Charles Schwab CEO Rick Wurster Talks Earnings, AI, Prediction Markets

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**Carol Massar** (0:07)
Charles Schwab reported earnings that topped estimates as retail investors continued to jump in and out of the market amid volatility sparked by geopolitical uncertainty. Company reported a record 11.9 million daily average revenue trades in the second quarter, a 57% increase from a year earlier. Tim, trading revenue also rose, climbing 28% to $1.2 billion.

**Tim Stenovec** (0:29)
Net revenue had beat too, up 21%.
Revenue per trade missed the Bloomberg estimate. Second quarter total net new assets hitting $118.7 billion. That was a significant beat.

**Carol Massar** (0:39)
Yeah. And in terms of the stock reaction, we saw it rally earlier, but now we're looking at it down about 1.6%.
We caught up just a short while ago with Rick Wurster. He's the president and CEO of Charles Schwab. He joined us here in studio to talk about the latest financial update.

**Rick Wurster** (0:54)
It was a really strong quarter. And what gives us a great amount of pride and satisfaction is that our clients continue to trust us with more and more of their wealth, and they continue to trust us to do more and more for them. So they're not just coming to us for investing and trading. Certainly they're doing lots of that, but they're also coming to us and asking for help with their wealth, and they're helping for tax planning, and they're asking for lending, for us to help them with lending. And so we're doing more to help our clients' financial lives. Their wealth is at an all time high, and it's a great time to be in this business, to support our clients and help them thrive.

**Tim Stenovec** (1:28)
Rick, when you say that clients are trusting Charles Schwab with more of their wealth, where is that wealth coming from? I mean, it is essentially a zero-sum game. So are they moving it from other platforms to you, and sort of how do you measure that?

**Rick Wurster** (1:42)
Well, first, I think a lot of our client wealth is being delivered by the returns you're seeing in the market. Over the last year, the market's up 21-ish percent, I believe, through June 30, and our client assets are up about 22 percent. So they've really participated, their wealth has grown. I think where their additional dollars come from is their employment activities, maybe they sell a house, other investment activities outside of Schwab.
But with employment so strong, it's not surprising, and the market doing well, not surprising that they continue to bring us a fair amount of assets. The other place we see it is that we do a lot to serve independent advisors. And independent advisors as a group are really taking share of the advice market. And so as they win and they bring more assets to us, we benefit from growth.

**Carol Massar** (2:26)
What are they trading? And what are they continuing to trade? I'm always curious about what exactly you're seeing across the platform.

**Rick Wurster** (2:31)
Yeah, it's been pretty interesting, actually. I'll highlight a couple of things. Number one, which is fascinating to me, is that we saw three and a half times more volume on down days in the market.
Which means that they're buying the dip. The other thing we've seen is a rotation. So they went from really interest in the MAG-7 to more on the AI trade. And that's been a driver of interest for our clients. And then the final thing I'd say is that because of some of the geopolitical risk in the markets, they are more actively trading so that we see more frequent trading, but the trade sizes are often smaller. And so they're making more incremental trades because they're not exactly sure what's gonna happen with the geopolitical situation. So those are three of the themes that we've seen with our retail traders.

**Tim Stenovec** (3:14)
How sustainable are these themes? The Wall Street Journal, I think, the headline was, the stock trading boom is here to stay, citing you and your comments earlier today.
Why do you believe it's here to stay? Why do you think it's sustainable?

**Rick Wurster** (3:28)
Well, a couple of things, I think they're great for our country because the more people invest at a young age, I think the better off they are over the long run. And we have seen a real increase in young investors.
Gen Z is 45% more likely to invest by the age of 21 than the prior generation. So we have that. I think the second structural change is when we went to zero on commissions and then all the other major brokers followed. It just took away the last barrier for investors. For people that were wealthy and trading in hundreds of thousands, the $5 commission didn't mean much. But for the person who had $5,000 or $1,000, that was a barrier. And now that's no longer a barrier. I also think AI is helping people get more comfortable researching stocks and taking positions and being an investor and learning about the power of compounding. So I think it's all adding up to just more engagement. We've seen the highest level of stock ownership of stocks that we've seen in the last 20 years. So it's great to see that kind of interest in markets.