Updated: Our Most Recent Perspective on Industry Events from Founder Charles Schwab and CEO Walt Bettinger

April 6, 2023

To our clients, employees, and owners:

Since our last update on March 23, heightened attention on the financial services industry has continued, and experts and non-experts alike have shared their opinions on the state of the industry as well as on Schwab. Given that focus and the risk of confusion, we thought some additional perspective from us would be helpful.

First, some context about the financial environment and where we think we are in the current cycle.

This unusual period in the country’s financial history has been driven by a few unique factors.

Years of quantitative easing and a zero-interest rate policy following the financial crisis of 2008 had increased money supply dramatically. Then, beginning in 2020, the COVID-19 pandemic became the center of a national emergency and the government responded by increasing the money supply by 40% from March 2020 until the present, adding $6.3 trillion to it. The economy became flush with cash. Much of that ended up in the banks earning a near-zero interest rate.

More recently, faced with stubborn inflation, the government has been working to reduce the money supply, taking money out of the economy and banks. In 12 short months it lifted the funds rate of near zero to 5 percent, a generational rise in record time. At the same time, the Federal Reserve reduced their bond portfolio.

The logical and expected result of that process for banks and brokerages – Schwab included – has been that as interest rates rose, investors moved their investment cash from relatively low-return accounts to higher yielding investments such as money market funds, CDs, and bonds – just as you would expect thoughtful investors to do. And just as we encourage our clients to do.

But that trend eventually reaches a plateau. With history as a guide, we know there is a level of cash clients prefer to keep in a highly liquid form, what we call transactional cash. That is money available to take advantage of investing opportunities that arise or for day-to-day personal cash flow needs. Typically, that transactional cash is in the range of 5-10% of a client’s overall assets here at Schwab. History suggests the movement of cash into investments such as money markets, bonds and CDs reaches a peak and then returns back towards historical norms.

A final piece of broad context on the current environment for investors: it is possible that America is moving into a recession. Certainly, the economy will tighten given the actions by the Federal Reserve. It may be mild, but of course, no one ever knows. But for investors, the anticipation of recession is usually seen as an opportunity to engage, and so recessions often mark a reversal for the stock market.

So how has Schwab navigated during this period and how do we see the path forward?

Most important, our business is extremely robust. This March alone, we saw a strong influx of core net new client assets of over $53 billion, the second highest March results in our history. The diversity of our business remains a strength. For example, our trading and wealth management businesses experienced a very strong first quarter. Our company is devoted to our clients’ success, and they have remained highly loyal and supportive. That’s our true north and our most important measure of success.

Earlier this week, Charles Schwab earned the highest ranking in investor satisfaction among full-service wealth management firms in the J.D. Power 2023 U.S. Investor Satisfaction Study.* (Visit jdpower.com/awards for more details. The J.D. Power 2023 U.S. Full-Service Investor Satisfaction Study is independently conducted, and the participating firms do not pay to participate. Use of study results in promotional materials is subject to a license fee.) Other third parties such as Investor’s Business Daily, Kiplinger’s, and Fortune also continue to recognize and reflect the exceptional value and service we offer to investors.  Ironically, challenging market environments like this one allow us to shine for our clients, to make a difference in their financial lives and help deepen lifelong relationships. With 50 years of experience, we know that both our company and our clients come through times like these stronger on the other side.

Deposit flows at Schwab Bank have remained fairly consistent during this tumultuous period.  In fact, adjusting for modestly increased cash movements during the week last month following national concerns about regional bank stability, the average daily outflows were below February.

Of course, the Fed’s actions to decrease the money supply and raise interest rates will naturally increase our cost of funding and consequently have some impact on earnings. But that higher cost of funding will begin to decrease, which combined with natural growth in our business and lower expenses, we will eventually begin to enjoy growth in earnings. While the first quarter was a challenging time, for sure, reflecting negative investor sentiment, ongoing interest rate hikes, and regional banking turmoil, Schwab’s client-centric growth model remains firmly intact and is performing well. The company continues to operate from a position of strength with strong current momentum. All of which leaves us extremely confident in our current progress and long-term future.

We would like to remind everyone that on April 17, at 9 am ET, we will have a soup-to-nuts review of our business and question-and-answer session as we do at every quarter end, and it is open to anyone to attend. We look forward to sharing more at that time about the robust strength of the business, our significant liquidity, conservative capital position and ongoing organic capital formation, the success to date of the integration of Ameritrade and the substantial cost savings coming from the conversion that will be roughly 90% complete this year, and of course, our continued progress on strategic initiatives that enhance Schwab’s growth.

Thank you, as always, for your continued trust and confidence in us.



Charles Schwab, Founder and Co-chairman

Walt Bettinger, Co-chairman and CEO


The April 17th Update is scheduled to run from 6:00 a.m. - 7:00 a.m. PT, 9:00 a.m. - 10:00 a.m. ET. Participants will include Walt Bettinger, Co-Chairman and Chief Executive Officer, Rick Wurster, President, and Peter Crawford, Chief Financial Officer.

The Update will be accessible at schwabevents.com/corporation.