Kristen Scholer:

Welcome into another episode of the Inside The ICE House Podcast. Today's guest is the CEO and President of Charles Schwab, Rick Wurster.

Rick, thanks so much for joining us Inside The ICE House.

Rick Wurster:

It's wonderful to be here. Thanks for having me.

Kristen Scholer:

A lot to celebrate, of course, as we're sitting down here on May 1st, Charles Schwab celebrating National Investing Day at the New York Stock Exchange, all about educating and empowering people to think about their financial futures.

From your view, why does an event like this matter now?

Rick Wurster:

I think it's a really important event because it's all about the power of investing and what it can do for your financial life. And it's so important that as many people as possible invest. It'll make a real difference in their ability to buy a house someday, put themselves or their children through college, retire. Investing is the backbone of generating wealth and we want as many people involved as possible, and we view it incumbent upon us to spread the word about the power of investing. And so we created this day, National Investing Day, to get people excited about it, to raise the voice of investing, and to get people out there hopefully participating in markets.

Kristen Scholer:

A strong message because the stock markets at an all time high, the S&P 500 surpassing 7200 for the first time ever. When you look at moments like this, National Investing Day, what's the biggest misconception that you think people have about investing?

Rick Wurster:

I think there's not necessarily a misconception, where I think the challenges that we're trying to get out and address is that not everyone gets the opportunity to learn about financial literacy, about investing growing up. I was fortunate enough that with my parents, we would talk about investing. Certainly, I talk about investing with my kids. But there's lots of people that graduate high school, in fact, less than 50% that have taken a class in finance or have a sense of basic investing, saving, credit scores, things like that. And so we want to raise the importance of that. We surveyed parents about what was important to them about their kids' high school education, and the number one topic was financial awareness. It actually ranked ahead of math. I think it's really important that we get the word out, that people are engaged learning about investing and ideally make it a part of their life.

Kristen Scholer:

How do you think this can lead to better outcomes, that early education as you've been talking about?

Rick Wurster:

Well, I think a couple of things. One, it sets people on a path to understand the power of compounding, that foregoing a dollar of spending today could be $8 of retirement spending when you compound that over a 40 plus year career. I think that is critical. Just making people know that this should be a part of what they're thinking about, how they're saving and it'll generate wealth, that's the message we're trying to get out.

Kristen Scholer:

Of course, this year we're celebrating America 250 and July 4th is an important day for a variety of reasons, one being that Invest In America accounts are set to open and accept contributions on this July 4th, designed, of course, to help American kids get started with saving from a very young age. What impact can an early account like this have on lifelong financial habits?

Rick Wurster:

Here's what I love about the Invest In America accounts, every child born in our country will be given $1,000 from Treasury. And if they never put in another dollar, that $1,000 when they become 18 may be worth $2,000 or $3,000. And clearly, that won't change their life. But what will change their life is the recognition that $1,000 became $2,000 or $3,000 by just having it invested in the market. And if people see the power of compounding over time, I think they will make investing a part of their life. That's why I love the Invest In America accounts. I think it's a game changer because there's many Americans that otherwise wouldn't save, wouldn't see the power of compounding, wouldn't be talking about markets and finance without them. I think it's a wonderful thing. I hope they grow and I hope every American participates.

Kristen Scholer:

It is a steady growth that we see in the stock market, certainly over history. Yet I would say since the pandemic, we certainly have been in an environment where trading can be framed as fast and flashy and certainly social media having an impact on that. We've seen just the surge over the course of the past five years or so in platforms like Reddit. How do you help investors understand the fundamentals and approach investing in a disciplined way?

Rick Wurster:

Yeah, we try to give our more active traders everything they need to be successful. It starts with our thinkorswim platform, which is an award-winning platform that gives great charting capabilities, news about the stocks that they're looking at. We provide them with research on fundamentals on what's happening to the stock. We've got a TV network that they can tune into that generates trade ideas. We want to help our clients with everything from the platform to research education so that they put the odds on their side of having success in markets.

Kristen Scholer:

Of course, investor behavior can matter as much as market fundamentals when it comes to particular moves that we might see for the major indices. What's the hardest habit you think for investors or traders to overcome?

Rick Wurster:

Well, investing can be emotional. And if you're just starting out and you invest some money and then something comes along, it's a war or a financial event and you see the value of your account go down, that is a very emotional process for people. And so I think the most important thing we've got to do is talk to people about time in the market as opposed to timing the market. If you invest in stocks and you hold them long enough, they are going to generate a positive return for you. And I think that's really important for people to understand. And if they get emotional, they see their account going down, they get nervous and they sell, that's where we tend to see emotional decisions lead to not realizing as much gains as someone could.

Kristen Scholer:

And we've seen the past few years just how quickly the market can bounce back to the point that you're referencing there. Okay. Let's talk about, of course, Charles Schwab and its history dating to the firm's incorporation in 1971. As you reflect over five decades of evolution at this giant and see how the industry has really transformed, how do you ensure that the company stays modern through it all?

Rick Wurster:

I think the number one principle we think about every single day is, is this good for clients? How do we see through clients' eyes make sure that we're doing the right thing for clients? Now, the right thing for clients in 1975 and what they were looking for when we started the company may be different than today. But the golden rule of making sure we delight clients, we see through their eyes, that is timeless. That's why I get out into our retail branches all the time, I go to 30 plus branches a year. I spend time with hundreds of our independent advisors every single year. I hold focus groups with our clients. I'm out talking to our professionals. I want to know what our clients are looking for and to make sure what we're doing is aligned to their needs. If we listen to them, if we deliver on their needs, we're going to have a really successful business.

Kristen Scholer:

Talk to me more about the original values of Charles Schwab and how those are still intact.

Rick Wurster:

I think the original values of the company were trying to make investing more accessible, less expensive so that more people could invest and participate in the benefit of compounding. If you go back to 1975 when there were fixed commissions, if you had a million dollars and you wanted to build a diversified portfolio of 35 stocks, it would cost you 1% of your assets if you had a million dollars. If you had $100,000, it would've cost you 10% of your assets to have a diversified basket of stocks. That is not accessible. And so what we've tried to do and what we have done over the last 50 years is eliminated every barrier to any American being an investor. And that's why we're proud to have National Investing Day because there are now no barriers for anyone to invest. If you have as little as $5, come on into Schwab, buy a part of a stock and just make investing a part of your life and over time hopefully becomes a bigger part.

Kristen Scholer:

You spent a decade with Charles Schwab and you've had the chance to work closely, I see, with Charles Schwab himself. How does his influence and perspective guide you now in your decision making leading this company?

Rick Wurster:

The first time I met with Chuck, I was extremely nervous. It was the first time I'd met someone that successful that had created their own company that had that much success. And I remember preparing for that meeting for weeks and I walked in with a deck full of information and ready to talk about the business I was leading and how we could grow the business, generate more profits, and how that would benefit the company. And as I had that meeting, he kept asking me about the fees that we were charging clients. And I was thinking to myself at the time, he's asking me this because he knows our fees are well below our competitors and he thinks we can charge more, generate more revenue and grow the company.

What turned out it was the exact opposite. He wanted us to... He said, "Rick, we've got to lower all these fees." I said, "Chuck, we'll lose hundreds of millions of dollars." And he said, "No, we won't because our clients will do more business with us. They'll trust us more, they'll bring more assets, they'll tell their friends to come to us and we'll have a thriving business." And I think that principle of doing right by clients, that's been the center of everything we've done for 50 years. And if we keep it at the forefront of everything we do, it'll drive our success the next 50.

Kristen Scholer:

Is there a recent example during your tenure leading this company where that lesson has guided you specifically in decision?

Rick Wurster:

Well, I think all the time we're thinking about how do we generate the best outcome for a client, the most client-friendly outcome. In everything we do, whether it's we're launching crypto to clients this month and we're doing so with the lowest spread on trading of the first dollar of any crypto of any client. Our wealth business which we're growing, we're growing at fees that are well below others. Our lending products, when you have assets at Schwab, our rates can't be matched and the process can't be simpler. It all comes back to as we design and innovate and roll out new capabilities, it comes back to that original idea of is this the right thing and is it good for clients?

Kristen Scholer:

To that end, what do you think matters most to clients these days?

Rick Wurster:

I think there's a few things on the minds of clients. Number one, they want more than just an app. We have what we think is the number one app. It got voted the number one investing platform this year by US News. We're proud of things like that but we're so much more than an app. When markets are going up and down, we're in a war, oil is taking off, people want to be able to call someone and have a conversation about their specific situation. And so I think the fact that we have award-winning service matters a lot. People want advice, they want simplicity in their financial life, and increasingly we're seeing clients gravitate towards holistic solutions where someone is taking on the stress of their financial life and managing it on their behalf. People value their time, they expect easy interactions with us and we lean into creating digital experiences that are quick, easy, straightforward. Those are a few of the things that come to mind and that we're delivering to clients.

Kristen Scholer:

It is really impressive. And of course, National Investing Day, we're happy that you're celebrating it here at the New York Stock Exchange. You referenced crypto earlier, Rick, and so I do want to dive into that a little bit more. Obviously, it's gained a lot of momentum I would say since the pandemic but certainly existed before that as well. How do you think investors should be thinking about crypto exposure?

Rick Wurster:

I would think about crypto as a speculative asset that could potentially be diversifying to their portfolio. If you believe in crypto, you can own it. We make it available on our platform. We do not recommend that people invest in it when we have an asset allocation that people come in and say, "Hey, I'm 55 years old, what should my asset allocation could be?" We're not going to include crypto in it but we're certainly going to include it as a choice for those people that want crypto. And that's how we think about crypto.

Kristen Scholer:

Certainly, market structure is evolving. And I think one thing that's coincided with the rise of cryptocurrency is this always-on mentality. I note that earlier you said that Charles Schwab wants to service the client. How is your company thinking about that always-on nature that the customer might expect?

Rick Wurster:

Well, a couple of things. Our service is around the clock anytime you want or need it, or you can call and talk to somebody. Number two, we've moved to 24/5 trading so that people have around the clock trading. It is interesting as much as people wanted that, we see very little volume outside of market hours. That's been interesting but it's available should clients want it. And then we try to have an award-winning digital experience. For clients that want to access it on their time, on their terms, they can do anything they want on our web or mobile app. And I think it's important in this day and age, you've got to be available for clients when they have the time to engage and we want to make it a great experience for them.

Kristen Scholer:

Longer trading hours, more accessibility there. What about instantaneous settlement as well as fractional shares? What are your view on those topics?

Rick Wurster:

Well, fractional shares I think are a great thing because if you go back to the story I shared earlier about trying to create accessibility, now you can buy a share regardless of how much money you have. If you want to buy a share of Tesla and you don't have $400 or wherever it's trading today, you can buy a part of Tesla or NVIDIA or whatever stock you want to own. I think fractional shares are a terrific thing for investors.

We'll see where things go with instant settlement. There are trade-offs to going to instant settlement. When we went to T+1, we created the systems in a way that will allow us to go to T+0 so we are ready to do it. There are some benefits in having a little bit of a lag in the process where securities are validated, make sure they show up, make sure the counterparty is there, all that stuff. There are benefits to some time lag. But if the market wants T+0, we are ready for it and we certainly will make that available to clients.

Kristen Scholer:

Let's talk alternative investments and private markets. Charles Schwab made a strategic move back in March with the acquisition of Forge Global. What role do private markets now play in Schwab's broader vision?

Rick Wurster:

Well, if you look at institutions over time, they've used private investments to diversify their asset allocation. And over time they've realized probably slightly higher returns in private markets and it's brought down their risk profile. On the other side of that, they've given up some liquidity but it's helped round out their asset allocation and institutions have had that access and have participated. What we're trying to do right along our theme of accessibility and providing access and choice to clients is to bring the opportunity to invest in private investments to the retail market. And we're doing that in a number of ways, you can invest in a fund structure from a leading manager, many of the names you've heard of that are famous private equity managers or venture capital funds. And with the acquisition of Forge, now you can invest in individual securities. If you want to own SpaceX or OpenAI or whatever may be of interest to you, you can go participate. And then we'll have a fund structure where you can invest in a passive basket of private companies.

We want our clients to be able to access it, make it a part of their asset allocation, and enjoy the benefits of it just like institutional investors have.

Kristen Scholer:

As we prepare to round out this conversation, Rick, what else do you want listeners to know when it comes to National Investing Day?

Rick Wurster:

Well, I think the most important message we're trying to get out today is about the power of investing, how much a difference it can make in your life. If someday you aspire to own a house, start saving today. If you want to send your child to college, start saving today. If you want to retire or not have to work, start saving. And so it really is a very simple message about trying to get the word out to as many people in our country as possible to make investing a part of their life because it will really enhance their wealth and as a result, enhance their life.

Kristen Scholer:

And what does this mean for Schwab? How is this going to define success for the company in the future?

Rick Wurster:

Well, we've been a mission-based company for 50 years. We've always wanted to make our country a great place to invest and to give people a place they trust that is on their side, that's going to do right by them, that's going to provide no trade-offs. You're going to get great service, you're not going to have to pay a lot. You have access to self-directed investing, you have access to more holistic advice. You can get anything you want at Schwab, we want people to succeed. And so this is a right on message for us, it's all about bringing more people into investing in our country. And should they choose Schwab, we're honored to serve them and make them a client.

Kristen Scholer:

Rick, thanks so much for joining us Inside The ICE House.

Rick Wurster:

Thanks for having me.

Kristen Scholer:

Great to have you.