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Schwab Sees ‘Massive Surge’ in Social Media-Influenced Trading

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What You Need to Know

  • Schwab’s core net new assets were $51.4 billion last month, while total client assets were $6.9 trillion.
  • Total assets in Advisory Services, the firm's RIA business, grew to $2.9 trillion as of Feb. 28.

Charles Schwab saw a significant rise in new brokerage accounts in February — driven largely by a huge increase in trading influenced by social media, as well as ongoing trends and the addition of TD Ameritrade in October — according to Peter Crawford, the company’s chief financial officer.

Schwab’s core net new assets totaled $51.4 billion last month, it said Friday. Net new assets excluding mutual fund clearing totaled $50.3 billion.

Total client assets were $6.9 trillion at month’s end, up 79% from February 2020 (due largely to the TD Ameritrade deal) and up 2% compared to January 2021, Schwab said.

Meanwhile, new brokerage accounts were 1.2 million in February, up more than 200% from February 2020 and up 11% compared to January 2021, it noted. The total number of active client accounts is now roughly 31.5 million.

Total assets in Advisory Services, Schwab’s RIA business, grew to $2.9 trillion as of Feb. 28 — up 72% from a year ago (largely tied to the TD Ameritrade deal) and up 3% from Jan. 31.

Total assets in Investor Services’ accounts owned by retail clients receiving ongoing advisory services from Schwab increased to $481.3 billion, a 49% increase from February 2020 and a 2% increase from January 2021.

“While retail trading activity overall has been increasing since Schwab helped lead the industry to $0 commissions in October 2019, the effects of work-from-home, technology-driven enhancements in access to information, and the increased convenience of stock-trading have further heightened investor engagement,” he said in a commentary piece.

“Most recently, the added accelerant of social media-influenced trading has led to a massive surge in interactions for brokerage firms and helped push equity trading volumes to truly breathtaking heights — well beyond the pre-pandemic peak reached during the 2008 financial crisis,” Crawford explained.

Plus, “given our size and reach, it’s no surprise that Schwab — with the inclusion of TD Ameritrade — has seen engagement levels soar as clients utilize our broad array of products, solutions, and educational resources to meet their investing needs,” he added.

More Trading Details

A whopping 88% of daily average trades last month were retail vs. 12% for advisory services, according to Crawford. Schwab saw 6.4 trades per account in retail last month vs. 2.7 in advisory services, compared to 2.6 for each of the two channels in February 2020, he noted.

Although trading levels grew last month across all demographics, younger retail clients — with account balances under $100,000 — are “driving a greater percentage of trading volume than in prior periods,” the CFO pointed out. “While this percentage has doubled over the past two years, it’s clear that clients above the age of 40 still account for the substantial majority of trading activity.”

Since October 2019, Schwab has seen a “steady build in the contribution to overall DAT volume from accounts open less than a year — growing from about 15% to about 35% now, he said.

Meanwhile, although “volumes for all trading products have been significantly elevated over the past 12 months,” Crawford explained, “client interest in equities has noticeably outpaced derivatives and other products.”

When looking at the most frequently traded stocks by principal value, “that interest spans both large cap tech and some newer names that have been the subject of recent social media buzz,” he said.

Schwab clients are also “actively increasing their usage of our digital platforms to place trades, with the usage of mobile increasing 15 percentage points over the past two years,” Crawford explained.

Simultaneously, both the number of shares per National Market System (NMS) equity trade and the number of contracts per option trade have “continued to decline over that same timeframe,” he noted.

Schwab chalks these latter trends up to a combination of several factors: “the removal of friction following the broad move to $0 commissions, an increase in fractional share utilization, and the growing influence of relatively new-to-category investors,” according to Crawford.