 7: with that personally with what you need And that's to
Speaker 7: us what it really means. So it is, though a
Speaker 7: balancing act because you want to be able to do
Speaker 7: that scalably. So that's why I've met about the collision,
Speaker 7: like sometimes personalization runs counter to scale. Scale could unlock it,
Speaker 7: but then you can start to get into an echo
Speaker 7: chamber of complexity.
Speaker 3: Where do you come in though? When it comes to personalization,
Speaker 3: because these arias who you support, they're the ones who
Speaker 3: are the ones doing the personalization for their clients.
Speaker 4: Where do you come in.
Speaker 7: I mean, we continue to be very pro open architecture.
Speaker 7: If they want a solution that we haven't yet explored,
Speaker 7: we're willing to look at it.
Speaker 6: I think, though, what we have to do now is
Speaker 6: make sure we're.
Speaker 7: Making that as simple as possible, because if we just
Speaker 7: keep layering tech on tech on tech, those things don't
Speaker 7: work together the right way, and they have to work
Speaker 7: together for people first and foremost.
Speaker 6: So you got to skinny it down a little.
Speaker 3: Do you care if they use like a SCHWABYTF versus
Speaker 3: a Vanguardi TIF.
Speaker 7: Completely agnostic to the offer solution. We're proud of our solutions.
Speaker 7: We do have some great optionality in the wealth management
Speaker 7: space so to third party providers, and it's all about
Speaker 7: really finding what advisors need.
Speaker 2: You began your career on the Schwab trading desk Schwab Desert.
Speaker 2: But I do also think about you know, it's so
Speaker 2: funny when people are even in broadcast. I'm like, you know,
Speaker 2: go and do as many different jobs and then you
Speaker 2: really kind of understand the industry, tell us about that
Speaker 2: experience and how that has helped you to where you
Speaker 2: are today, and understand, you know, kind of understand what's needed.
Speaker 6: Yeah, for me, that is how I got where I am.
Speaker 7: I've been at Schwab for thirty years and I've done
Speaker 7: just about every job, all of it in the advisor space.
Speaker 7: So I got to grow up watching this industry grow up, right,
Speaker 7: and seeing both client service delivery, what do advisors need
Speaker 7: when they are calling us and relying on us for a.
Speaker 6: Solution, as well as what those solutions need to be.
Speaker 7: And that's kind of where I sit now, is trying
Speaker 7: to bring these offer solutions to the table, whether it's tech,
Speaker 7: whether it's a product solution, got to harmonize it.
Speaker 6: So it's been a cool journey.
Speaker 2: What would the Jelina thirty years ago be like? Kind
Speaker 2: of shocked about what's going on in advisory services today?
Speaker 5: Oh wow?
Speaker 7: I think the proliferation of technology really and not to
Speaker 7: harp on technology too much, but I think ria space
Speaker 7: has been growing so quickly that you have seen such
Speaker 7: opportunistic advancements, and so I think looking back thirty years ago, thinking, okay,
Speaker 7: you know, back then, you've got to trade on a
Speaker 7: faxed piece of paper, right, That's where we've come from.
Speaker 7: Now you could get it via a fixed connection, you could.
Speaker 6: Do it direct on the website.
Speaker 7: You can submit something through your own portfolio management system.
Speaker 6: So I think that complexity that I.
Speaker 7: Talked about a few minutes ago, it's here, it's real,
Speaker 7: and we've got to help sort of simplify and smooth
Speaker 7: out that ecosystem for advisors so they can spend time
Speaker 7: on their clients, which is the most important thing.
Speaker 3: What's interesting is Schwab has its own advisors also, so
Speaker 3: I could walk into a Charles Schwab brick and mortar
Speaker 3: location in many different cities and towns across the country,
Speaker 3: or I could use a registered investment advisor who on
Speaker 3: the back end is a Charlie Schwab product. As for
Speaker 3: custodial purpose, which one do you prefer?
Speaker 7: I gotta say I don't have a preference. It's really
Speaker 7: it comes back to the client's needs and what they desire.
Speaker 7: Some clients want to work with somebody in a physical
Speaker 7: location that they can walk into, touch, So you feel
Speaker 7: RaaS can do that. We can also do that in
Speaker 7: other parts of our business.
Speaker 6: Ecosystem. But really, let me put it this way.
Speaker 7: We have in our in our space four and a
Speaker 7: half trillion dollars worth of assets under custody for half
Speaker 7: of the company's size.
Speaker 6: Our company believes in.
Speaker 7: The power of rias as well as what we do
Speaker 7: on the retail side, and there's there's plenty of opportunity,
Speaker 7: thirty seven trillion dollars worth of opportunity out there for
Speaker 7: us all to serve those people and meet their needs.
Speaker 2: And it's really about the clients, all right. So I
Speaker 2: got to say, coming off that AI panel that I
Speaker 2: did this morning, somebody came up to me, one of
Speaker 2: the advisors, Schwab needs its own CHATCYPT using information that
Speaker 2: Schwab already has, tying it into performance and to the
Speaker 2: analysis in future analysis.
Speaker 7: Is spot on, and we're working on this right now.
Speaker 7: So we're going to start internally. We're doing a chat
Speaker 7: GPT like solution for our service professionals so that when
Speaker 7: advisors are talking to us right they get the right
Speaker 7: answer the first time. But what we're going to do
Speaker 7: is extend that into our Internet solutions so that advisors
Speaker 7: can access that directly too.
Speaker 6: So we're we're on track.
Speaker 3: For that what does it look like?
Speaker 6: It really just looks like a knowledge assistant.
Speaker 7: You ask you questions, much like in the session this morning,
Speaker 7: where they're typing in the questions and it's going to
Speaker 7: feed you.
Speaker 4: Back the best way.
Speaker 3: How are you training it?
Speaker 7: A lot of trial and error. Actually, we have been
Speaker 7: practicing on it for six or eight months. The early
Speaker 7: hit rates certainly some failure rates. We've seen that go
Speaker 7: up by about forty percent. So started with about forty
Speaker 7: percent accuracy or about eighty five percent accuracy now, so
Speaker 7: it's continuously learning because people just keep feeding questions.
Speaker 3: But who's feeding questions to it?
Speaker 6: And is it our employees?
Speaker 3: So but when I call, if I call, if I'm
Speaker 3: a customer of Charles Schwab and I call Charles Schwab,
Speaker 3: would you be able to use use my question to
Speaker 3: somebody on the phone then to help train that AI.
Speaker 6: Yes, And that's exactly what's happening.
Speaker 7: They're using it on the phone and typing it in
Speaker 7: in response to a client inquiry.
Speaker 6: So it's really cool.
Speaker 3: Does it get to the point where it listens to
Speaker 3: me and then automatically gives the answer to whoever I'm
Speaker 3: talking to?
Speaker 7: Yes, our voice technology actually can pick up not just
Speaker 7: on what they're saying, but the emotion of what they're
Speaker 7: saying too, and cla flag, Hey we need to talk
Speaker 7: to a different way because you're getting frustrated or upset.
Speaker 2: Do you feel like in terms of AI, we're just
Speaker 2: scratching the surface of how it's going to affect investment
Speaker 2: advisors and your interaction with them.
Speaker 7: One percent scratching the surface. We're starting in these safe
Speaker 7: places like the example we just used. I feel like
Speaker 7: it's a ways off before we can really rely on
Speaker 7: that for portfolio solutions. Yeah, that's a ways off. And
Speaker 7: there's regulation we've got to consider.
Speaker 2: Okay, Yeah, which is why we talked about regulation in
Speaker 2: Washington with recordster Jelina. Thank you, This is fine, Julina.
Speaker 2: If you all kurse, She's managing director of Client Experience
Speaker 2: at Schwab Advisor Services. You are listening and watching Bluemberg
Speaker 2: BusinessWeek here in San Francisco.
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