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Charles Schwab Biography
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Charles Schwab
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| Type | Public (NASDAQ: SCHW) |
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| Founded | April 1971 (as First Commander Corporation) |
| Headquarters | San Francisco, California, United States |
| Key people | Charles R. Schwab, Chairman Walter W. Bettinger, CEO |
| Employees | 13,3001 |
| Website | Schwab.com |
The Charles Schwab Corporation (NASDAQ: SCHW), based in San Francisco, California, is a company founded as a traditional (brick-and-mortar) brokerage house, and which today is one of the world's largest discount brokers.citation needed Schwab offers the same services as traditional brokerages but with lower commissions and fees than many other brokers.citation needed The company serves some 7.5 million individual and institutional clients, with $1.22 trillion in assets (as of May, 2008), from some 300 offices in the U.S. Clients can also access its services via telephone, wireless device and the Internet. Besides discount brokerage, the firm offers a wide range of investment research, mutual funds, annuities, bond trading, and now checking and mortgages through its Charles Schwab Bank. In 2009, Schwab received the inaugural Tiburuon CEO Summit award for Maintaining a Focus on Consumer Needs. 2
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Registered investment adviser firms
Schwab's success depends heavily on the success of their independent investment adviser firms.citation needed Schwab serves roughly 5,000 independent advisers within its network. Most independent adviser firms are not affiliated with any brokerage firm, are not managed by a brokerage firm, and work independently from the brokerage firm, as adviser firms offer investment services to individuals or businesses. These adviser firms are generally regulated by state/local government or by the federal government and are also governed by the basic principles similar to that of a broker and yet different when rendering objective investment advice. Schwab was the first online discount brokers in the industry and has maintained its simple platform with simple tools for the novice trader.3
In 2005, the headline of a newspaper for financial advisers read Schwab Battles for Wirehouse Assets. The article announced a new strategy of shifting more accounts from the brokerage firms and transitioning more brokers from the "brokerage world" into registered investment advisers.
On November 20, 2006, Schwab announced an agreement to sell U.S. Trust to Bank of America for $3.3 billion. The deal closed in the second quarter of 2007.
Troubled times
In 2000, Charles Schwab Corporation's merger with US Trust was complete. Synergy was never achieved between the two companies and both firms' assets declined in the bear market of the early 2000s. The US Trust division was slapped with a $10 million fine for violation of money-laundering rules, a judgment handed down after the merger with Schwab.
In 2000, Schwab was reeling from a dramatic drop-off in online trading precipitated by the tech-stock collapse. In March 2000 Schwab acquired CyberCorp, makers of the CyberTrader trading platform. This acquisition helped bring back traders with Schwab's now more competitive software tools, such as StreetSmart Pro. Inevitably though, they had to cut back and downsize and subsequently the revenue fell 25%.
David Pottruck, who had spent most of his 20 years at the brokerage as the founder’s right-hand man, was named CEO in May, 2003; however, he was removed by the board 14 months later, in July 2004. He had shared the CEO title with Charles Schwab from 1998 to May 2003, when the founder gave Pottruck sole control of the top post.
In late 2003, Schwab was one of the companies investigated by the U.S. Securities and Exchange Commission (SEC). Schwab faced allegations regarding market timing by a fund family operated by UST and illegal late trading in the Schwab Mutual Fund Marketplace.
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 Clarles Schwab's trading execution capabilities although the equity research business would come under increase regulatory scrutiny in the following years. SoundView received a 57% premium to its market price before the announcement.45
In 2004, Schwab sold Schwab Capital Markets and paid a $350,000 fine to the SEC.
Return of Charles Schwab
On July 20, 2004, the board of Charles Schwab Corp. ousted chief executive David S. Pottruck and replaced him with the company's founder and namesake, Charles R. "Chuck" Schwab.
News of Pottruck's removal came as the firm 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.
Once back in control, Charles Schwab—who later conceded the company had "lost touch with our heritage" -- 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. So did the stock. The share price was up as high as 151% since Pottruck’s ouster, 10 times since the return of Charles Schwab.citation needed Charles Schwab’s net transfer assets, or assets that come from other firms, quadrupled from 2004 to 2008. In the fiscal year 2008, Charles Schwab Corp generated 5.1 Billion in revenue and recorded a net income of 1.2 Billion. As of May, 2009, they had $1.22 trillion in client assets and 7.5 million client brokerage accounts. For the first quarter of 2009, Charles Schwab Corp. reported 1.1 Billion in revenue and 218 million in net income. Due to Charles Schwab Corp's relatively low exposure to mortgage backed securities, the company has been largely able to escape the turmoil of the 2008 financial crisis that has seriously damaged many of its competitors.citation needed
"Talk to Chuck" campaign
On December 1, 2004, Euro RSCG New York announced it was chosen by Charles Schwab as its full-service advertising agency.
Starting in 2005, Charles Schwab launched a series of television ads. In a Slate magazine review, Ben Stuart, VP of Brand Strategy and Advertising for Schwab, said the cartoons force the viewer to focus on what he hears. The TV ads were produced by Euro RSCG and directed/animated by Bob Sabiston's Flat Black Films.
"Talk to Chuck" ads are also seen in print media, online, billboards, and visible in branch offices.
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 apparentcitation needed since he was named president and chief operating officer in February 2007. Charles Schwab remained executive chairman of the company and said in a statement that he would "continue to serve as a very active chairman." Bettinger is a 13-year veteran of Schwab and has held numerous executive posts along the way. He came to the company in 1995 when it acquired the retirement-plan services firm (Hampton Co.) 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."
References
- ^ "Company Profile for Charles Schwab Corp (SCHW)". http://www.zenobank.com/index.php?symbol=SCHW&page=quotesearch. Retrieved 2008-10-22.
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- ^ "Schwab Reviews". Schwab Reviews. 2009-06-18. http://stock-broker-security.com/schwab-reviews/. Retrieved 2009-06-18.
- ^ Schwab to Acquire SoundView Technology Group. November 19, 2003
- ^ SCHWAB TO BUY SOUNDVIEW FOR $321 MILLION. New York Times, November 20, 2003