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Schwab Co-Chairman and CEO Walt Bettinger on CNBC

Walt Bettinger joins Jim Cramer on CNBC's Mad Money on May 23, 2024, to discuss the company's growth and shares what's ahead for Schwab now that the Ameritrade integration has completed. 

JIM CRAMER:  …this was the high 40s t, high 70s earlier this week. I’ve been recommending the retail brokerage titan the whole way because I thought it was unfairly maligned during last year’s mini banking crisis. A lot of uninformed people about the stock. Yesterday, Schwab held its inaugural Institutional Investor Day on Wall Street. And, clearly, well, you know what? There was some problems in the stock, but it fell 4.6%, lost another 3.9% going back to 72. By then, it was not very big and ran into the meeting. What went wrong? Even though Schwab reaffirmed some its previously issued long-term financial targets, imagine also some incrementally negative comments about its near-term outlook, including a walk down of earnings expectation for the current quarter but not the future. So what do we do now? Has it been punished enough with this pullback? Do we have to say the easy money’s been made? Let’s go straight to the source, with Walt Bettinger. He’s the Co-Chairman and CEO of the Charles Schwab Corporation, to find out. Mr. Bettinger, welcome to Mad Money. 

 

WALT BETTINGER:  Thanks, Jim. I appreciate the invitation. 

 

JIM: Okay, so you just finished a huge deal, TD Ameritrade. It’s just an incredible heavy lift. You’ve got a giant number of people. What’s next for Schwab? This was about as tough a deal as I’ve ever seen close. 

 

WALT: Well, it was a complex transaction for sure, but I think anyone looking at it objectively would say it was an unparalleled success. We converted almost $2 trillion in client assets, 17 million accounts. Those clients have already brought us about $60 billion in new money after they converted over to Schwab. And although you can certainly go out when you’ve converted 17 million clients and find a few who have a complaint, the numbers are really small. We actually have to report all complaints to our regulators, and we averaged about 55 complaints per one million accounts converted. Now, with a past as an actuary, Jim, I should be able to do the math, but I’ll just say that’s a lot of zeros after the decimal point in terms of complaints that we received. 

 

JIM: It certainly is. And just in terms of the stock price, it did run up well into the meeting. And there were some people that believed that this cash sorting issue had been behind them, which is something, by the way, that, you know, you’ve never held us to any false promises. The fact is this problem is a short-term problem. It has nothing to do with the long-term future of Charles Schwab. 

 

WALT: That’s exactly right. At the beginning of this year, we said that we expected earnings in the fourth quarter to be somewhere between 80 and 90 cents, and we actually affirmed yesterday that we now expect it to be near the top end of that range. However, it was going to be volatile during the year on our way to those numbers. And in the first quarter, we did about 74 cents of earnings. That was a 500 basis point improvement in pre-tax margins over Q4. And I think some of the analysts might have gotten a little ahead of themselves in anticipation of us getting into that 80- to 90-cent range. We still feel really good about where we’ll be in the fourth quarter, and even better about where we’ll be in 2025, with sequential improvement in those EPS numbers. 

 

JIM: Well, that’s what matters to our people. Now, you have consistently championed both individual investors, our viewers, and the advisors who serve them. We’ve got some of those, too. And I think you’ve done it because you’re a trusted advisor with a great vision, but you’ve also offered great value. Now, what I’d like to know is we went from 52% people in the stock market to 62% over the last 11 years. From your vantage point, I know you’ve gotten a huge number of those people coming to you, are they investing responsibly, the Charles Schwab way, or are we seeing too much gamification? 

 

WALT: Well, there’s probably a mix in there. And you’re exactly right, there’s been an influx of new investors. I often say that when the market is going up, everyone is a brilliant trader. When the market is going down, it’s a lot more difficult, or when it’s choppy. 

I think what we try to do at Schwab is provide as much education, tools, ability to speak with a professional who has decades of experienced trading, help people who want to trade, do it responsibly, and do it as effectively as they can. We’re not really interested in just pure volume of trades. That’s not in the best interest of our clients. And of course that’s never been the Schwab way, to try to just drive revenue on the backs of behavior that may not be in our clients’ best interest.

 

JIM: Alright. Well, people should know, we keep our charitable trust with Mr. Bettinger and Charles Schwab. And one of the reasons we do that is because you are good to both the big and the little guy. Now, my wife, unbeknownst to… someone did not know that she was married to me, and they kicked her out of their core group of advisors because they said she wasn’t rich enough, which didn’t ring well with me, frankly. Do you kick people out because they’re not rich enough? 

 

WALT: No. In fact, one of our guiding principles at Schwab among our five is that every client matters, no matter how small or how large. And if you go back to Chuck’s origin 50 years ago, it was all about helping bring investing to the Main Street of America. I know that that has been co-opted, or attempted to be co-opted a little bit in recent years, but Chuck was the original opening up Wall Street to Main Street, and that’s still a huge part of what we do today. Of course, we serve a lot of investors of all sizes. About 70% of our retail assets are with clients that have $1 million or more. But if you look at that on a client basis, the vast, vast majority of our clients are below a couple-hundred thousand dollars. 

 

JIM: Do people have a mixture of index funds, and do some individual investing at the same time?

 

WALT: They do. Actually, we’ve called that core and explore for a long time, and have recommended for most investors setting up a solid portfolio of low-cost, generally, index funds, or low-cost actively managed funds is really the right way to build a portfolio. You and I both know that when it comes to investing, time is your friend, and being in the market is often a lot better strategy than trying to time the market. There are those who are pretty good at it, but it’s a minority. And of course, those who do it well are incredibly disciplined, very careful. They utilize all the risk management tools we make available. Those are the folks who generally trade, and do it successfully, over a longer period of time. 

 

JIM: Okay, and from your perspective, I know we hear about this higher for longer, but are people going… people want, your shop, they want inflation tamed, because they know that the value of the dollar will be eroded. What would you say is the zeitgeist of the place? I mean, we want rates slower because we obviously want to make more money. At the same time, you have core investors who must have inflation slain, or else they’re going to lose their purchasing power. What do you think is the mood of the account base, if you will? 

 

WALT: Well, we just put out today one of our regular studies on client sentiment, and what’s happened is inflation has now become the number one concern among investors across, again, 35 million clients that we serve. And so when they think about inflation, it has moved their position from the first quarter of being a little bit on the bullish side, to where now they’re a little bit on the bearish side. So inflation is such a big concern for the average individual and the average investor. Again, this is why it’s so important to have a diversified portfolio, so that if you have a mix of fixed income, or cash and stocks and other investments, and you get a bit more inflation, you do have the opportunity to build income on that side of your portfolio, the cash and the bond side. 

 

JIM: Well, that’s exactly how we feel at Mad Money, and that’s why we’re so happy to have you on the show after a terrific run. And there were people, by the way, just so you know, who actually counted this company out, and that is just ridiculous. 

I want to thank Walt Bettinger, Co-Chairman and CEO of Charles Schwab, SCHW, where we have our account for our charitable trust. Thank you so much. We really appreciate it. 

 

WALT: Jim, thanks for having me on the show, and always appreciate the wise counsel you offer to investors and traders. 

 

JIM: You are very kind. Thank you. Thank you so much. We have buddies back after the break.

 

Chuck Schwab

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You know Charles Schwab as our founder and the man who helped make investing accessible to everyone. But did you know he was a door-to-door insulation salesman? Or that he almost flunked out of college? Or that he raised chickens as a boy? Now you can find out where it all started for Schwab (the man and the company), and how he went from dyslexic student to Wall Street disruptor, as the company went from start-up to industry leader, in the new documentary “Chuck” by Oscar-winning director Ben Proudfoot.

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Since our founding, we have championed Main Street investors by giving them the tools, resources, and investment advice needed to secure their financial futures. Our goal is to be the most trusted leader in investment services—not only by championing every client's goals with passion and integrity, but also through our investments in the success of our employees and the communities where we operate.

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What We Do

At Schwab, we take a more human approach to financial services, and treat clients and colleagues the way we'd like to be treated. We offer more intelligent ways to invest—combining the best of people and technology—and offer it all at low costs, which helps clients achieve better outcomes.

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People at Schwab are free to be their authentic and full selves—without compromise. And we’re stronger for it. Every employee’s unique strengths deepen the value we can create for each other and for our clients.

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This contains forward-looking statements, which reflect management’s expectations as of the date hereof. Achievement of these expectations and objectives is subject to risks and uncertainties that could cause actual results to differ materially. Important factors that may cause such differences are described in the company’s most recent reports on Form 10-K and Form 10-Q, which have been filed with the Securities and Exchange Commission and are available on the company’s website (https://www.aboutschwab.com/financial-reports) and on the Securities and Exchange Commission’s website (https://www.sec.gov). The company makes no commitment to update any forward-looking statements.

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