Past CFO Commentary

By now, you may have noticed that we recently made a few changes to our disclosures, and I'd like to make sure everyone is aware of these developments as well as provide context for how they help tell our story.  As a large savings and loan holding company, our required reporting has expanded significantly in recent years.  In addition, as Schwab evolves, we revisit our reporting and strive to keep it closely aligned with the everyday workings of the business.  In the second quarter of 2015, we added a new Other Regulatory Disclosures tab to our corporate website, made changes to the Asset Management and Administration Fees (AMAF) table in our earnings release package, and included some new information in our 10-Q filing.

The Other Regulatory Disclosures  tab is accessible via our Investor Relations landing page on aboutschwab.com.  This tab contains our Basel III Standardized Approach Disclosures and 2015 Annual Dodd-Frank Act Stress Test (DFAST) Disclosure.  The Basel III disclosures pull together and organize key capital information from our Forms 10-K, 10-Q, FR Y-9C (for bank holding companies), and FFIEC 041 (for domestic banks).  We see this as a very helpful tool for readers seeking to understand Schwab's capital picture as efficiently as possible.  With the posting of DFAST results, viewers now have a more concrete, empirical look at Schwab's results under the Severely Adverse Scenario as prescribed by the Office of the Comptroller of the Currency, which regulates the Bank.  The Basel III disclosures will be updated quarterly; the DFAST results are published annually.

Shifting to our earnings release, the AMAF table now breaks out three categories for Advice solutions – Fee-based, Intelligent Portfolios, and Legacy Non-Fee – as opposed to the single, all-inclusive line shown previously.  This makes it easier to track Intelligent Portfolios' progress while preserving an accurate view of the revenue yield from Fee-based advice solutions.  In addition, the AMAF table now reflects a reclassification of certain mutual fund balances out of OneSource to Other third party mutual funds.  The balances are no longer shown on the table, and the corresponding revenue is now included in Other AMAF revenue.  Although these funds generate balance-related revenue, they are not technically part of OneSource.

In our second quarter 10-Q filing, we began including the AMAF table, and provided additional detail regarding the fund flows that generate AMAF revenue.  We added a roll-forward of client assets in Schwab proprietary money market funds and equity and bond funds, as well as Mutual Fund OneSource.  Beginning balances, net flows, net market gains or losses, and ending balances are presented for each of these groupings.

Finally, the 10-Q includes new disclosure discussing our order flow revenue and its drivers. While less than 2% of our annual net revenues come from this source, we recognize there is substantial investor interest in the subject and believe this transparency will provide useful perspective on our practices.

We remain committed to evolving Schwab's disclosures to better reflect our business and its drivers.  We hope you find these changes helpful as you follow the company and assess its progress.