Charles Schwab Corporation

History

In 1963, Charles R. "Chuck" Schwab and two other partners launched Investment Indicator, an investment newsletter. 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, Mr. Schwab and four others purchased all the stock from Commander Industries, Inc., and in 1972, Mr. Schwab bought all the stock from what was once Commander Industries. In 1973, the company name changed to Charles Schwab & Co., Inc. 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 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.

U.S. Trust

In 2000, Schwab purchased U.S. Trust for $2.73 billion. 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. On November 20, 2006, Schwab announced an agreement to sell U.S. Trust to Bank of America for $3.3 billion cash. The deal closed in the second quarter of 2007.

SoundView Technology

In November 2003, Schwab announced the $345 million acquisition of SoundView Technology Group. The acquisition was intended to integrate SoundView's equity research content with Charles Schwab's trading execution capabilities, although the equity research business would come under increased regulatory scrutiny in the following years. SoundView had received a 57% premium to its market price before the announcement.

Return of Charles R. Schwab

David S. Pottruck, who had spent the majority of his 20 years at the brokerage as 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. Just a year later, 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 percent, to $113 million, for the second quarter, driven largely by a 26 percent decline in revenue from customer stock trading.

Charles Schwab acquired a market making firm called Mayer & Scweitzer during the late 90s to profit from trading against its retail customers orders. The acquisition was successful because Schwab internalized customer orders instead of sending it to stock exchanges profiting from wide spreads at the expense of its customers. The unit was later renamed Schwab Capital Markets.

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. The company’s net transfer assets, or assets that come from other firms, quadrupled from 2004 to 2008. In the fiscal year 2008, the company generated $5.1 billion in revenue and recorded a net income of $1.2 billion. For the first quarter of 2009, Charles Schwab Corp. reported $1.1 billion in revenue and $218 million in net income. Due to the company's relatively low exposure to mortgage-backed securities, the company has largely been able to escape the turmoil of the 2007–2010 financial crisis that seriously damaged many competitors. It did, however, market to clients an instrument called YieldPlus that had subprime exposure, leading to massive losses for some investors.

Walt Bettinger named CEO

On July 22, 2008, Walter W. Bettinger was named chief executive, succeeding the company's namesake.

Bettinger has been the heir apparent since he was named president and chief operating officer in February 2007. 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." Bettinger came to the company in 1995 when it acquired retirement-plan services firm Hampton Co. that he had founded at age 22. Bettinger, in the company’s statement, seemed to nod to the idea that some Schwab shareholders might worry about another succession going awry: "Chuck and I have worked closely together over the years preparing for this transition," he said, "and we will continue to work closely together in our respective roles as executive chairman and CEO."

Marketing

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

"Talk to Chuck" campaign

Starting in 2005 Charles Schwab launched a series of television ads featuring the slogan "Talk to Chuck". The TV ads were produced by Havas Worldwide (then called 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.

A Wall Street Journal blog post described the ads as effective because they included a single memorable phrase.

Registered investment adviser firms

Schwab' business model is based on independent investment adviser firms. The company serves 7,000+ independent advisers. These firms are generally regulated by state/local government or by the federal government. Schwab also offers online solutions, through online tools, for novice traders.

Competitors

Competitors in the discount brokerage industry include: E*TRADE, Fidelity Investments, Firstrade Securities, IDealing, Merrill Edge, Place Trade, Scottrade, TD Ameritrade and TradeKing.

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 your 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.