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00:00Talk to us about the quarter, because on several metrics, you guys definitely beat,
00:04and yet we do see the stock down on that revenue miss based on analyst estimates.
00:08How do you explain the miss, and what do you think investors might be missing here?
00:13Well, it was an exceptional quarter.
00:15We had record results, record earnings, record revenue growth.
00:18We saw record new assets come into the firm in March, and it was an across-the-board growth.
00:25Every one of our businesses grew double digits year over year.
00:28So it was a really strong quarter for the firm.
00:31It was also a quarter in which what we do, I think, really stood out for investors.
00:36We're a firm that stands behind every client, helps them get to where they want to be in their financial
00:40life,
00:41and in a market with more volatility, being in 400 local communities, having 16,000 advisors on our platform,
00:48taking 8 million calls, all of those things makes a difference in the everyday lives of people that invest at
00:53Schwab.
00:54It was also a quarter when we made a tremendous amount of progress around innovation.
01:00We launched teen accounts, sending a strong signal to teenagers and parents in our country about the power of saving,
01:08investing, and compounding.
01:09We made significant progress in AI.
01:12We announced earlier this morning that we are launching Spot Bitcoin and Ether, and we'll do so in the coming
01:19weeks.
01:20We built out some of our lending capabilities, specifically for the clients of our advisors, which are being well-received,
01:28and we closed the Forge acquisition so that we can offer private shares to our Schwab clients.
01:34So it was a tremendous quarter, thrilled with where we are.
01:38The stock goes up and down some days, and we don't know why, so we'll see what happens.
01:42But we're thrilled with how we're delivering for clients, thrilled with how we're performing as a business.
01:48Hey, Rick, on that record engagement, a 39% increase in daily average traders in March compared with a year
01:53earlier.
01:54What are you seeing from retail investors in April as markets do recoup these losses?
01:59Are you seeing the same level of activity in real time right now?
02:04We are, actually.
02:05So trading levels have stayed roughly similar as we come into April.
02:09And our client behaviors, I've spent a lot of time with our clients over the past months.
02:13And what I've heard from them, all different cohorts of clients, our more trading-oriented clients are very active.
02:19But they're not taking the same bold bets that they might have been taking, say, a year ago.
02:25They're taking smaller positions.
02:27They're holding those positions for a shorter period of time because they don't have as strong a view on the
02:33direction of the market and some of the factors driving it.
02:37So they're taking smaller positions.
02:39Our longer-term-oriented investors are staying the course.
02:42They've got a plan.
02:43We've helped work with them to build that financial plan.
02:45And they're sticking to it, and they've had really good resolve in terms of navigating the down moves here and
02:52sticking with stocks and benefiting from that over the long term.
02:56So I think clients are both engaged and acting very wisely.
03:01So one of the things I want to ask you, and you mentioned the teen accounts, and I know we've
03:05had some other reporting out where you made some comments about younger investors.
03:09They'll come in and buy the dip.
03:12I mean, talk to us about those younger investors, whether it's the teen accounts, whether it's just younger in general,
03:17what kind of activity you're seeing on the platform.
03:20Is that where a lot of the growth or where a lot of the growth in activity is?
03:24Well, we're crushing it with the younger investor for a whole variety of reasons.
03:29You know, our teen account launch was about going into the homes of Americans, teenagers and parents, and being able
03:37to share a message about how to get started in your financial life.
03:41You know, you and I and us, we've been invested in markets.
03:45We've seen the power of what markets can do to your wealth over time.
03:48Not every American has has participated in markets and the ability to get to investors earlier and give them a
03:56positive message about owning stocks, owning bonds, being a participant in markets, I think is incredibly powerful.
04:03And it's really needed at this time because they're inundated on social media and other platforms with messages about, you
04:11know, come come gamble on who's going to be what bad bunny is going to play first.
04:15And that's really been the message that teenagers have been getting.
04:19And we're thrilled to get out ahead of that and offer a message about saving, investing and compounding timeless messages
04:27that will serve them well for the rest of their life.
04:30And we couldn't be more proud to work with a lot of young investors who are thriving on our platform.
04:34Well, that's a good segue to get into prediction markets because you use the word bet there and bet on
04:38pop culture.
04:39On today's earnings call, you said Schwab is taking a hard look at prediction markets, would stay away from allowing
04:44clients to place bets on sports or pop culture, given the firm's focus on building that long-term wealth.
04:50What is the timeline for this?
04:52Is it fair to say you're going to launch them this year?
04:55Well, you know, we are closely following some of the developments from the CBOE and other participants that are using
05:02existing structures to come out with prediction markets.
05:05And they're treating them essentially as a binary option.
05:08And so if the CBOE were to come out with that, and I think they've publicly communicated they expect that
05:13sometime in the fall, that would be a very prudent way for us to be able to offer prediction capabilities
05:18to clients.
05:19They would be financially related around financial events and financial markets.
05:23They'd be in a structure that our clients understand.
05:25And that would probably be the prudent way for us to deliver it to clients.
05:30So we're closely following that and closely partnering with them, and we'll see where that goes.
05:34But, Tim, you're exactly right.
05:36Our goal is to bring prediction markets to clients that are financially related, that where you, on average, are going
05:43to add to your wealth as opposed to gambling-oriented things, which are going to detract from your wealth.
05:49All right.
05:50So, Rick, wait.
05:51So then could it happen by the end of this year?
05:54Well, we'll see.
05:56There's too much up in the air for me to commit to a date.
05:58I've been around too long to not lock myself in there.
06:01But I am proud that we said we'd have spot crypto out in the first half of this year, and
06:06we certainly look like that will be the case.
06:09So when we put out a date, we stick to it.
06:11I'm not going to put one out yet on prediction markets, largely because as we look at our priorities and
06:17the innovation that's coming, it's not top of mind for investors.
06:21And so as we think about what we're really leaning into, it's all the things I've talked about.
06:25It's getting crypto to market.
06:26It's having the opportunity to invest in private capabilities.
06:30It's having more lending capabilities.
06:33And it's meeting the full needs of our clients' wealth spectrum and being able to help them across their financial
06:39life.
06:40Our clients have record amounts of wealth, and they need more help with that and more advice.
06:45And those are the things we're leaning into and building.
06:47Certainly, we'll offer prediction markets when it makes sense.
06:50And I know there's some clients that would appreciate that.
06:54Hey, one of the things, though, Rick, we were curious about, our own Bloomberg Intelligence team has been doing some
06:58work on this.
06:59And they noted that around 88 percent of U.S.-based activity on prediction markets still sits squarely in sports markets.
07:06If you're not going to do prediction markets on sports or pop culture, some might say, why offer it at
07:13all?
07:13I mean, is there enough volume there, or is that why you're taking your time to see if there truly
07:17is enough volume?
07:19Well, Carol, you hit the nail on the head.
07:21And when I said, hey, there's not a lot of client interest in this, you can look at the volume
07:26in prediction markets.
07:26It's all sports gambling, and that's not something that's of interest to us.
07:31Fewer than 5 percent of people that put money into a sports gambling app take out more money than they
07:38put in.
07:38Our business for 50-plus years has been trying to help enrich our clients' financial life.
07:44And with stocks and bonds and ownership, it's all about owning a piece of the growth of our country and
07:49the companies in it.
07:51And sports gambling is fundamentally different than that.
07:53And that's why, again, as we think about prediction markets, I think it's likely something we'll have at some point.
07:58But it's not top of the list in terms of what we want to roll out, because there's just not
08:03a lot of volume outside of betting on sports and pop culture, which we're not interested in.
08:07Hey, Rick, you announced Schwab Crypto.
08:09It's a spot cryptocurrency trading service that will begin rolling out to retail clients in the coming weeks, direct access
08:15to Bitcoin and Ethereum trading.
08:17Why did it take so long to do this?
08:20What were you waiting for?
08:22I actually think we're getting Bitcoin and Ether out very quickly.
08:26If you look at the other major financial institutions, I think we're at the front of the line.
08:32We're doing this in a really thoughtful way, which is we're building the books and record capabilities ourselves.
08:37We're building the ability to custody the assets.
08:40That sets us up for the long run, which is the ability, if markets go towards tokenization, we're building the
08:47capabilities to support that.
08:49So we're making the investments we need to operate in a world that's more digital should it go that way.
08:54And we're thrilled with our progress and got to market relatively quickly, I think, after the regulation changes, which allowed
09:02banks to get into these markets.
09:04Well, Fidelity, Robin Hood, Morgan Stanley, Coinbase, they've been doing this for quite some time.
09:08Coinbase has a decade long head start.
09:10You manage 11.9 trillion in client assets.
09:13What is your competitive edge in crypto?
09:15And would you want like a Schwab client who has a Coinbase account to move their crypto assets to Schwab?
09:23Well, Tim, we've got if they've got a 10 year history, we've got a 40 year history ahead of them
09:27of building trust, of doing the right thing for clients, of being able to bring value, service, support and advice
09:35together.
09:36And so what we offer that's differentiated is we're not just making a product available.
09:41We're making all of Schwab available and crypto is now a part of that.
09:45And we have so many clients that that I hear from all the time that say, I can't wait until
09:49you can offer this because I want to hold it on your platform.
09:52I trust you.
09:53You give me great advice.
09:55When I have a question, I call you, pick up the phone quickly.
09:57You can't get that on a lot of the other platforms.
10:00And in terms of your reference of them being out there earlier, the big difference with all those companies you
10:05listed is they don't have a bank.
10:06And as a bank, up until recently, we weren't able to have spot crypto for clients.
10:12And I think of the banks that have a bank, I think we're out there relatively quickly.
10:16So that's the difference on timing.
10:18But I do think we have a very competitive offer, given all that we have to offer at Schwab.
10:22And we're doing it with great value as well.
10:24I got to say, there was so much in the earnings call that really is playing into the narrative today,
10:30Rick.
10:30And we got to ask you about AI, because, you know, back in February, there were some concerns.
10:35We saw wealth managers selling off yours, along with Raymond James and LPL.
10:40And this came after Altruist came out with a tool that was going to help financial advisors personalize strategies for
10:46their clients.
10:48So you came on Bloomberg, and you said you were disappointed and surprised by that sell-off.
10:52And you thought AI has the potential to make financial advisors more efficient than irrelevant.
10:57Today, you said you're planning to launch an AI-driven investment portfolio insights come May.
11:03What exactly will this be?
11:05And I've got to say, having been, Tim and I, at Schwab Impact, we heard it from the RIA community.
11:10Like, this is the kind of thing that they want, and they wanted it from you.
11:16Absolutely.
11:17Well, AI is a huge accelerant to our strategy.
11:20It's going to help us grow faster, and it's going to help us drive scale and efficiency.
11:24On growth, we'll use LLMs.
11:27We'll treat them as a new distribution channel, which will allow us to reach a new set of clients, much
11:31like we've worked with Google to open ourselves up to new clients.
11:35We'll work with the LLMs.
11:37We'll also be able to deepen relationships with clients we can't serve, which ties directly into your question.
11:41There's a group of clients that we don't engage in an individual personalized relationship with, and AI is going to
11:48allow us to reach them in a scalable way and provide insights, tailored views, and what's happening to their portfolio
11:55and their asset allocation that's going to add value to their financial life.
11:59And that's going to help us grow.
12:00And then on the scale and efficiency front, every single call that comes in to a salesperson or a service
12:08person or when you walk into one of our branches, all of that is now being supported by AI.
12:14It's making our people more productive, more able to help the individual meet their financial dreams, and serve more of
12:21our clients.
12:22So we're thrilled with AI.
12:23I think it's going to be an accelerant to our business and drive both growth and scale and efficiency.
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