To my fellow stockholders

“Through Clients’ Eyes.” It’s a simple phrase. Maybe even a bit simplistic. But it is at the core of how we operate at Schwab. These three words dictate our strategy, our approach to service, our approach to pricing, and our approach to communications.

When I pen my annual letter to you, my fellow stockholders, you are my clients. And to meet your needs as clients, I strive to craft the letter with a minimum of jargon, corporate speak, and trendy buzzwords. My goal is to be clear, transparent, and straightforward as I share the current standing of your company and its future prospects. As always, the litmus test for my letter is whether it reads as if I were corresponding with a business partner who has been out of touch for the past year. Please let me know if I’ve achieved this goal.

2016 was a remarkable year in the business world on many fronts. While our country waded through a bruising presidential election, we faced a slow-growing economy, a volatile stock market, and continued ultra-low interest rates. While some companies grew, many more faced extreme difficulty in increasing their customer base and revenue. Your company was one of the few that demonstrated outstanding growth in 2016. Why? Because “Through Clients’ Eyes” are not just words on paper—they describe how we operate each and every day.

Operating through clients’ eyes contributed to three primary themes for 2016:

1. We continued as a disruptive force for change, challenging the status quo in the investing world;

2.   Our clients’ trust enabled us to achieve record revenue, record earnings, and record client assets; and

3.   Their trust creates tremendous optimism for future growth.

Please join me as we examine each of these themes.


Challenging the status quo

Change was in the air in 2016 as our citizens elected a new president and Congress. Most would agree that a surge in populist and local attitudes played a major role in deciding the winners and losers in the election. This emphasis on Main Street, as opposed to Wall Street or Hollywood, is core to our efforts at Schwab.

Forty-five years ago, our founder, Chuck Schwab, insisted that investing should be opened up to the average American. When brokerage commissions were deregulated in 1975 and most investment firms raised commissions on the average American, Chuck lowered them. As a result, more of Main Street America became investors in the stock market, and their wealth has grown dramatically over the past decades.

Low-cost investing today

Today, the world of investing is changing. Fewer investors research and invest in individual stocks, or even bonds. Instead, more and more investors are opting to invest in index mutual funds and exchange-traded funds (ETFs) that track the stock and bond markets. And consistent with this approach, fewer investors are choosing to invest in actively managed mutual funds that try to outperform the markets.

As you would expect, Schwab is right there supporting Main Street America. Most investors know that our ETFs are generally the lowest priced in their respective Lipper categories, but did you know that our market-cap index mutual funds1 are also? In fact, our market-cap index mutual funds are among the lowest in the industry and—importantly for Main Street America—are offered with no minimum investment required.

Why do we care about keeping these fees so low in Schwab index mutual funds for all investors? It’s really simple. The less our clients pay in fees, the more money they keep in their pockets. After all, it’s their money to begin with. Seeing through clients’ eyes means challenging the status quo when it comes to offering great pricing—but that’s only the beginning.

Schwab Satisfaction Guarantee

In early 2017, we announced an industry first—a very simple “no questions asked” Schwab Satisfaction Guarantee.2 Seeing through clients’ eyes led us to ask, “Why is it that when you buy a new watch, or maybe an outdoor grill, you expect to be satisfied with your purchase or have the right to return it for a refund? And yet, in the investment services industry, this same concept has largely never applied?” Now it does at Charles Schwab.

We made it as simple as possible. If, for any reason, you are unhappy with the service you received from Schwab on a trade, a transaction, a service experience, or even on the select advisory services we offer, we will refund 100% of your commission or advisory program fee with no questions asked. And then we will work with you to understand where we failed you—and strive to make it right.

Shouldn’t every investment firm offer this simple promise?

Schwab Intelligent Advisory™

Most investors realize that the cost of buying and selling stocks has fallen over the years. At Schwab, our basic online equity commission is now only $4.953 per online equity or ETF trade. And most investors realize that the expenses associated with investing in an ETF or an index mutual fund tend to be very low. However, many investors remain frustrated by the relatively high cost of financial planning and personalized investment advisory services. And higher-net-worth investors are often particularly frustrated by the notion that the fees they pay for advisory services just keep rising as their assets grow.

At Schwab, we recently introduced Schwab Intelligent Advisory—a modern approach to investment advice that addresses these key issues. First, we made it available to Main Street America with a low investment minimum of $25,000. Next, we included personalized financial and investment planning sessions with professionals who have a CERTIFIED FINANCIAL PLANNER™ certification. Of course, we built in an automated professional investment advisory platform that offers diversification across as many as 20 asset classes, along with automatic rebalancing and tax-loss harvesting for most clients. And we did it all for an annual advisory program fee of only 0.28% of a client’s managed assets. To top it all off, we capped the annual fee at $3,600—no matter how large your investment portfolio is!

Seeing through clients’ eyes means leveraging technology and credentialed professionals, along with exceptionally low costs, leaving more money in clients’ pockets and helping to ensure they can meet their goals for the future.

Record revenue, record earnings, record client assets

Today, many businesses run sophisticated algorithms or computer models to maximize revenue generated per customer, or they adjust their pricing in real time to optimize profits. Have you noticed this lately when you’ve purchased tickets to fly with a commercial airline or ride with one of the newer car services during rush hour?

At Schwab, we think about revenues and profits differently. We believe our clients’ trust in us is the lens through which our financial results should be viewed. As we demonstrate trustworthiness, our clients choose to bring more of their business to us—whether it is their investment dollars, their checking accounts, or their mortgages. So when we enjoy record financial results in virtually every measurable area, we turn to our clients and say, “Thank you.”

And we owe our clients many thanks for 2016. Our revenue continued its upward climb to a record $7.5 billion—17% higher than the prior year and 59% higher than it was only five years ago.

Earnings, or net income, also achieved record levels in 2016—31% higher
than the previous year and 119% higher than only five years ago. And client assets, the ultimate measure of client trust, ended the year at record levels—11% higher than the prior year and 66% higher than only five years ago.

Although these financial results are impressive, we also made sure they weren’t “one-year wonders.” Too many companies create short-term results by underinvesting in their business or taking shortcuts that ultimately come back to hurt stockholders later. But not at Schwab. Our disciplined approach ensures we invest for the future, often sacrificing short-term results for long-term stockholder value.

For example, our technology development budget in 2016 was the largest in our firm’s history and 48% higher than the year before. We invested in hiring new employees, growing our workforce by 6% to 16,200 professionals at year-end—virtually all of them hired right here in the United States. And we did all this with the discipline you’ve grown to expect from Schwab. A discipline that permeates every trade-off decision we make. After all, when your leadership team spends money, we never forget that it is your money. And we take that responsibility incredibly seriously.

In the end, our “Through Clients’ Eyes” strategy and disciplined focus on operating the business creates results for you—our stockholders. Five years ago, on December 31, 2011, our stock price was $11.26. In 2016, our stock price exceeded $40.00 and ended the year at $39.47. When adding in the dividends we paid to our common stockholders, investors in Schwab earned a 21% return in 2016. And loyal long-term investors have earned a 271% return over the past five years, including dividends.

Optimism for future growth

One of our favorite sayings at Schwab borrows from the Great One himself—Hockey Hall of Famer Wayne Gretzky. Mr. Gretzky was fond of saying he would always “skate to where the puck is going.” At Schwab, we never stop asking where the puck is headed—and striving toward that place. And others recognize this approach.

In 2016, J.D. Power ranked us highest in overall satisfaction in its Full-Service Investor Satisfaction Study.4 And in the 2016 Customer Quotient™ (CQ) US Report by C Space, Schwab was the most customer-inspired brand in financial services, with a score of 7.31 against an industry average of –0.68.

More globally, we were also honored as one of the FORTUNE Top 50 “World’s Most Admired Companies®”— ranking No. 1 for innovation and social responsibility in our industry category.5 

Certainly, we acknowledge that third-party recognition is only so important. The ultimate measure is how our clients and prospects see us. And this gives us great confidence and optimism for the future. In 2016, clients entrusted us with more than $100 billion of net new assets—the fifth consecutive year they have honored us with this level of trust.

And other winds also began to blow in our favor as we came to year-end 2016. In December, the Open Market Committee of the Federal Reserve raised short-term interest rates another 0.25%. Although a modest increase and the only increase in 2016 (relative to the three or four 2016 increases the Fed was projecting in December 2015), the resulting rise in interest rates helps us generate more net interest revenue and positions us well at the start of 2017.

And with the new president and Congress in place, the potential for corporate tax reform and some moderation in the recent proliferation of regulations could also lead to improved financial performance.



For the past nine years, I have had the honor of crafting this letter to you, our valued stockholders. Last year, I spoke of a possible inflection point as the Fed raised rates in December 2015 for the first time in about a decade. Today, interest rates have been raised again, and the aggressive Schwab I hinted at last year is now in full force.

With our recent decisions to reduce commissions, lower index mutual fund expenses, and introduce Schwab Intelligent Advisory, we are just getting started. Our unique strategic position based on scale, discipline, and our “Through Clients’ Eyes” approach is poised to drive considerable growth in the coming years.

We believe our domestic market opportunity is in excess of $30 trillion as investors look to the future and consider more modern ways to invest. Our goal is to capture as many of those dollars as possible by being the single most trustworthy investment services firm in America. It’s an ambitious goal coming from a company that virtually no one had heard of only four decades ago. But for a company that today approaches $3 trillion in client assets, I would not discount our chances.

It’s a virtuous cycle—we strive to challenge the status quo to benefit investors, who reward us with more of their assets, leading to record financial results, which in turn lead to outstanding stockholder results and greater investments, which enable us to challenge the status quo to benefit investors. And the best part of it all…we have only just begun.

Thank you for your confidence!



Walt Bettinger

March 2, 2017


1 This claim is based on prospectus net expense ratio data comparisons between Schwab market-cap index mutual funds (no minimum investment required) and ETFs and non-Schwab market-cap index mutual funds and ETFs in their respective Lipper categories. Schwab operating expense ratios (OERs) reflect OERs effective as of 3/1/2017. Competitor net OERs represent the lowest OER reported from annual reports, prospectuses, and Strategic Insight Simfund, as reflected on 2/24/2017. Funds in the same Lipper category may track different indexes, have differences in holdings, and show different performance. Competitors may offer more than one market-cap index mutual fund in a Lipper category, including funds that are not market-cap index mutual funds. Expense ratios are subject to change.

2 If you are not completely satisfied for any reason, at your request Charles Schwab & Co., Inc. (“Schwab”) will refund any eligible fee related to your concern within the time frames described below. Two kinds of “Fees” are eligible for this guarantee: (1) asset-based “Program Fees” for certain investment advisory services sponsored by Schwab; and (2) commissions and fees listed in the Charles Schwab Pricing Guide for Individual Investors (“Account Fees”). Program Fee refund requests must be received no later than the next calendar quarter after the Fee was charged. Account Fee refund requests must be received within one year of the date that the Fee was charged.

3 Restrictions apply: The $4.95 commission does not apply to certain transactions. All broker-assisted and automated phone trades are subject to service charges. See the Charles Schwab Pricing Guide for Individual Investors for full fee and commission schedules.

4 Charles Schwab received the highest numerical score in the J.D. Power 2016 Full-Service Investor Satisfaction Study, based on 6,006 responses from 20 firms measuring opinions of investors who used full-service investment institutions and were surveyed in January 2016. Your experiences may vary. Visit

5 From FORTUNE Magazine, March 1, 2016 ©2016 Time Inc. FORTUNE and The World’s Most Admired Companies are registered trademarks of Time Inc. and are used under license. FORTUNE and Time Inc. are not affiliated with, and do not endorse products or services of, Charles Schwab & Co., Inc. Based on a survey by the Korn Ferry Hay Group of 4,000 respondents comprised of corporate executives, directors, and analysts. The respondents were asked to select the 10 companies they admired most from a list compiled according to selection criteria established by FORTUNE and Korn Ferry Hay Group.

The S&P 500 Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Schwab.  Copyright (C) 2016 by S&P Dow Jones Indices LLC, a subsidiary of McGraw Hill Financial, Inc. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without written permission of  S&P Dow Jones Indices LLC.



 Admired as an employer of choice in 2016

We are proud of our culture of service, teamwork, and seeing the world through clients’ eyes. Our culture truly differentiates Schwab and makes our company a great place to work. We place great value on the recognition we receive as an employer of choice, particularly those awards that are based on the feedback of our employees.

Since 2013, Schwab has consistently been recognized as a top place to work based on employee feedback in major markets where Schwab has significant concentrations of employees, including Austin, Chicago, Cleveland, Denver, Indianapolis, the San Francisco Bay Area, and the state of Arizona. In 2016, Schwab’s annual recognition expanded to include Central Florida and Charlotte.

Schwab is also recognized nationally

Gallup® Great Workplace Award

In 2016, Schwab received with distinction a fifth consecutive win of the Gallup Great Workplace Award, placing Schwab among the top 40 companies recognized for having the most engaged workforces in the world. Schwab was also awarded the “Excellence in Outcomes” award, given to the company with the best “Total Performance.”

Human Rights Campaign Corporate Equality Index rating

Cultivating a work environment that celebrates diversity and champions inclusion benefits everyone—our employees, our clients, and our communities—so we put great effort into this, and we are honored to be recognized for our work.

Since 2004, Charles Schwab has received a 100% rating on the Human Rights Campaign’s Corporate Equality Index. The index rates American workplaces on lesbian, gay, bisexual, and transgender equality.

Multiple military-friendly workplace awards

Schwab has been recognized annually as a military-friendly workplace and for its commitment to hiring veterans by G.I. Jobs and Military Spouse magazines since 2012, and Military Times EDGE magazine since 2010. Schwab has also been recognized as a “Best of the Best Top Veteran- Friendly Companies” by U.S. Veterans Magazine for five consecutive years.

Brokerage Products: Not FDIC Insured • No Bank Guarantee • May Lose Value

Charles Schwab & Co., Inc. is an equal opportunity and affirmative action employer committed to diversifying its workforce. It is Schwab's policy to provide equal employment opportunities to all employees and applicants without regard to race, color, religion, sex (including pregnancy, childbirth, breastfeeding, or related medical conditions), gender identity or expression, national origin, ancestry, age, disability, legally protected medical condition, genetic information, marital status, sexual orientation, protected veteran status, military status, citizenship status or any other status that is protected by law.

The Charles Schwab Corporation provides a full range of securities, brokerage, banking, money management, and financial advisory services through its operating subsidiaries. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (“Schwab”), Member SIPC, offers investment services and products, including Schwab brokerage accounts. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides deposit and lending services and products.

Schwab Advisor Services™ serves independent investment advisors and includes the custody, trading, and support services of Schwab. Independent investment advisors are not owned, affiliated with, or supervised by Schwab. Schwab Retirement Plan Services, Inc. provides recordkeeping and related services with respect to retirement plans.