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Charles Schwab Corporation

The Charles Schwab Corporation
Public company
S&P 500 Index component
IndustryFinancial services
Founded1971; 48 years ago (1971) (as Charles Schwab & Co., Inc.)
FounderCharles R. Schwab
HeadquartersSan Francisco, California, U.S.
Number of locations
345 branches
Key people
  • Charles R. Schwab
  • (Chairman)
  • Walter W. Bettinger II
  • (President & CEO)
Electronic trading platform
RevenueIncrease US$10.132 billion (2018)[1]
Increase US$4.562 billion (2018)[1]
Increase US$3.329 billion (2018)[1]
AUMDecrease US$3.25 trillion (2018)[1]
Total assetsIncrease US$296.482 billion (2018)[1]
Total equityIncrease US$20.670 billion (2018)[1]
Number of employees
~19,500 (December 2018)[1]
Footnotes / references
[2] [3]

The Charles Schwab Corporation is a bank and stock brokerage firm based in San Francisco, California. It was founded in 1971 by Charles R. Schwab. It is ranked 13th on the list of largest banks in the United States and it is also one of the largest brokerage firms in the United States. The company offers an electronic trading platform to trade financial assets including common stocks, preferred stocks, futures contracts, exchange-traded funds, options, mutual funds, and fixed income investments. It also provides margin lending, and cash management services, as well as services through registered investment advisers.

Schwab operates in four main divisions: investing, wealth management, banking, and trading. As of December 31, 2017, the company had 10.755 million active client brokerage accounts, with $3.362 trillion in assets.[2] The company operates 345 branches in 46 states, as well as branches in both Puerto Rico and London.[2]


In 1963, Charles R. Schwab and two other partners launched Investment Indicator, an investment newsletter.[4] At its height, the newsletter had 3,000 subscribers, each paying $84 a year to subscribe. In April 1971, the firm was incorporated in California as First Commander Corporation, a wholly owned subsidiary of Commander Industries, Inc., for traditional brokerage services and to publish the Schwab investment newsletter. In November of that year, Schwab and four others purchased all the stock from Commander Industries, Inc., and in 1972, Schwab bought all the stock from what was once Commander Industries. In 1973, the company name changed to Charles Schwab & Co., Inc.[5]

In 1975, the U.S. Securities and Exchange Commission allowed for negotiated commission rates and Schwab set up a stockbrokerage. In September 1975, Schwab opened its first branch in Sacramento, CA, and started offering discount brokerage services. In 1977, Schwab began offering seminars to clients, and by 1978, Schwab had 45,000 client accounts total, doubling to 84,000 in 1979. In 1979, Schwab risked $500,000 on a back-office settlement system called BETA (which was short for Brokerage Execution and Transaction Analysis), enabling Schwab to become the first discount broker to bring automation inhouse. In 1980, Schwab established the industry's first 24-hour quotation service, and the total of client accounts grew to 147,000. In 1981, Schwab became a member of the NYSE, and the total of client accounts grew to 222,000. In 1982, Schwab became the first to offer 24/7 order entry and quote service, its first international office was opened in Hong Kong, and the number of client accounts totaled 374,000.

In 1983, Stephen McLin purchased the company for Bank of America for $55 million. In 1984, the company launched 140 no-load mutual funds. In 1987, management, including Charles R. Schwab, bought the company from Bank of America for $280 million.[6]

In 1991, the company acquired Mayer & Scweitzer, a market making firm, allowing Schwab to execute its customers' orders without sending them to an exchange.[7] In 1997, it was fined $200,000 for failing to arrange the best trades for its customers.[8] The unit was renamed Schwab Capital Markets in 2000.[9]

In 1993, the company opened an office in London.[citation needed]

In 1995, the company acquired The Hampton Company, founded by Walter W. Bettinger, who became CEO of Schwab in 2008.[10]

In 1996, Web trading goes live. Customers can trade listed and OTC stocks, or check balances and the status of orders on the website.[11]

In 1998, dissatisfied by the in-house results, the company hired interactive firm Razorfish to redesign the website. Years later the website would be entered in the Cooper-Hewitt Museum's inaugural National Design Triennial.[12]

In 2000, Schwab purchased U.S. Trust for $2.73 billion.[13] In 2001, less than a year after the acquisition of U.S. Trust, the U.S. Trust subsidiary was fined $10 million in a bank secrecy law case. It was ordered to pay $5 million to the New York State Banking Department and $5 million to the Federal Reserve Board.[14] On November 20, 2006, Schwab announced an agreement to sell U.S. Trust to Bank of America for $3.3 billion in cash.[15] The deal closed in the second quarter of 2007.

In January 2004, Schwab acquired SoundView Technology Group for $345 million to add equity research capabilities.[16][17]

David S. Pottruck, who had spent the majority of his 20 years at the brokerage as Charles R. Schwab's right-hand man, shared the CEO title with the company's founder from 1998 to 2003. In May 2003, Mr. Schwab stepped down, and gave Pottruck sole control as CEO. On July 24, 2004, the company's board fired Pottruck, replacing him with its founder and namesake. News of Pottruck's removal came as the firm had announced that overall profit had dropped 10%, to $113 million, for the second quarter, driven largely by a 26% decline in revenue from customer stock trading.

After coming back into control, Mr. Schwab conceded that the company had "lost touch with our heritage", and quickly refocused the business on providing financial advice to individual investors. He also rolled back Pottruck's fee hikes. The company rebounded, and earnings began to turn around in 2005, as did the stock. The share price was up as high as 151% since Pottruck's removal, ten times since the return of Charles Schwab.[18] The company's net transfer assets, or assets that come from other firms, quadrupled from 2004 to 2008.

In April 2007, the company acquired The 401(k) Company.[19]

On July 22, 2008, Walter W. Bettinger, the previous chief operating officer, was named chief executive, succeeding the company's namesake. Charles R. Schwab remained executive chairman of the company and said in a statement that he would "continue to serve as a very active chairman".[18]

In 2011, the company acquired OptionsXpress.[20] The company also acquired Compliance11, Inc., a provider of compliance software.[21] In 2012, it expanded again by acquiring ThomasPartners, an asset management firm.[22]


In 2004, Charles Schwab chose Havas Worldwide (then called Euro RSCG) as its full-service advertising agency. In February 2013, Schwab hired Crispin Porter + Bogusky (CP+B) as its lead creative agency with Havas Worldwide remaining to create ads for ActiveTrader and optionsXpress.[23] In March 2015, Adweek reported on marketing material created by CP+B for Schwab's Intelligent Portfolio service.[24]

In 2005, the company launched a series of television ads featuring the slogan Talk to Chuck by Euro RSCG and directed/animated by Bob Sabiston's Flat Black Films. "Talk to Chuck" ads appeared in print media, online, billboards, and branch offices.[25] A blog post in The Wall Street Journal described the ads as effective because they included a single memorable phrase.[26]

In 2013, the company launched an advertising campaign with the slogan Own Your Tomorrow.[27]

Schwab Charitable Fund

Schwab Charitable Fund is a donor advised fund which preserves the anonymity of donors by not disclosing individual donor names. Professionally-managed accounts are only available through independent investment advisors working with Schwab Advisor Services, a business segment of The Charles Schwab Corporation. It accepts contributions of real estate, private equity or other non-cash assets via a charitable intermediary, with proceeds of the donation transferred to a donor-advised account upon liquidation. This intermediary considers donations on a case-by-case basis, with a typical requirement that assets be valued at $250,000 or more.[28]


Improper marketing of Schwab YieldPlus Fund

The Schwab YieldPlus Fund fund was named as one of the decade's top ten fund disasters for the 2000s.[29] "In written materials and in conversations with customers, some Schwab representatives omitted or provided incomplete or inaccurate material information relating to the fund's characteristics, risk and diversification, and continued to represent YieldPlus as a relatively low-risk alternative to money market funds and other cash alternative investments that had minimal fluctuations in net asset value (NAV). Between Sept. 1, 2006, and Feb. 29, 2008, Schwab sold over $13.75 billion in shares of YieldPlus to customers, which accounted for approximately 98 percent of the amount Schwab customers invested in ultra short-term bond funds. During this time period, Schwab's solicited sales of YieldPlus totaled approximately $3.36 billion, approximately 40 percent of which were to customers 65 years of age or older. Schwab collected approximately $17.5 million in fees from sales of the fund."[30]

From June 2007 through June 2008, the total return on Schwab's YieldPlus fund was -31.7% when other ultra short bond funds had little or no losses. These large losses occurred because Schwab's YieldPlus fund was not an ultra short bond fund as claimed by Schwab. It was instead an ultra long bond fund. YieldPlus held large amounts of securities backed by illiquid, long-term, private label mortgages. It also held long maturity corporate bonds and trust preferred securities. In doing so, Schwab's fund violated concentration and illiquidity limits stated in its prospectus and had much more credit and liquidity risk than it disclosed in its SEC filings and marketing materials. YieldPlus' long term securities including private label mortgage backed securities gave it a slight advantage over its peers prior to 2007. Unfortunately, the extra yield was an order of magnitude smaller than the losses that followed when credit and liquidity spreads widened and the value of its long term holdings dropped significantly in 2007 and 2008. YieldPlus's heaviest reported losses occurred in early 2008, yet Schwab still appears to have understated these losses by significantly inflating the value of the fund's holdings and therefore its NAV ...The YieldPlus fund made large, risky investments in long maturity structured products, such as subprime Residential Mortgage Backed Securities ("RMBS") that were inconsistent with the SEC's definition of an ultra short bond fund. Schwab marketed the fund as a cash equivalent investment and as a safe alternative to money market funds with a higher yield and only slightly more risk. Such a claim would be incorrect for a typical, conventionally managed ultra short bond fund, but was especially false when made by Schwab on behalf of the YieldPlus fund. In its marketing materials, Schwab compared returns on the YieldPlus fund to returns on the Lehman Short U.S. Treasury 9-12 month index. The Treasury securities included in the Lehman index have no credit risk, are highly liquid and have short maturities. The holdings of the YieldPlus fund generally shared none of these attributes.[31]

Investors in the Schwab YieldPlus Fund, including Charles Schwab himself, lost $1.1 billion.[32] Schwab closed the YieldPlus funds in 2011.[33]


  1. ^ a b c d e f g "The Charles Schwab Corporation Annual Report (Form 10-K)". U.S. Securities and Exchange Commission. February 2019.
  2. ^ a b c "US SEC: Form 10-K The Charles Schwab Corporation". U.S. Securities and Exchange Commission.
  3. ^ "Charles Schwab". Fortune.
  4. ^ Waggoner, John (April 11, 2013). "Icons: Schwab still roots for the small investor". USA Today.
  5. ^ Kador, John (November 22, 2002). Charles Schwab: How One Company Beat Wall Street and Reinvented the Brokerage Industry. John Wiley & Sons.
  6. ^ Fisher, Lawrence M. (February 3, 1987). "Bank America Is Selling Schwab Unit to Founder". The New York Times.
  7. ^ "COMPANY NEWS; Charles Schwab In an Acquisition". The New York Times. June 6, 1991.
  8. ^ "Schwab Unit Agrees to Pay $200,000 Fine". The New York Times. Bloomberg L.P. October 22, 1997.
  9. ^ "Schwab and TD Waterhouse Join Forces to Build New UK Market Making Firm" (PDF) (Press release). Toronto-Dominion Bank. January 31, 2001.
  10. ^ "Charles Schwab acquired The Hampton Co., a defined benefit and defined". Pensions & Investments Online. November 9, 1995.
  11. ^ "Company history". September 9, 2019.
  12. ^ "The Artless Website:". American Institute of Graphic Arts. January 25, 2006.
  13. ^ McGeehan, Patrick (January 14, 2000). "Schwab to Pay $2.73 Billion For U.S. Trust". The New York Times.
  14. ^ Brick, Michael (July 14, 2001). "U.S. Trust Is Fined $10 Million in Bank Secrecy-Law Case". The New York Times.
  15. ^ Lipton, Josh (November 20, 2006). "Bank of America To Buy U.S. Trust". Forbes.
  16. ^ "Schwab Completes Acquisition of SoundView Technology Group" (Press release). Charles Schwab Corporation. January 16, 2004 – via Business Wire.
  17. ^ "Schwab To Buy Soundview For $321 Million". The New York Times. Bloomberg News. November 20, 2003.
  18. ^ a b "Charles Schwab steps down as CEO of his brokerage". Los Angeles Times. July 22, 2008.
  19. ^ "Schwab Completes Acquisition of The 401(k) Company" (Press release). Charles Schwab Corp. April 2, 2007 – via Business Wire.
  20. ^ "Schwab Completes Acquisition of optionsXpress" (Press release). Charles Schwab Corp. August 31, 2011 – via Business Wire.
  21. ^ "Schwab Completes Acquisition of Compliance11, Inc" (Press release). Charles Schwab Corp. November 16, 2011 – via Business Wire.
  22. ^ "Schwab Announces Agreement to Acquire Thomas Partners" (Press release). Charles Schwab Corp. October 15, 2012 – via Business Wire.
  23. ^ Beltrone, Gabriel (February 7, 2013). "Charles Schwab Completes Creative Search: Crispin outstrips Fallon for lead role". AdWeek.
  24. ^ Gianatasio, David (March 12, 2015). "Ad of the Day: Meet Charles Schwab's New Intelligent, Nonhuman Pitchman: CP+B builds embodiment of the company's robo-adviser". AdWeek.
  25. ^ Stevenson, Seth (December 5, 2005). "Money Toons: The distinctive animated ads from Charles Schwab". Slate.
  26. ^ Higgins, Michelle Perry (August 6, 2014). "Why 'Talk to Chuck' Was a Great Ad". The Wall Street Journal.
  27. ^ "Charles Schwab Launches New Campaign Celebrating the Spirit of Engagement" (Press release). Charles Schwab Corp. June 12, 2013 – via Business Wire.
  28. ^ "Schwab Charitable Facilitates More Than $1.5 Billion in Grants in Fiscal Year 2017" (Press release). Charles Schwab Corp. July 10, 2017 – via Business Wire.
  29. ^ Silverblatt, Ron (December 30, 2009). "The Decade's 10 Worst Fund Disasters". U.S. News & World Report.
  30. ^ "FINRA Orders Schwab to Pay $18 Million to Investors for Improper Marketing of YieldPlus Bond Fund" (Press release). Financial Industry Regulatory Authority. January 11, 2011.
  31. ^ Deng, Geng; McCann, Craig; O'Neal, Edward (2010). "Charles Schwab YieldPlus Risk" (PDF). Securities Litigation & Consulting Group.
  32. ^ Norris, Floyd (January 14, 2011). "At Schwab, Unkept Promise To Investors". The New York Times.
  33. ^ Pender, Kathleen (June 24, 2011). "Schwab shuttering beleaguered YieldPlus funds". San Francisco Chronicle.

Further reading

  • Cronin, Mary J. Banking and Finance on the Internet (John Wiley & Sons, 1998). online
  • Ingham, John N., and Lynne B. Feldman. Contemporary American business leaders: a biographical dictionary (Greenwood, 1990). pp 566–71.
  • Kador, John. Charles Schwab: How one company beat Wall Street and reinvented the brokerage industry (John Wiley & Sons, 2002).excerpt
  • Silver, A. David. Entrepreneurial Megabucks: The 100 Greatest Entrepreneurs of the Last 25 Years (1985).
  • Willis, Rod. "Charles Schwab: High-Tech Horatio Alger?" Management Review (Sept. 1986) 75#9 pp 17–20

External links