Chuck Schwab: Slaying Wall Street Dragons—The 2015 IA 35 for 35

Schwab’s values-driven management helped create a firm that made investing more accessible

This is the fourth year Chuck Schwab has been featured on the IA 25, and the eighth year Charles Schwab leaders have been recognized. (Portrait: Joel Kimmel) This is the fourth year Chuck Schwab has been featured on the IA 25, and the eighth year Charles Schwab leaders have been recognized. (Portrait: Joel Kimmel)

Investment Advisor recognized the long-term impact Chuck Schwab had on the industry when we included him in our inaugural IA 25 list back in 2003. “If all that Charles Schwab had done was to found a discount brokerage that loosened the wirehouses' stranglehold on stock trading, his place in history would be secured,” Jamie Green wrote then.

That wasn’t all he did, though. Schwab’s custody platform made the RIA model possible. Now, Schwab Advisor Services serves 7,000 advisors with $1.13 trillion in client assets as of the first quarter of 2015. That’s a 2% increase over the previous quarter and a 9% increase since last year.

Net income for the first quarter of 2015 for Charles Schwab Corporation fell 7% to $302 million from the first quarter of 2014, but CEO Walt Bettinger highlighted other gains for the firm.

“Our strong client momentum continued in the first quarter of 2015, as our innovative, full-service model continued to resonate with investors,” he said in a statement. Net new assets from retail investors were the highest since the first quarter of 2008, totaling $12.5 billion, and clients opened 274,000 new brokerage accounts, up 6% year-over-year, according to Bettinger. “As March ended, we were serving 9.5 million active brokerage accounts, 986,000 banking accounts, and 1.5 million retirement plan participants, up 3%, 6% and 10%, respectively, from year-earlier levels.”

He added that continued efforts to build awareness of the firm’s wealth management capabilities led to an increase in client balances receiving ongoing advisory services that “kept growing faster than assets overall. At quarter-end, $1.06 trillion was under the guidance of a registered independent advisor and $188.4 billion was enrolled in one of our retail or other advisory solutions, up 9% and 18%, respectively, over the first quarter of 2014.

The Once and Future Disruptor

“In the beginning when investors were at the mercy of stockbrokers, financial self-determination, like airplane travel, was reserved for the well-off. Then Charles Schwab beat Wall Street and reinvented the brokerage industry. Now Charles Schwab & Co. Inc. continues to liberate the world of personal finance and we are all, rich and poor, better off for it,” John Kador wrote in the introduction of his book, “Charles Schwab: How One Company Beat Wall Street and Reinvented the Brokerage Industry.”

Kador wrote that Schwab the company was able to withstand major upheaval over the years thanks to Schwab the man’s “values and leadership,” which led to a “values-driven management mindset that encourages the company to put the interests of its customers first.”

Schwab continues to be a disruptor, to the point that it’s disrupting the longevity of other disruptors. When the firm launched in March its robo-advisor offering, Schwab Intelligent Portfolios, Cerulli Associates said it was a “serious threat to [robo-advisors'] continued existence.” Not only is the robo-advisor model easy to duplicate, big firms like Schwab can offer more services at a lower cost, according to Cerulli.

Schwab is chairman of the board for the firm that bears his name. He was CEO of the firm from 1986 to 2008, except for a period from 1997 to 2004 when he shared that position with David Pottruck, who was asked to leave by the board, the Wall Street Journal reported at the time.

In an updated edition of his own book “Charles Schwab’s Guide to Financial Independence,” Schwab urged investors to not let themselves be overwhelmed by a lack of financial knowledge, but to start gradually, so long as they start.

“I’ve spent more than 40 years living and breathing investing; I know what to do, and I’m eager to pass on what I’ve learned,” he wrote. “The biggest risk in investing is doing nothing. You’ve got to start; as soon as you do, you’re two steps closer to your hopes of financial security.”

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See the full 2015 IA 35 for 35 and the calendar for extended profiles of each honoree.

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