AI Integration and Stock Fears

SPEAKER_1 (0:02)

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Tom Keene (0:27)

Rick Wursters with the Charles Schwab Corporation. He's making the media circuit today. But now we're going to do a real interview about what matters. So he's a tuck up at Dartmouth. But before that, he's at Villanova where he was captain of the golf team.

Have you played golf with Jalen Brunson? That's all we want to know.

Rick Wurster (0:46)

No, I haven't. He's probably better than me given how well he plays basketball.

Tom Keene (0:49)

Yeah, really. He'll just pick up the clubs.

Paul Sweeney (0:52)

Maybe he's played with the Pope. I don't know. Maybe Rick's played with the Pope. He's at Villanova.

Tom Keene (0:55)

Well, that's true.

We wish the Pope good health here after the challenging week he's had with the recovery, I would say, from his distressed lungs. Rick Wurster, I have to talk about Schwab and the misconceptions about Schwab. I dealt with this decades and decades ago. What's the number one thing people don't know about Charles Schwab within asset management today?

Rick Wurster (1:20)

Well, we're operating from a position of strength. We just had a quarter with record results.

Most importantly, record results with clients. We brought in $190 billion of new assets from clients, an all-time record for a quarter. To me, that's a sign that clients trust us. They're doing more with us. We're deepening relationships with them in wealth and in lending. I think that's misunderstood of how much we do for clients across their financial life.

Tom Keene (1:43)

I would say one of the few things people don't know is the commitment of Charles Schwab International to Americans abroad. Very few people are doing this and Charles Schwab is out there for Americans who need financial services worldwide, right?

Rick Wurster (2:01)

Absolutely. International has been a source of growth for us. The person that loves to invest in the US., they love what we do outside the US because we give them personalized support, advice and the platform that makes it easy to invest here in the US.

Tom Keene (2:14)

What are you seeing in flow?

I'm just asking the same questions as Lizanne Saunders. This is nothing new. Rick, what are you seeing in flows right now? What are we doing with our money?

Rick Wurster (2:26)

A couple of things. Number one, clients are still heavily engaged in equity markets. They're trading at about 50 percent more than they were last year. Their margin levels have grown as the market has gone up, so they're engaged in equities. Number two, we're seeing a record level of interest in fixed income, and clearly that's a shift driven by interest rates.

So, that's a big deal. The third thing is we're seeing a lot more interest in tax aware investing. Clients have made, generated a lot of gains in a few number of stocks, and they want to protect those gains from capital from taxes, and so they're coming in and looking for help. And then finally, the fourth theme I would highlight is clients really are looking for advice. There is a bull market for advice in our country, and we're doing more than ever to help them in their financial life from tax planning to estate planning to how to invest.

Paul Sweeney (3:19)

Rick, I know it's always important for you guys to gather new assets and coordinate new assets in Q3, reach $190 billion, up 38% year over year.

Rick Wurster (3:28)

Who are these people?

Paul Sweeney (3:29)

Where's this money coming from?

Rick Wurster (3:30)

Interestingly, 70% of new to firm clients are Gen Z or millennials.

We are winning the young investor, and we're winning them because no one can match our value proposition. We have a combination of research, and you get to talk to our research folks all the time. Broad support, we've got thousands of people who pick up the phone every day, including trading professionals to help support the young investor. We've got content and platforms that can't be beat, and we're going to find them where they are. We're big on social media. We're the most followed financial services company on YouTube.

Tom Keene (4:05)

I will agree that you have pioneered the social media. He sounds like a CEO.

Did you say everything is record with Rick Wurster? Okay, there's a fee war out there. We're seeing mutual funds absolutely crater down to ETF structure fees. How do you people make money five years from now, given the fee compression that's out there?