Tell me about your goals for the company and Schwab Institutional. Our mission, our vision, is to be the ethical brokerage firm for the individual investor and their advisors.
I started out as an analyst and junior portfolio manager for an investment advisor--so my roots go back a long way in this business, and frankly, I was never really a traditional stockbroker. I look at the advisor business through great empathetic lenses--I'm proud of the fact that early on I realized that investors who wanted investment help wanted to get it from someone who preferably was independent of the transaction.
Would you talk about the competition? At a meeting last year in New York with journalists, when someone asked who you thought your competition was, you didn't miss a beat and said, "Fidelity." Fidelity is, frankly, one of our significant competitors, [and it's also] the most opaque company in the world, not subject to Sarbanes-Oxley or anything like that, so they can put out only the information that they want to put out, unlike us, who as a public company are in a glass box. They have vulnerabilities because they rely on a suite of funds [with an] average OER [operating expense ratio] of about 128 basis points,
Wealthy people--or people who aspire to be wealthy--know that [the best] management of assets doesn't always come from a single firm, but from multiple firms, so Schwab has always offered open architecture--we've done it with mutual funds, we've done it with our investment advisors, and throughout Schwab. Fidelity will not own it all, let me assure you.
What about Schwab's financials? You've made cutting costs a big priority, but Schwab Institutional seems to be a more important part of the overall company. We've taken out a lot of costs that were built up in the prior five years. The beneficiaries of our reduced costs have been lower prices to our client base, including all our clients within Schwab Institutional, which represents about a third of the company in terms of assets; revenues are probably 20% of the business. It's a very important part of Schwab, and will continue to be for the indefinite future.
What about your personal plans? I've committed to the Board that I would be CEO through January '07, but would remain as chairman afterward. I serve at their pleasure.