Charles Schwab by the Numbers

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Charles Schwab by the Numbers

Aaron Levitt Oct 23, 2019

When it comes to the investment industry, there are a handful of firms that have leveled the playing field for ordinary Joes and have made saving easier. One of the top managers has to be Charles Schwab. From its foundation in the 1970s, Schwab has built an empire focused on low-cost investment management. As the Securities and Exchange Commission (SEC) allowed for negotiated commission rates on stock trades, Schwab was one of the first firms to jump at the opportunity – and the firm hasn’t looked back.
From sophisticated wealth options and checking accounts to index funds and online trading, Schwab has continued to expand into the marketplace in order to appease a wide range of investors. So, it’s no wonder why Schwab has become one of the largest brokerage firms, asset managers and banks in the United States. It’s also become one of the most respected firms in terms of advice and commentary – with Founder Charles R. Schwab appearing on various financial media as well as the firm putting on the must-attend IMPACT series of conferences.

With that, Mutualfunds.com takes a look at Charles Schwab by the numbers.


Schwab’s Wide Range of Offerings

These days it is hard to believe, but Schwab actually started out as an investment newsletter publisher and was once owned by Bank of America. The real turning point for the firm came when the SEC democratized trading commissions, which allowed firms to compete on costs. This eventually led to a reduction in brokerage commission and a wide adoption of stock and bond trading by the masses. Schwab was one of the first to jump on this idea, and the continued focus on clients has transformed the investment manager into the powerhouse it is today.

Headquartered in San Francisco, through its three main subsidiaries – broker-dealer Charles Schwab & Co., Charles Schwab Bank and Charles Schwab Investment Management – Schwab now provides a gamut of options for investors. This includes full-feature brokerage accounts, proprietary-managed mutual funds and exchange-traded funds (ETFs), separately managed accounts and banking options such as checking and savings accounts. Schwab also offers a host of wealth management solutions and high-net-worth services, including trust and estate planning
 
In addition to these options, Schwab has aggressively moved into services such as compliance and back-end products to help other broker-dealers, RIAs and financial advisors. With Schwab addressing a wider market than just retail investors, the firm has become one of the largest asset managers in the U.S. Of the roughly $45 trillion worth of investable assets in the United States, nearly $3.77 trillion (as of September 30, 2019) is parked at Schwab.


A Leader in Investment Management

Aside from its leadership position in brokerage services, Schwab has really made a name for itself in mutual fund management. This includes many active mutual options. Where Schwab has seriously won over investors’ wallets has been in its index funds. Today, the firm is the third-largest provider of such funds and manages more than $183.4 billion.

And thanks to Schwab’s client-first mentality, these mutual funds feature some of the lowest costs versus their peers. Moreover, Schwab features low initial and additional investment minimums of just $1. That minimum is for not only its index options but its active and top-performing fundamental/smart-beta mutual funds as well.
 
Schwab has also become a top destination for portfolios’ uninvested cash or savings. Most managers offer just one or two options. However, Schwab offers 11 different money market funds in addition to its FDIC banking products. This includes government, prime and municipal funds. As a result, Schwab manages nearly $170 billion in money market investments as the seventh-largest provider of such funds.
 
Digging into Schwab’s overall mutual funds, you can see the wide range of its options.
 
For active investors, Schwab offers different active mutual funds, including several sector-focused funds like the Schwab Health Care Fund (SWHFX) or core-equity funds like Schwab Hedged Equity Fund (SWHEX). On the flipside, Schwab offers bread-n-butter market-cap index funds like its Schwab S&P 500 Index Fund (SWPPX) as well as several smart-beta index funds. For example, the Schwab Fundamental US Large Company Index Fund (SFLNX) uses various screens to build its portfolio.
 
Schwab’s breadth of offerings doesn’t just stop on the equity side. The firm features some decent fixed income mutual funds as well. For taxable bonds, Schwab offers three broad index funds covering the U.S. Aggregate Bond Index, short-term bonds and inflation protection via the Schwab Treasury Inflation Protected Securities Index Fund (SWRSX). For tax-free bonds, Schwab offers a couple of funds covering the entire U.S. plus a California-specific fund.
 
Finally, through its client-focused mantra, Schwab has been a major supporter of retirement initiatives and savings. This includes a huge suite of target-date funds (TDFs) that come in two flavors – either using index or active mutual funds to accomplish their goals. Both suites of TDF’s offer eleven different funds in staggered five-year increments through a 2060 retirement date.
 
Altogether, as of September 30, 2019, Schwab had more than $450 billion in its proprietary mutual fund and ETF assets.


Assets Keep Trending Higher

Thanks to its low-cost services and wide range of products, Schwab has continued to see its assets and accounts trend higher over the last few years. As of the end of 2018, Schwab had nearly 11.6 million active brokerage accounts. That’s a nearly 24% increase over the number it had in 2014. Moreover, Schwab has continued to be a destination of registered investment advisors (RIAs) and other financial planners. Today, the firm serves more than 7,500 RIA firms holding more than $1.55 trillion of client money at Schwab. This has grown by an 8% compound annual growth rate over the last five years.

Part of this growth in asset growth has come from the trend in Schwab lowering costs of investment management. The firm recently cut trading costs on stocks and ETFs to zero, and its mutual funds have been one of the major protagonists in the so-called “fee-war.” As a result, Schwab has continued to add new clients to its base. Last year alone, new clients contributed a whopping $227.80 billion to its assets – a jump of 15% over 2017 or more than twice that of 2008 levels.
 
With new digital advice solutions, wealth management options and dedicated advisors for folks in the middle, Schwab has become a one service producer for both individual investors as well as RIAs. This has produced positive trends in assets across the broad.


The Bottom Line

While it had humble beginnings, Schwab has become a tour de force in investment management. This stems from its client-first mantra. Thanks to its focus on lower costs and quality products, assets at the firm continue to grow. This focus has also continued to make Schwab a great home for RIAs and other advisors looking for a one-stop shop for their clients’ assets.

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