NAOMI: I'm going to start.

Hi, everyone.

I hope you've had a great day of classes.

And I'm delighted that we finish up today's full activities with our speaker series for this month.

I'm so pleased to be able to introduce Jonathan Craig, who is senior executive vice president of investor services and marketing at Charles Schwab.

You've received Jonathan's bio, which is incredibly impressive. You know, he's been at Schwab for just under 20 years, and in that time, honestly, it's kind of as close to a vertiginous rise as I can think of.

His--our conversation is particularly timely because, of course, you know, there's been a lot of discussion about institutional and retail investing. There's a lot of curiosity about where the market is and where the market is going, which is always the case.

Jonathan was kind enough, right, to bring your crystal globe for us.



And so--

JONATHAN: We have yet to hear on that one.

NAOMI: The format for today's talk is a kind of, you know, a fireside chat format. I encourage you to put your questions into the Q& A panel, which Connie and Amanda will be monitoring. And you can upvote questions there as well.

And, so, with that, I'm going to get started.

So, Jonathan, thank you so much. It's really great that you're here. We've been working on this talk

for some time, and I know how busy your schedule is. And we feel, you know, particularly privileged to have you come from Schwab.

I have to tell you that I've been a Schwab investor for a long time, and it started when I was a graduate student, and of my two pennies, I thought maybe I should put half a penny someplace.

And I spoke to someone who--and asked them, "Well, you know, how do I do this?" And they said, "Oh, you should go to Schwab."

And, so, I'm one of your long-term but very small clients.

So, you know, let's start off with--tell us a little bit about yourself. What's your background? How did you get into this field?



NAOMI: What made the field appealing to you?


JONATHAN: Sure--well, let me just first say thanks for having me.

It's great to be here, at least virtually, and it has been a crazy month and a crazy couple months, and even a crazy week, but it's nice to be Friday afternoon.

So the timing was good. Thanks for having me.

But also, I just wanna say, you know, how much I admire everyone who's going through this program.

I did go through a similar program at Berkeley.

It was not weekends, it was evenings, but I just have a lot of admiration for people who are, you know, taking the time to invest in themselves in school while they work, and I do know how hard it is.

I went--I think I was--I started in my late 20s. I guess I graduated early 30s. I was in a sales job at the time. It was a challenging job. I didn't have a big team. I wasn't married, I didn't have kids.

I remember looking around the room and thinking, "I don't know how these people do it," who are, you know, farther along in their career, and may have big teams and really big roles and families.

And so I found it incredibly gratifying but also incredible amount of work.

And again, you know, I had it "relatively" easy, given the stage of my life, so...Anyway, just--I'm glad--thanks for having me, and thanks for being in this program.

My wife actually went to NYU in part--in the evening. She didn't finish. She moved out to California for some reason to be with me. But she did start--she did start the program, so...Anyway, so, yes, I'm Jonathan Craig. I've been at Schwab for 20 years.

I lead--it's called investor services and marketing. What that is, is our retail business, which you know us for. That's the traditional business, our 401(k) business, our stock plan business, as well as international.

And then I also lead marketing. I was named CMO in 2012, and I've kept that accountability since till now.

Personally, lived here in San Francisco. Been here 23 years, which is pretty crazy. Didn't expect--like Schwab, I didn't really expect it to be a destination, more of a stop. And it's become a destination.

I have two boys, Monty and Max, wife, Patty, and a golden retriever named Wilson. That's the whole--that's the family. I can add--I can go into a lot of detail.

And I joined Schwab--kind of--I mean--I was--I didn't grow up as an investor.

My parents didn't have a lot of money at all.

But I sort of was cheap--frankly cheap and frugal, and I remember I got transferred out to California by AT&T, actually.  And they gave me a relocation package, and I didn't even know what a relocation package was at the time.

I--you know, thought they would pack my stuff up and move me out, which is what they did, but I was a renter and they put me in an apartment. But I did get a check, and I remember 'cause it was a big check, and it was for $10,000, and it was for relocation, and it was, you know, quite a surprise.

And having grown up frugal and just paid off all my college loans, I opened a Schwab account and started investing before I joined Schwab. So, you know, that's how I got to know Schwab as a company.

Joined it for a whole bunch of reasons, and I can go into a lot of detail, but I thought it would be a bit of a stop on a career path, and it really has become a destination.

You'll probably get a sense, but I bleed Schwab blue. I believe deeply in what we're doing, and I--you know, I believe investing matters, and we can talk about that, but I really do believe investing matters in so many ways, and being independent--financially independent matters in so many ways, so I can go on, but--

NAOMI: Yeah, I saw on your LinkedIn profile that you had been chief of staff for Mr. Schwab himself.

JONATHAN: Yeah, yes.

NAOMI: So, you know, what--at what stage was the company at that point, and how has it gone on from there?

JONATHAN: Yeah, so let me--quick history.

So I joined--and again, I joined in 2000, I was actually in telecom sales, and loved--well, I liked what I was doing, but I wasn't terribly passionate about it.

I did have a Schwab account, and I was pretty passionate about investing, and some other circumstances led me to join Schwab. I actually joined the company launch--our wireless training business, which was--this was in 2000, and 2000, the markets were going crazy. Everyone was trading, and we "launched" a wireless trading capability with PalmPilot and BlackBerry, so--totally different world.

Did that for a couple years; the market crashed shortly after I got here, no causation, hopefully, but a very different time. So I spent probably 2002 after wireless till 2006 in a variety of different roles around Schwab. We were reorganizing pretty significantly. It was not a great time for the company after the market crash.

I worked in U.S. Trust for a little bit, which was our high-end wealth management organization in New York. But then in 2006, Chuck had come back as CEO, I think in 2004--he had begun--he relinquished the title of CEO as an executive chairman, came back in 2004, got very involved in--in 2006, one of his priorities--he called it, was, "We needed to grow the nursery," which I thought was a horrible way to describe it, but his point was we needed younger clients in the franchise.

You know, he was worried that our clients were getting older every year and we were missing the next generation. So he wanted a direct initiative leading that, and wanted a person who reported and had a retail job I'm in now, and they asked me to do it, you know, maybe because I was Gen X at the time, but this was--I'm still Gen X, but I was the right age at the time.

The was the "Gen X" initiative. And we did a lot of things in 2006, 2007, and 2008 to really make Schwab even more approachable for the younger investor.

Got a lot of access to Chuck in that environment, and then he--his--the chief of staff opportunity opened up in 2008, which I did through 2010. It was an incredible opportunity to work for what I--who-someone who I think is an American icon on every level.

You know, he's not listening so I don't get any credit for this, but he just--you know, he's, I think, done so much for investing and democratizing investing in employment, and just helping people achieve financial freedom for tens of thou--hundreds of thousands, millions of clients.

But anyway, I worked for him in 2008, which was also the financial crisis. So it was an incredible time to be chief of staff for Chuck because--you know, we were one of the only firms that didn't take TARP money.

We were fine, we were in great shape--we were in good shape, but it was right in the middle of a financial crisis, and it was, you know, truly a once in a lifetime--I hope.

So, anyway, working for Chuck--I can--there's so many stories I can tell, but like most founders, he's--he just has an uncanny sense of what the individual investor needs and wants, and a deep, deep insight.

And, you know, in public, he's a multi-billionaire, but for a multi-billionaire, you know, he basically manages his own money, and he's so in tune with what the individual investor wants.

To this day it amazes me.

He's still very involved, he still calls and comes in all the time, and, you know, I'm always afraid of his long list of all the things that we're not doing and what we need to do.

NAOMI: So let me ask you a follow-up about that.

So, you know, what enables, you know, iconic founders to have that incredible instinct about, you know, their particular audience, whether it's, like, Steve Jobs for Apple or Chuck Schwab for Schwab?

Is it something that's honed? Is it something you can acquire?

JONATHAN: Yeah, I--that's a great question. I mean, there's so many examples of individuals who transformed companies, from, you know, Henry Ford to Steve Jobs, you know, same for Chuck.

So, you know, I would hope it's not required, but I hope you can acquire it, but I do think there's something particularly unique about Chuck. I think, you know--I can't--I don't wanna speak for Chuck, he did talk sometimes of being dyslexic--he is dyslexic--and I think that's sort of common too, you'll find, and I think that may be an example of--he just works really hard, but also looks at things differently.

You know, he--I often tell people--Chuck--when you meet with Chuck, and I--you know, he used--you know, he's a very hard person to work for in that he's hard-driving, he has high expectations.

But--and I always tell people when you go meet with him, everyone's always, you know, nervous, whatever, and I'd say, "You know, the most important thing is, first of all, you know, he wants--"he's a human being, treat him--"you know, he wants you to treat him as an incredible--just as a peer.

"It sounds crazy, but act like a peer, and that'll go a long way.”

"But also, Chuck's gonna say some crazy things, and you're gonna be shaking your head going, 'How can that make any sense? You know, did I just hear that?'"

And I'm telling you, 'cause I experienced this for three years working directly for him, and then my career here, you go back to your desk, and when you start to think about what he was really saying, when you start to triangulate it, it's almost always some level of insight that you just missed, and you kick yourself for having missed it.

So, you know, I don't think it's--clearly, there's plenty of examples of wildly successful leaders who are, you know, founders of all, you know--and great transitions of companies, even Apple, obviously being a great example. But there is something unique about certain people, for sure.

NAOMI: Mm-hmm. So--

JONATHAN: Let me just add--it's a lack of group--I think groupthink is dangerous, and I think when you think differently, when you just look at things differently--maybe that's a lesson for all of us that--you know, be careful of groupthink and surrounding yourself with people who think similarly, 'cause you're probably collectively wrong.

NAOMI: I'll come back to that in a later question--thank you.

Thank you for making the lead-in. Let me ask you a little bit about Schwab as a company. So, you know, how does Schwab function? How does Schwab make money?

JONATHAN: Yeah, well, it's actually remarkably easy. And it's one of the things I love about Schwab. I mean, you know, I'm not--we are recruiting, I'm not trying to recruit on this call, but if you--just tell me if I get too positive about the company, but, I mean, there's three things that stand out with Schwab that make it very powerful for me, and this will help answer your question.

Number one is our focus.

You know, we have 30,000 employees now coming to work every day with one objective, which is to help individual investors achieve great outcomes. And, you know, that's it.

So major banks--if you're a Merrill Lynch or a B of A or a Goldman Sachs--these are great companies, I'm not--but they do a lot more than that. They have lots of constituents, lots of clients, lots of things pulling them in lots of directions.

At Schwab, it is all about helping individual investors achieve great outcomes, and I think that focus is incredibly powerful. And we have 6 trillion assets now--it's all against that.

The second thing that's special about Schwab is our culture, and every company says their culture is special, so you should treat it with the appropriate grain of salt, but, you know, we do, I believe, have a level of clients' interest that is pretty unique in our category.

And we talk about seeing the business through clients' eyes, but, you know, as I say to clients--I've been in every EC meeting--executive committee meeting since 2012, all--every board meeting since 2017, and many board meetings before that presenting, and I think if a client was in any of those meetings, they would've been proud that their money was at Schwab. And maybe every company can say that, I don't know, but the conversations are always around, you know, the client, so...

Then the last thing I would say about Schwab is for a company our size, we have a history of disruption, and disruption is another overused word, but it's--I live in, you know, California, right, the center of disruption. And I would say, you know, it's easy to disrupt if you're founding--if you're a start-up or if you're a company that's flailing ‘cause you have no choice.

If you're a start-up, you're founded--you're funded to changing industry. If you're in trouble, you have to swing for the fences, but, you know, Schwab, we cut commissions to zero and to cut--most recently, you know, we've done many things, but we took hundreds of millions, those billions of dollars of revenue out of our business in May of--or October of 2019, and that was not--no matter what the press says, it was not about any short-term concerns about the state of business.

That was just--we can afford it, let's move to where puck is going, let's take a long-term view, and--so I think, you know, what's special about the company is that culture, that focus in that disruption. I realize I didn't answer your question.

The way we make money--the way we make money is related to our focus. You know, I can explain to my mother. We help individual investors achieve great outcomes.

We make money through ways--net interest incomes.

So we are an investment management firm, you know, brokerage, but clients, when they put money at Schwab, some of that money is in cash, we earn return on that cash, and we lend to our clients on margin. You know, we lend--home lending and some things.

So net interest income is a big part of it.

A big part of it is asset management fees. So a lot of our clients pay us a fee to manage their money. And we also have some products that have fees associated with them, like ETFs and mutual funds. That's the second major category.

The third category is transactions, which are still less important, but there are still fees on options, contracts. There's still transaction fees, occasionally. I talk about no commissions, but there are transaction fees that happen, and that's all very explicit.

So, you know, we help individual investors, we make money three ways: money on client cash, asset management, and transactions.

NAOMI: And so, you know, my understanding is that Schwab is largely focused on sort of North America. Is that correct, or does the company have sort of global--

JONATHAN: Specifically in the U.S. We have an international presence, but it's relatively small. I mean, the vast, vast majority of business is in the U.S. We have a broker dealer in Hong Kong. We have a small presence in China, very small, we just opened, actually.

We have a branch in London, and we have clients all over the world, but they're mostly expats or--so the short answer--it's complicated--but the short answer is we're a U.S.-based business. And that's a conversation with lots of debate.

You know, do you wanna take the Schwab model globally? And, you know, you would think there's tremendous appeal, and there is. There's also tremendous complexity. The regulatory framework in the U.S. is complex enough. It's replicated many times over in every country.

So, you know, we're primarily U.S.-focused with opportunistic international.

NAOMI: So if I can just sort of ask a follow-up to that and not--so what was--if you can share a sort of strategic thinking around, say, opening an office in China. Is that for American businesses in China or, you know--'cause, I mean, one part of the sort of high net worth market, you know, has some such--

JONATHAN: Yeah, we had a business in Hong Kong for many, many years. In fact, going back to the '80s, I think, Chuck opened--it was one of our--and I don't even know the whole history. One of our very early branches, and I think that says a lot about Chuck's vision.

And that is, you know, a lot of that was serving some mainland China business, not just Hong Kong, but obviously mainland China business. So that's been our primary presence.

When we bought TD Ameritrade, they had a small entity in Beijing, but it's not doing business in terms of brokering. It's not managing money; it's called wholly owned financial entity.It's an opportunity to promote education and content.

And we've been doing a lot of that through Schwab and TD Ameritrade around financial education.

We do surveys every year, [indistinct] from China.

So we started to have a presence, and we feel like we should have a presence there, but we don't have a direct business there. The direct business is in Hong Kong.

NAOMI: Got it.

JONATHAN: In China. Obviously, the complexity of any international market is complex. In China, it's even more complex.

NAOMI: I mean, would you say that the--you know, sort of this choice to really focus on the U.S. is part of a sort of another expression of Schwab's sort of overall focus on certain areas and let other areas--leave other areas to others, sort of thing?

JONATHAN: I think making trade-offs is the hardest part of strategy. I think the company's probably done a good job there. You know, so not go--and by the way, we made a lot of mistakes.

We actually had a much bigger international business. You know, I joined in 2000. We owned Sch--we had Schwab Canada, which we bought from Scotiabank. I think we sold them back. We had a joint venture in Japan. So over the course of Schwab's history, we had a little bit in Australia, Singapore--actually, we have a presence in Singapore now, again, with TD Ameritrade. So we have done different things around the world over time and learned where it works and where it doesn't work.

But in general, I think the point, Naomi, about focus is probably the most important. I think Schwab has done a nice job recognizing what we're good at and where we belong. And, you know, our market share at 6 trillion in the U.S., we still think is in the teens. We think the market's probably about 50 trillion, I--we should know, but it's fluid in how you define market, but we think our market share is still in the teens in terms of the retail investment market.

So lots of opportunity and that focus on--last thing I'll say is, you know, in 2008, our revenue got cut in half from the financial crisis. So the company was incredibly strong from a balance sheet standpoint, but, you know, the stock got killed, the owners, you know, employment--we had layoffs, obviously, it was a very difficult environment.

And I give Chuck, obviously, all the credit, and Walt, the current CEO, who's--actually, my job and became the CEO at that time--I think many other companies would've started to look for other revenues "sources," right? M&A, new business lines. And frankly, we basically said, "This is an externality. It's all about a financial crisis. The country will recover. Schwab's business is sound. Schwab's focus is our strength.” Our clients like us, you know? They don't like losing money, so they didn't love us in that environment, but they like us, and we're gonna stay the course.

And I think a lot of our success today is not making mistakes to divert from who we are.

NAOMI: Mm-hmm, mm-hmm. Absolutely.

So then--so not making mistakes leads me sort of to my next question, which is what keeps you up at night? What worries you?

JONATHAN: You know, usually I'd say, like, you know--not a literal question, but literally what keeps me up at night in the last two weeks is the market. I mean the la--I'll answer it more broadly, but first, I mean, the level of trading and investing and engagement in the market over the last month has been truly astounding. I don't know--you know, Schwab announced today a million new accounts in January, and that's literally unbelievable.

And, you know, that's the function of--you think you're a good company, great company doing great things, but it's a function of market. People are engaging the market. I mean, our competitors are growing as well.

And so what keeps me up at night over the last couple of weeks is literally just being there for our clients. We've had--we pride ourselves on, you know, delivering great customer service.

We pride ourselves on picking up the phone for, you know, all of our clients in 30 seconds or less, live individual. I don't like VRUs, I don't like--we love talking to our clients. And I can tell you in the last couple of weeks, you know, our hold times have been, you know, 10 minutes, 20 minutes, couple hours, some--you know, I get emails every day from clients who are just irate and so--you know, just--not irate--just upset about our inability to be there for them, and the fact that it's a volume issue is not a good answer.

I mean, you know--but the analogy I gave them last couple of weeks is, you know, if you build a restaurant to serve 100 people, then you know how to scale it to 200 or 300, but, you know, 1,500 show up all at once, you know, that's kind of the environment we're in.

So we're--today, we're getting there to our clients, we're there for them, systems are up, everything is up. But our service levels are keeping me up at night just because we've created really high expectations. You know, more longer term, competitors--if competitors don't keep you up, you're probably not healthily paranoid, and I am.

A lot of respect for all of our competitors, and we operate in a very fragmented business. So I've got, you know, Merrill Lynch, and B of A, and Morgan Stanley, and Goldman Sachs, and firms like that, and Fidelity, and Vanguard, and E-Trade, and then, you know, local banks who provide investment management or wealth management, and then fintechs.

And so, you know, the competitors keep me up at night.

The good news is there's so many of them. I say this all the time. There's so many of them, if I spend any time in any one of them, it'd be an inappropriate use of time, so I do get to focus on thinking about clients.

Second thing that keeps me up is culture of integrating TD Ameritrade, and we had four acquisitions this year for a company that doesn't do acquisitions a lot.

TDA--TD Ameritrade's the biggest--great company, similar culture, but, you know, just when you have integrations in the middle of a pandemic and people aren't together and culture and you believe is your differentiator, that's a risk area.

It's, like--we all do a fantastic job, I'm sure, but it makes me--you know, we gotta keep our culture. In any integration, that's critical.

And then I'd say the last thing is client trust--is client trust in our category is so important.


NAOMI: So can I--just going back to TD Ameritrade. So can you share some of the thinking that made Schwab decide to make this acquisition?


JONATHAN: They're in the exact same business as we are, and scale matters, and the opportunity was right. I mean, I think it's as simple as that, I think.

I talked about our focus, I talked about our disruption, I talked about our culture. I think their focus is identical, they're in the exact same business, literally, so there's no--you know, it wasn't about diversifying our business. It was about scaling up business even more in a category where scale does matter, both in terms of being able to bring prices down for clients and at the same time bring new products and support--the regulatory framework and everything else.

I think they have a great history of disruption, great product innovation, great digital innovation. I think we saw a lot of technology and strength there that we could bring over.

And I think culture. I mean, all cultures are different, but there's a similar sort of clients. And interestingly a little bit--it's a bit different since TDA grew up through lots of different acquisitions, but a similar culture.

So it was really the right time, the right company.

We don't--you look at our history, we haven't had a lot of M&A in the last decade.

Just--the time was right.


NAOMI: Mm-hmm, mm-hmm. That's great.

So, you know, in the role that you're in, you get to make choices that you know are gonna impact the culture. Can you talk a little bit about how you go about making those choices and the trade-offs if you're going to make a choice that is gonna be a big change for your people?


JONATHAN: Yeah, I don't know when you say impact the culture--I mean, I don't--I would hope I'm not making any choices that get in the way of preserving the clients' interest. To me, that's the core of our culture.

I think there's a humility in our culture that's pretty strong.

I think there's an approachability in our brand, but internally, there's an approachability.

And so I think I would never make--I would not deliberately ever make a decision that got in the way of any of those. It's more about--you know, it's just more about the reinforcing those in a world where you've got lots of your own employees.

And, in this pandemic, you know, it's not--you--it's--you couldn't pick a more complicated time to--integrations are hard to begin with, but you couldn't pick a more complicated time when volumes are going crazy and we're still in the pandemic.

But, you know, we've been so pleased with the people that--you don't know the people until you--you know, start to bring them over and start to work with them until you're truly a legal--one legal entity, and we've been--it's been great to see.

We've learned a lot from TDA culture too. I think there's a level of speed and a level of nimbleness that they bring and risk-taking that I think is pretty interesting for us to take some lessons from them as well.

But I wouldn't trade-offs--I wouldn't make any decision that got in the way--that in any way I thought was in the way of our culture at all.


NAOMI: So, you know, I'm gonna but I just wanted to ask you.

Many of our students are, as you know, they're gonna be in sort of--three main sort of preoccupations. There are students who are doing wonderfully well at the current firms, and they wanna move up. They wanna get from, you know, middle, high-level management to the executive ranks.

There are students who are looking to pivot.

And then we have students who are sort of entrepreneurs.

So can I ask you for a word of advice for each of those categories?

For the students who are looking to make that jump from, you know, sort of functional management to general management. What advice do you have for them?


JONATHAN: Yeah, I don't know if the advice would be that different for any of them.

I mean, it's interesting. When I went to school, I wasn't really--I was in the camp of, you know, I believe a lot in education. I mean, I wanted to keep learning and I was in a sale--I was in a leadership program, and I was in a sales role at the time, and I didn't wanna permanently be in sales though I loved it and it was lucrative.

So I saw it was a little bit of an opportunity to expand, but it was more about education. And by the way, I remember saying this. You know, I took a lot of finance classes at Berkeley, not because I'm a finance--you know, I'm not in finance, but I remember thinking, you know--actually, I remember thinking a lot--it was 2000, and a lot of the courses were very Internet strategy, marketing strategy for the Internet age.

And I remember thinking, "I'm doing this for the long term, so I'm gonna take classes that have, like, you know, a long-term lens." And so I did go--helped me into finance, but, you know, my goal, personal goal, wasn't to switch careers, it was more to further myself.

I think as it relates to individuals and you're thinking where you wanna go from here, you know, my advice, the most important advice, would be find a role and you sort of will believe--can believe honestly that you'll be very energetic in your most tired times.

I mean, you know, life is busy, life is complicated. You know, make sure you bring energy to work every day, because as you become a leader, people aren't gonna follow people who don't have energy.

And, you know, it's hard, I mean, after a long week. And I think the way you get energy is from loving what you do.  And I know it's overstated, but I think you have to be honest with yourself.

I think related to that, you might love what you do, say, I love marketing, or I love sales, or whatever, but you're sure you're at a firm you have some passion for what they do. I would not underestimate that.

You know, I was in telecom before Schwab, and I was in AT&T and then a little bit of British telecom joint venture, and they treated me really well, I thought I loved what I was doing, it was lucrative, but there was no passion.

I was selling global networks around the world. I--you know, I wasn't--there was no passion in what I was doing.

It was like a job and a game and--not a game, but I tried to make money, and try and make--but I wasn't making a difference.

And I really, when I got to Schwab, realized in a very visceral way other than health--I think for me, wealth, helping people achieve financial independence was very important, so...

You don't have to buy that, you should do whatever you wanna do, but, you know, make sure you're at a company you have some passion for what they do.

And then the last thing, and really important is you know, work for someone you trust. I mean, work for someone you can learn from and trust.

I think that's very, very important.

And then maybe finally be patient. I think, you know, I--it's--I think patience is really important, and I think sometimes people, because they're trying to climb a ladder or get somewhere, they--and they may not have patience, they take on roles that probably were not the best roles for them,or maybe all three of those boxes weren't checked.

And I would just say be patient.

You know, I appreciate saying I've had a great career, and I have, and I feel incredibly lucky, but, you know, that--I was in--you know, I was in similar role for eight years in terms of levels. You know, I wasn't promoted, you know, wasn't--I think patience and passion--I think patience and passion and conviction and trust in your colleagues and energy are all really important to health and ultimately, you know, success, I think.


NAOMI: Thank you.

Well, I've been seeing questions flowing in, so I'm gonna pivot over to the Q&A panel.

From JP, a question that ten other students have given a thumbs up to, and I'm sure that this won't come as any surprise to you.

"With all of the news around Robinhood controlling access to GME, AMC, others, and the rise of trustless platforms in cryptocurrencies, how do you see the role of brokerage houses or financial intermediaries changing going forward, if at all?"


JONATHAN: Yeah, I mean, that's such a broad question.

I mean, first, you know, on the--I am not gonna comment specifically on Robinhood. I would say, you know, on the fintechs in general, Robinhood included, I guess, I--you know, we have a lot of respect for the work those companies are doing.

I think, you know, I believe that Schwab is fundamentally different. I think that we talk about the best of people and technology, we talk about this being a trust-based business, we talk about this being a relationship-based business, and I think ultimately, Schwab is winning and will win.

But at the same time, I think the fintechs deserve a lot of credit for bringing lots of new people into the category, which is very important to all of us. I think they--a lot of credit for curation and content and just user experience and client centricity around that.

I think the technology lens has been great for those firms, and I think great for the industry, and so just in general with respect to the fintechs, you know, lot of respect. I think the Schwab model--I think this is a complicated business, and relationships matter, and people and technology matter, and I think the Schwab model will win over time.

I think in some ways, question around GameStop--and, you know, I don't have any specific to say. I will--'cause I wanna say it, 'cause it's been very frustrating leading corps communications and PR and marketing.

The press got it wrong. Schwab did not stop trading in anything, even though somehow the press--neither did TD Ameritrade, by the way. We did not stop trading in GameStop or any position in buying or selling positions, people-owned or basic options.

What we did during that flurry of activity is what we always do and you'd expect us to do, is we limited people's ability to execute complex advanced option strategies where, frankly, they didn't have the capital to sustain the risk.

That's what a risk management firm does. We don't just lend money, you know, to anybody to take on whatever risk that they can't sustain.

So not--I'll leave it at that, but I don't think that the press--the press did not get that right, and it's been very frustrating.

Cryptocurrency is a whole another conversation, and that's a long one.

I think we currently don't offer crypto directly at Schwab. Clients can access it via futures, they can access it via some exchanged product, but in general, we don't offer direct access, and it's something we're looking at.

I think, you know, for our clients, it's not the most important question in their mind in terms of what they can deliver for them. But it's certainly newsworthy, and, you know, I think you'll continue to see news there, and noise too.


NAOMI: Just to pick up on your comment--so what is the most important thing on your clients' minds, as you think about it, as Schwab thinks about it?


JONATHAN: First, it's hard, you know--being a scaled business with 6 trillion assets, we have clients from $2,000 to 100 to 200 billion--million or billion--I mean, active traders, long term investors, you know, so it's hard to answer what's on the clients' minds.

I think, you know, I think ultimately for the vast majority of our clients, they're saving--they're investing for a reason. They're investing to, you know, have a more secure future. It's usually--there's active traders and that's a different--but for most of our clients, they're investing for a goal. That goal is longer term orientation, and what's on their mind is comfort that they're doing the right thing, and that they're making the right steps.

This is an emotional cate--this is a--dealing with money is a highly complex endeavor, you know, with lots of behavioral financial considerations--and by the way, it's hard enough when it's one person. For many people, it's a family, or two people, at least.

And so, you know, for most people, what's on their minds is just confidence. "Am I doing the right thing? Am I making the right decision? Am I securing the future for myself and my family?" And of course the pandemic, you know woke many people up to the reality of how fragile things can be, both financially and health, and I think, you know, that's not gonna change.

In fact, you know, we have--we do lots of analysis around generational differences, and how you serve generations differently, and, you know, to be clear, or to be sure, there's absolute differences between how you want to maybe serve a Boomer, Gen X, or Millennial, or--and how they think about things.

But there's also a lot of things that are just about life stage, you know, a lot of it is life stage. And how you think--how a 20-year-old might think who is, you know, single and has no concerns or commitments, and a 40-year-old who's single and has no concerns or commitments--they think more similarly than you think.

And the 25-year-old who's coupled and has kids and a 45-year-old who's coupled and has young kids, they tend to be a lot more similar.

So it's not often about generation, it's often about life stage.


NAOMI: Well, that's really interesting.

So my question sort of connects with Abhishek's question, which is, "How do you motivate people to take control of their personal finances?"


JONATHAN: If I could solve--that's a great question.

I mean, I think the biggest challenge we have as an industry is not competitors, it's engagement, it's inertia. That either people don't invest when they should, and you probably all know people--maybe some of you, if you wanna invest, Schwab's a great place, but, you know, I mean, we--there's so many people who don't invest when they should, and many of them have the disposable income to do so but they don't know where to get started.

And then there's many people who do invest but they chose their "investment provider" in a very non-scientific way. Maybe they went to school with the individual. Maybe, you know--and--a lot of what Own Your Tomorrow--a lot of what our brand platform is, On Your Tomorrow, is about a call to engagement with your money.

You know, Own Your Tomorrow's not about managing your money yourself. It's about--this is the most--one of the most important decisions you're gonna make. And you need to lean in and engage. You need to ask the tough questions.

The questions I say to everybody, you know, "How much are you paying to invest? How does your firm make money? What are you invested in?" You know, questions like that, you'd be shocked how many wealthy people with a lot of money invested don't know what they're paying, don't know how their firm makes money, and don't really even know what they're invested in.

By the way, a lot of times when you ask them what they're paying, they say they don't pay, which is quite an amazing--you don't pay? I mean, of course you pay. You may not know you're paying, you may not explicitly pay, but you're paying for something.

So getting people to engage with their money is so important.

I don't know what the answer is. I think we've tried with our--with Own Your Tomorrow, all of our marketing, a little less recently, but especially at the beginning, a lot of it was just getting people to lean forward and ask, you know, "Am I asking enough questions about my money and how it's managed?" And--but it's hard. It's like health.

I mean, the analogies are-- I've said it probably five times, but the analogy's people don't deal with their health often until they're sick, and that's not a good plan, and dealing with your money when it's too late is not healthy either. Although, it is never too late. It's never too late for both.


NAOMI: And on that note, I will exercise more, it's—


JONATHAN: I mean, it's--there's--I think it's important to remind people too that it's not so daunting.

We get a lot in our industry you know, maybe--you know, you go in and you fill out a financial plan that says you gotta save $1 million a year for the next 20 years and you'll be fine.

People are like, "Okay, I make 40,000a year, how am I gonna do that?" And it's not--we've gotta make our tools easier, we've got to make our--we've gotta give people small steps, and we try to--we've gotta curate Schwab's supermarket.

Go to and you log in, it can be a bit daunting.

And, you know, I'm trying to figure out how to simplify while still supporting a broad set of needs that these clients have.


NAOMI: So you touched a little bit on in your own career how--when you joined Schwab, you were sort of--you know, 2000, thinking about digital as, you know, as the next big thing.

And, I mean, in tech U.S. 2000 feels prehistoric.


JONATHAN: On PalmPilot.


NAOMI: Listen, I had a PalmPilot, not to tell you too much information.


JONATHAN: I did too, but our first wireless trading thing was a PalmPilot, and you had to slide it into a modem. So if you wanted to trade wirelessly--so you could use your PalmPilot, but if you want it wireless, you had to slide it in.

It was a--


NAOMI: That's awesome.

So Nadia is asking, "How do you compete with companies that are built with a digital-first mindset?" She mentions Betterment. In other words, what are the challenges in your journey between traditional and digital, and do you see a difference between those two?


JONATHAN: Yeah, I mean, I think it's less about the digital-first mindset as, you know, any company that has an existing base of business, it's very significant and a broad set of clients--you know, how do you innovate, you know, the classic sort of--you know, how do you change the tires while the car's going down the road, versus, you know?

And that's a very fair question and hard to do.

I think, you know, I think we've done a good job trying to stay on top of both serving our existing clients and scaling up business as well as being very innovative.

You know, I don't wanna go through the list, but, I mean, if you look at Schwab's history, you know, first to offer subscription-based pricing and planning, first offer, no fee [indistinct], you know, major firm offer, no commissions--there have been lots of deep innovation for an existing firm.

You know, I think that the question brought up a competitor.

You know, what's interesting about that competitor and some like them is part of what their strength is that they offer one solution, and, you know, Schwab is a supermarket.

And I think it's less about digital, it's more about--they would probably say they offer more than one solution, but generally speaking, they're offering a more simplified solution for clients, and sometimes simplicity is powerful.

And I think at Schwab, our challenge is to offer that simplicity for clients who are looking for a single answer while at the same time being a supermarket of capability, because people's needs change and that's the bigger challenge, I think, than digital versus non-digital.

I'll also say I do believe this is a people business, and we believe it too. And that doesn't mean that there are end-to-end digital experiences, but it does mean for many individuals, at some point, they wanna talk to somebody, and they want that person to know.

They want that person to trust. People are very important when dealing with money. And just like health, you know, at the same time digital's very important.


NAOMI: So, Jonathan, we've got sort of a series of questions that are more or less getting at a similar topic. And that is, in a way, how does Schwab see--you know--how do you guys see yourselves when you're dealing with investors who are not the best educated?

So do you feel like you have a fiduciary responsibility to say, "Hey, don't go there, go there"? The one question I have here is from Jonathan Gold who says, "A lot has been written about people depositing their stimulus checks "into brokerage accounts and investing. "Does Schwab have a view on this? Or is it, you know, 'Yeah, sure, what do you want us to do?'"


JONATHAN: Yeah, I mean, we have a very clear--it's a great question.

We have a very clear set of investing principles, and it's all about, you know, having a plan, being diversified, keeping your cost low, keeping--thinking about taxes, ignoring the noise, which is really important.

People get caught up in the noise in the moment. And so we have a very clear set of investment principles.

We have a lot of education and content. A lot of financial literacy from very, you know, early stages to significant educational, complex content.

We have managed solutions that, you know, we'll take care of it for you and manage the money against the risk tolerance while we are the fiduciary.

And yet, at the same time, we do wanna allow people to trade. And so it is a balance.

I think, you know, you don't wanna be so paternalistic.

And then again, this goes back to an earlier example. Some firms may go to market just as a fiduciary and just say, you know, "Bring your money here and we'll manage it for you against your needs and goals and risk tolerance." And some firms may go to market and just say, "We're a broker dealer." Come here and you can buy and sell what you want."

Schwab is both, and I think being both is appropriate, also because--I think Chuck would say this in a very different, probably more eloquent way, but, you know, we talk about core and explore. I think Chuck would say, you know, the right way to invest is diversify in mutual funds, in ETFs, in managed money, but the right way to learn about investing is to buy individual stocks, because individual stocks, you start to realize the market has risk, the market has upside, volatility matters.

In fact, you know, he such a big advocate for investing and education, and I think we would all say that the best way to learn how to invest is to lose a little bit of money early and realize that, you know, it's complicated, and you either need to put the time in or bring a partner in or both.

But I just would say it's hard--there's nothing wrong with people buying and selling stocks. I mean, you know, they--get engaged and just take the time to do some research and be with a firm that supports that, and maybe put some money, you know, take a little bit of risk with some of it, but with the rest of it, maybe be a little more disciplined against your true risk tolerance.


NAOMI: So some questions around--


JONATHAN: Can I tell you a little quick story?

I'm not--I worked at--I worked--when I was in sales before Schwab, I worked--I was an account manager for Sun Microsystems and--maybe I'm not supposed to talk about stocks, but it was a long time ago. And I bought stock in the company because I was selling to them and I wanted to, you know, wanted to absorb and I wanted to be part of their success, whatever.

The company--you know, the stock went straight up, you know, for years, and I remember saying, you know, "I'm a genius, I'm not gonna pay the taxes. I'm not gonna pay the taxes."

You know, needless to say, many years later, I sold it for close to, you know, probably less than I paid for it. But on paper, I had, you know, made more money than probably ever should have, and, you know, that was a really important tuition.

You know, for me, that was not very smart; I got lucky. And don't be afraid of taxes. Those are--that's a good thing if you have taxes, it means you made money. It means you made some money.


NAOMI: That's great.

You talked a little bit about the 2008 crisis, and we've seen, you know--so there was a move towards compliance and regulation, and over the past maybe few years, a sort of a move towards sort of removing some of those limits, or arguments toward removing some of those limits.

You know, we're going through another huge sort of boom in the market. Do you see the market in a better place now than it was in 2008? Are financial institutions better prepared for the black swan and the downside?


JONATHAN: Yeah, I don't wanna predict the future or the pa--or really talk too much about 2008 comparisons, because it was a whole different world, but the banks were--everyone is far more capitalized than they were, and I think, you know, I don't know what the future holds, but I don't think there's any real comparison to what was going on in 2008.

But I think I'll leave it at that 'cause it's, you know, it's a complicated question.

But I can tell you for Schwab, I feel very, very comfortable with, certainly, the tremendous capital we have behind this firm, and our approach to risk management, and our focus and that.

Again, I would've said the same, that we were fine in 2008. The challenge with Schwab in 2008 was our revenues dropped dramatically because interest rates dropped dramatically.

And more importantly, our clients were--many of them were devastated.

I'll just tell you one other thing about 2008. You know, many, many, many clients sold all of their portfolios at half the value in 2008 and 2009, and many were retirees. And, you know, as much as you tell them try to have, you know, have confidence in the system, sell what you need to sell, but don't give up--you know, when you think about those retirees who might have $300,000 saved, you know, for their life savings and living off that and Social Security, all of a sudden, it's worth 150. They sold it for 150, put in cash, earned nothing. And, you know, that 150 would be, you know, 600, 700, 800, 900 today, you know, who knows?

I won't get the math right, but multiple, so...It's hard in those times for clients, and a lot of our job--and this is where people matter. A lot of our job is to try and get to clients and explain that, you know, we can't predict the future, but we can tell you that certain investing principles have passed the test of time.

We can't tell you we have a lot of confidence in the country or a lot of confidence in Schwab, and, you know, you need to protect your downside but don't leave.

I dealt with it with my parents at the time, and, you know, basically selling out and obviously I can help them and that's fine, but, you know, I personally watched people in those situations just say, "I can't afford to lose money." It's tough. It's tough.


NAOMI: let's switch to the other side, sort of the people who are looking to move up. Number of questions around what does Schwab look for in job candidates? You know, what makes the firm's leadership identify somebody as a, you know, a high potential, somebody to watch, somebody to promote?

Can we--let me leave that one.


JONATHAN: Yeah, I think--you know, sort of what the firm looks like--looks for, and then maybe what an individual hiring manager, you know, those are the same--are complementary, but both are important. I can talk a little bit about what I might look for, but from a firm's standpoint, I mean, you know, culture's a big part of it, so I would you, you know, we've had where people have not been successful at Schwab.

Very competent, but if they come in with a lack of humility, if they come in with a lack of client centricity, they're not gonna get past the interview. And if the get hired-- I've seen it happen--it usually doesn't work out because they get frustrated.

Because what they see is that, you know, their hard-driving ideas aren't being adopted, or their moneymaking ideas or revenue-generating ideas aren't being adopted.

So I think for Schwab, you know, there's a lot to it, but we're looking for people who, you know, have a degree--have a high degree of client centricity, have a degree of passion for what we're doing as a business, understand it.

You know, I think--related, you know, oftentimes what I talk about--I like alliterations, but I talk about, you know, hungry, happy, and humble. And to me, that means--hungry means they wanna win. Believe me, when I say client centricity and humility, that doesn't mean we don't want them to win.

So hungry means, "Yeah, I'm in it, and we're gonna win."

I think humility is kind of obvious, but, you know, this is a team sport, and I think a degree of humility is really important. And, you know, happy sounds kinda crazy, but I need another H. But, you know, what I mean is just the glass half full. I mean, things are really, really difficult at times, and things aren't great at times.

You know, the difference--some people see opportunities almost everywhere, and I'm not saying I'm one of them, but sometimes I see people who always see that, and I think, "Wow, that's--I need some of that."

But, you know, generally speaking, we want people who--I wanna work with people--everyone wants to work with people who have that glass half full nature because there are gonna be a lot of setbacks.

So, you know, find something you're passionate in, bring a degree of humility, a winning attitude, and a degree of, you know, glass half full, and I think combine that with the firm that matches your desires, and I think you'll be wildly successful.


NAOMI: So, you know, I was reading an interview that took place recently with Jeff Immelt from GE.

And, you know, this--obviously, GE's history, as we all know, has, you know, it's had some--it's had many ups and some downs. And one of the questions was around a culture where you promote from inside because you have a lot of institutional knowledge.

And the upside of that and the challenges with that, and a culture that's bringing in people constantly from the outside to refresh the flow of ideas.

Do you have a thought on how that balance works at Schwab?


JONATHAN: Yeah, I think, you know, in general, we certainly have brought in lots of talent, but on sort of on the scale, we probably are more promote within, partly, again, to preserve, I think, that culture that is so important. But again, we've certainly brought in lots of external talent as well.

You know, I think the danger of only promoting from within or only cultivating internally is you lose a little bit of--we call that sort of intelligent naivete that, you know, you sort of--if you've been around--I've been around for 20 years, almost any idea that's brought to me, you know, some version of we've tried that, we've done that, and I think that can be a little bit dangerous.

So as a leader, you know, I think I'd say on the Schwab side, we do lean heavily on talent that's been around because I think they understand what we're trying to get done.

They've demonstrated a commitment to that.

They've demonstrated a lot of success.

But certainly as a leader, in my shoes and across Schwab, we recognize the need to bring in external talent both because there may be certain competencies that are absolutely critical, that's obvious.

But also even if you think you have the competencies, do you have that sort of naivete that is so critical or someone who's saying, "Why not?"

You know, it's--don't tell me we've done it before.

Let's--you know, let me tell you--or let me tell you what we did elsewhere. So I think it's a balance. Every leader probably has to determine what's right for them and their firm, but I would say if they say it's all internal or all external, probably missing a point there.


NAOMI: So I know our time is running short, and I have two questions that I want to pass on to you. One is from Mo. "What industry disruptions that you believe are on or just over the horizon?"


JONATHAN: For financial services, I'm assuming.


NAOMI: Yeah, yeah.


JONATHAN: I don't know if there is--I mean, it's--it's hard because I don't wanna sound naïve.

But, you know, there's disrupting in a major way--this is a really, really complicated business. And even some of the examples of the companies that were referenced earlier around disruption--and again, I give them incredible credit, they've had a lot of success, and I--but they were sort of doing, in many ways, what Schwab and others were doing.

It's very different than what Uber did to the cab industry. I was in San Francisco, I saw that.

It's very different than what Netflix did to Blockbuster, where the pricing model, the client experience, everything changed, you know?

And, so I don't--I'm not naïve, I'm paranoid about competition, I'm paranoid about disruption. But I also think the nature of this category is that it's gonna be different.

When it's about people's money, highly regulated, scale matters.

I think--I don't think the sort of disruption coming out of nowhere is likely. Now, I also wanna be clear, financial services is a broad, broad category. So we can talk about payments all the way to ultra-high net worth wealth management.

I'm talking about in our category.

There's no doubt in payments and other areas that I'm less--a little less familiar with, there's a lot of great stuff going on, there's a lot of great stuff going on in our category. But I don't think there's something around the corner that's gonna pop up--and by the way, we have a history of if there is, you know, I think Schwab is more than willing to cannibalize our revenues to protect what we think is a great business for us and our clients, so, you know...

So I suppose the most obvious statement is watch crypto.

There's a lot going on there, but, you know, that's probably not--probably not the most novel idea.


NAOMI: So here's the last question for you, and it's from Lucas. "What books have you recommended or gifted in the last year?"



I've been so busy, I don't think I have--not sure I've--not sure I recommended or gifted any great books. I may have to get back to him on that one. Trying to think.


NAOMI: Sounds good, then. I'm going to--


JONATHAN: Last book I read was the Kennedy bio over the summer, and it was just partly at our house, it was there.

You know, it's one of those things where I wish I could--I wish was more deliberate, but it was an incredible story of, you know, the whole Bay of Pigs and the whole Kennedy administration.

Part of me--you know, just a reminder that history is so interesting and history matters, and you know, I picked it up and I knew the history pretty well, but I couldn't put it down.

It was also a reminder that we have to read more. Just take a--you know, turning off your phone and, you know--this was the last book I read, so I'm not living up to my own mandate. But I think we have to--we all have to read more and turn off our phones and just, you know, enjoy a book, because I think... And enjoy history, because there's a lot to learn from the past.


NAOMI: Thank you so much, Jonathan, you've been awesome.

And I can't imagine with the flow of information and decision making that's coming across your desk, especially in a super volatile time like this how you keep everything straight and, you know, keep to that path, the Schwab path.

You have convinced me that you bleed blue.


JONATHAN: Okay. It's not on brand, but I did put on--


NAOMI: And thank you for spending time with our students.

It's been really wonderful. If our students have any follow-up questions, can we--can they send questions to your assistant or is there a way that they can just touch base with you, or-- Understanding the limits on your time.


JONATHAN: Sure--I think it's--I mean, we can follow up after. You can send me personal email. You can send me email. I try to respond to everyone. Just, you know, give me time.

It's a busy time, but yeah, absolutely, absolutely. And I would just say thanks for having me and I would say have a great weekend, but it sounds like everyone's working.


NAOMI: It's gonna be a great weekend. Have a great class weekend.


JONATHAN: I do look back fondly. I would tell you--last thing--Berkeley. I do look back fondly.

I remember at the end of the semester, at graduation, they said there's a last class they said you could--as part of your tuition, you could audit any class forever.

I don't know if that's true at NYU, but--and I remember saying, you know, I'm gonna be back for this, this, this, and this.

And guess what, I batted zero on that one. So I would encourage you not do what I did, which is enjoy the time while you're there, and if there's opportunities after, just stay connected to the school and stay connected to your education and learning.

Take advantage of it, because I do regret it. I'm gonna go back and look this weekend. What's the next class I can audit?


NAOMI: You know, you might just come to us at Stern. We could make that happen for you. Thank you so much. Have a wonderful weekend.


JONATHAN: Have a great weekend.

Show Social Media
Include in Schwab Investing Insights email alerts
Compliance Code