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All Right, folks, if you really want to know what's going on in the investment universe, you really want to talk to the folks at Charles Schwab. It is a great place to start. First of all, it's one hundred and seventy five billion dollar market cap. Company stock is up about twenty six percent year to date following its recent earnings. At least eleven analysts raise their price target on the stock after Schwab's third quarter earnings beat thanks to a surge in retail investing activity.
And it's something we certainly want to dig into.
Yeah, let's talk about some more numbers behind the firm. Eleven trillion dollars more than that in client assets, thirty eight million client broadridge accounts, two point two million bank accounts, five point six million workplace plan participant accounts, and over sixteen thousand independent investment advisors. Thousands of them are here at Schwab Impact twenty twenty five in Denver, Netwrick.
Wurster took over CEO in January this year, after previously serving as president for about three years at the company. He was head of Schwab Asset management solutions before that. So you have been at the company company for nearly a decade, is that right?
Yes, welcome, thank.
You, thank you, thanks for having me on, and we're so thrilled that you made the trip to be here in Denver at the conference.
Well, we love coming here because we really do feel like it's good to get out of I feel like the coasts, and I feel like it's good to talk to the people who are actually managing tons and tons of money on a daily basis.
Talk to us about your first year and some.
Of what's been coming at you and how you and your team are making sense of kind of the investment environment when things can change often on a day to day basis.
Well, the most rewarding part of the first year has been serving our forty six million clients. And it's been a year in which the value of what we bring to the table, great in person experiences, the leading digital app the strength of our bank and wealth capabilities, where all of those things have been necessary to help clients navigate markets. So that's what I take most from the
first year. It's just such an incredible opportunity to serve our clients and the sixteen thousand advisors on our platform, many of whom are here. It's real honor to be their partner in business.
Well, the market environment right now, we want to dive right in there, because really this week we've heard from different Wall Street executives that an overdue collection have weighed on the market this week, so reduced expectations at that rate, cuts at prolonged government shot down. Michael Berry added to the negative tone with his disclosure of farish wagers on talent here and Nvidia diet buyers. Though coming back into the trades to day, retail investors have been buying dips.
How do you see today's environment from sort of a risk reward perspective.
We try to focus our clients on the long term. I think that owning securities and assets over long periods of time will generally go up. It's really hard to get the timing of markets down because you have to.
Make two correct calls.
First, you got to nail it to get out at the right time, which is really hard. In the strength of the kind of market we've had in the momentum, we've had to get out at the right times incredibly hard. And then you've got to be able to get back in at the right time, or you miss out. I was down in Charlotte, North Carolina, visiting with some clients and I heard from one client who back in twenty sixteen didn't like the presidential administration and so had sold
out of stocks. And this was back when we were having a pullback, and they said, would now be a good time to get back in the market, and they'd set out a huge amount of gains over a short term point of view. We try to have clients avoid that. Clients can stay in the market and tolerate some volatility. We think over the long run that gets rewarded because it is so hard to call the markets.
Both when to get out and when to get back in.
So as you walk around the floor and you're talking to advisors, I mean, what are they talking about, you know, in terms of timely advice that you're getting maybe from the advisors and what they are kind of hearing from their clients.
I think one of the most pressing topics from investors today is how to navigate concentrated positions. The S and p's as its concentrated as it's ever.
Been, right, the mag seven, the big tech.
Yes, and it's created a tremendous wealth for lots of retail investors, and now they're wondering how to diversify their portfolio and to do so in a way to minimize their tax burden. And there's all kinds of strategies that they can work with their advisor on to create a more diversity portfolio without having to pay a tremendous amount in capital rigaan.
How hard is it, though, that when clients are like, but why would I want to get out of Nvidia.
When I've seen what they've been doing for how many years?
Like?
How tough is that?
Because we constantly have conversations of people saying it's time to broad nab back off the big tech, and then it's the big.
Tech with so much momentum.
Well, you're absolutely right, and it's a really hard conversation to have and oftentimes we don't win it, but we want to make sure the client is cognizant of the risk and the choice.
That they're making.
Yeah, and to be fair to those investors, they've been right by sticking with their concentrated position for the most part, because the names that have driven the market higher have been the same ones here for a while, and so many people have stuck with it, and they are sitting on more gains and they might have anticipated.
So let's go further into the retail trader, because they've grown about twenty percent of the US equity market today. I'm curious about sentiment trends, like the structure of this trend. How resilient are we tell traders in an eventual downturn? Why?
I think retail traders have been the ones leading the market higher and have been the ones buying the dips. And I think they were out actually in many ways, out ahead of the institutional buyers. And so I think you have a retail buyer that has strong hands and we'll stick through the market.
So we'll see how it all plays out.
But markets go up and down and retail investors will inevitably make some decisions in there that's best for them.
People here, retail investor, they think about Robinhood. For example, your customer versus Robinhood's customer base. What are the differences there?
Well, our customer is an incredibly thoughtful group of retail investors. First, they have access to what we think are the best investing platforms in the industry. Number Two, they have access to the most robust research platform. We produce thirty five hours a week of live education and training for investors,
so they're making the most informed decisions. We also don't make them choose a channel, not only the leading digital app, but they can walk in and talk to someone that can call our phone and get their I should answer in less than thirty seconds. We have one thousand professional traders that wake up every morning ready to answer the phone to help our clients trade. So I think that we bring everything we can to help our clients be successful,
and I think they are. They make thoughtful decisions that are best for their financial life.
Now, you guys have talked about one third of your clients are gen Z, So talk to us about how you continue to bring them in. How do you defend them keeping them in? What do you need to kind of do to serve them and keep them on your platform.
So one third of our new to firm clients are gen Z, which is between the ages of thirteen and twenty eight.
We are having tremendous.
Sucives and that was new customers right.
New customers.
But we're having tremendous success with the young investor because we see through their eyes, and we put all the weight and strength of our firm behind helping them live their best financial life and make the smartest financial decisions for them. We don't just say hey, here's a platform, go for it. Certainly many want to do that and they can have at it, but we also stand behind every one of them. If they want access to our research, they want to talk to a professional, and in terms
of where we're finding them, it's interesting. I went to our marketing department and I said, I don't see enough about our advertising to young people. And they said, Rick, it's because you're not cool and in the places where young people go.
But where does that hurt?
It hurt a little bit.
We're the number one followed financial services company on YouTube, We're all over TikTok, We're on all these different places where young people are, and they're attracted to the breadth that the Schwab value proposition and how different it is than other offers they see in the market.
Well, speaking of what's out there in the market, go ahead.
Are you going to ask about crypto?
No?
Not yet?
Do you want to wait?
Yeah? I want to wait. I want to ask about prediction markets. Okay, because this is something that I think gen Z wants and polymarket is back in the US. It is certainly related to crypto, right, Carol, What role does schwab have in prediction markets in the future.
Well, I think prediction markets started out with financial services companies with the best of intentions. They wanted their investors to be able to bet on what was going to happen with the inflation report, what's going to happen with the job report, or what the Fed's.
Going to do.
And they realize that there's not a lot of volume and interest in those events in the general public, and that there's already ways in financial markets to invest around those activities. And then the election happened and the volume in prediction markets skyrocketed, and these companies got a windfall
of money. And then they said to themselves, well, a presidential election only comes one every four years, how do we generate this level of interest on more of an ongoing basis so we can see this wind fall more regularly.
And then they migrated from things that were tangentially related to financial markets to pure sports gambling, because every Saturday and Sunday there's lots of activities that the nation cares about and now I think we're in a world where what's driving all the volume and prediction markets is pure sports gambling.
So yes or no for Schwap getting involved.
But something we gotta keep an eye on.
You're considering it, we're not actively considering, and the reason we're not actively considering it is our mission is to make our clients better off their financial life. Five percent of people and actually read this on Bloomberg very early this morning, five percent of people that put money into a gambling app take out more than they put in in the first place. So gambling has proven to be
a negative contribution to your wealth. Now, it's fine if you use it as entertainment and you're doing it in a thoughtful way, but our mission is to make clients better off in their financial life and enhance their wealth.
Does that then say to you that it's not a good idea in terms of the prediction markets and kind of mixing them with traditional investing.
From my viewpoint, we want to do everything we can to put our clients in the best chance to grow their wealth. And I think it's fine for people to gamble. People are going to gamble, Hopefully they do it in a responsible way. The thing I worry most about is
the conflation between gambling and investing. If you're a young investor, you've got ten thousand dollars in your account, you can move it easily between investing in a stock that over the long run is likely to go up over the course of your life, or you can go bet on the Eagles game that weekend. I think that is not the greatest thing for the retail investor.
Speaking of gambling and perhaps gamification, Crypto we're just crypto fit into all of this for you guys.
Well, crypto has become an asset class that many people have their full confidence and trust in and they view it as a store of value. And on our platform we have lots of people engaged in crypto today. In fact, our clients own twenty percent of all the etp's crypto ETPs in our country, So our clients are big investors in crypto. And for most people, buying the exchange traded product is the right way to go because they're not looking to transact in bitcoin, they're just looking to get
exposure to the price movements now. In addition to offering the ETP, we will in time offer spot Crypto and We're confident that we've got clients that are sitting at digital native firms that have been long Schwab clients that we no want to bring those assets back to Schwaman.
We're looking forward to being able to.
Do that this year, next year.
Next year, still first out the twenty twenty ses.
That's where we're shooting focused and so far, so good.
You have an idea, I'm not going to get that specific.
I'd get slapped earlier by someone.
Well, speaking of last year, you sat in this chair, we were in San Francisco and we had a fun conversation about crypto. You made headlines. You said this was a year ago. I have not bought crypto now, and I feel silly. You also said crypto investors have been right in that you haven't been right, So update us. Have you bought crypto since then?
I have not bought crypto. I have nothing against crypto. I can certainly see the case of it. If people believe it's a store of value, it is scarce and it could go up. I think the blockchain is something that is likely to play a bigger part in markets,
and therefore crypto can have some value around blockchain. For me, personally, my investments are an assets that I consider to be productive assets or generating earnings, are generating principle or interest, and that's where I focus my investment place.
It's interesting that you say that, because when you said that comment to us last year in the middle of November, bitcoin was that and we were talking about bitcoin? Was that one hundred thousand dollars? Right now it's at about one hundred and four thousand dollars, So you look right by not actually getting in.
Right then possibly, and bitcoin and crypto generally is going to go up, It's going to go down. It's volatility is something. It's standard deviation is something like fifty percent, So we should expect wild swings. And for the right group of folks, they want to own it, they believe passionately in it, and they should have it as part of their portfolio. For some investors, it's what they want to invest.
In, private credit, private markets. How about that in terms of you think the role that that will play.
In our retirement those portfolios in our retirement accounts.
How do you feel about that one?
Well, you're a great private company. There's lots of great private companies in our country that have found really well, right, I think retail investors should be exposed to private opportunities. We would like to bring it to market in three ways. Number One, we access. We provide access to retail clients to great alternatives managers and private equity, private credit, venture capital,
a lot of the names that you're familiar with. Second thing is I think at the right time, we would love to be able to offer passive exposure in a fund like structure to private markets. Just like in public markets today you can go buy you know, the S and P five hundred eight X fund and get broad representation of stocks. You should be able to do that in private markets. We'd love to play a role in
that in the future. And then third, like you can buy individual stocks if you don't want either the active management or the passive exposure to the broad market. I think that marketplace for single security private companies should expand over time. And so those are the three ways we envision the market expanding, and we want to play a role in all three.
Do we have to wrap?
Can I get you twenty thirty seconds on elections and changes and environments? And I think the midterms and what might happen next time at the White House. How does that fit into your thinking in terms of long term strategy for the company, Because we've had a vault a year a little bit.
Markets have thrived through all types of administrations and changes and presidents and changes in the Senate and House and all of that. And so our message to clients is stay diversified and be invested, and stay invested and have a plan for your financial life. And if you do those things, they'll navigate different ups and downs associated with different administrations. And that's our council to clients.
All right. So appreciate your time as always and fun to be at your event.
I always love seeing you here and I appreciate the commitment you both made to be here in Denver and be a part of the Impact conference.
Thank you well.
Hopefully we'll see you next year and more between now and then.
Yeah, exactly, Rickhurster, Presidency of Charles Schwab of course, kicking off our coverage here at SWAB Impact twenty twenty five.
We are here in Denver, Brick again, thank you so much,