President and CEO Rick Wurster on CNBC

President and CEO Rick Wurster on CNBC, 1/23/25

BECKY QUICK: Shares of Charles Schwab are up more than 8% so far in 2025 and more than 26% over the last year. On Tuesday, the brokerage giant topped the street's revenue and profit expectations for the fourth quarter pretty handily. That stock was up sharply on Tuesday as a result. I think at one point I saw it up by 7%. The company said investor engagement surged following the election. The company, of course, has a new CEO, and that would be Rick Wurster. He took the helm at the beginning of the year, and he says the company has positioned for strength and poised for liftoff in 2025. Rick Wurster joins us right now. And Rick, it's great to see you this morning.

RICK WURSTER: Becky, really nice to see you. Thanks for having me on.

BECKY: Thanks for coming in. So let's talk about why you think you are positioned for growth. The numbers were really strong, stronger than the street was expecting. I think you beat by 10 cents or something on the top line, 1.01 versus the 91 cents the street was expecting. Revenue was up 20%. That was a pretty strong turnaround from what we had seen in the quarter before. What happened?

RICK: Well, we have engaged clients. In terms of our being ready for liftoff, we're number one or number two in the two fastest-growing areas of the financial services market. We have what we think is the broadest set of ways for investors to engage, and the broadest methods for people to come and find us, whether it's digitally, whether it's walking into a branch, and there's a bull market for ease. And so being able to find us in multiple places and do more in one place, that's leading to lots of client growth, and that growth is what's accelerating our stock.

BECKY: Well, where are the clients that are coming in? Who are they?

RICK: We see clients across the board. I think a little-known fact about Schwab is that about one out of every six households that have more than $20 million in our country work with Schwab. And at the same time, we're crushing it with younger investors. Roughly a third of our new-to-Schwab households last year were from clients under the age of 30.

BECKY: That shocked me. I was reading through some of the demographics numbers on that. A third were under the age of 30. How many were under the age of 40?

RICK: It was more than 50%, close to 60%. So we really are doing well with young clients. And our model is that we attract them, and then what we do is we try to do everything we can to delight them and grow those relationships over time, both through digital channels and through in-person interactions.

BECKY: What delights them? What makes them happy with that? What makes them stick around? And I guess I ask because if you think of younger investors, a lot of times people think it's Robinhood, right? That stock was up about 192% last year versus the 26% that you guys were up. What are you doing to find these younger people, and how do you keep them once you find them?

RICK: Well, our success with young investors is driven by the fact that we can do so much to help them. So young investors often are figuring out how to pay off their college debt, or they're figuring out how to buy their first home, and investing is an important part of that journey. And we can help them both with the investing part, but also the broader life, and how it's all going to come together from a financial standpoint. That's where we really stand apart. It's not just about a trading app. We have what we think is the best trading app in the market… we do more trades than the next two closest competitors in the retail brokerage space… but it's also because of we wrap around it.

BECKY: Where do you find them? Are you finding them online? You say you bring them in in person, too. Where do the majority of these new, younger customers come in?

RICK: I think our younger clients tend to engage with us first digitally. We have a great brand. We have a terrific marketing department that goes and finds young investors where they are, and introduces content to them that's of interest to them. We have about 35 hours a week of content that is curated specifically for newer investors that are just figuring out how to invest. We have a capability in our thinkorswim trading tool that allows young investors to practice investing without using real money. So it allows them to get used to what trading and what investing is like.

BECKY: Sort of like, 'Oops, what did I just do?'

RICK: That's a good way to learn.

BECKY: Right. So what do you think when you hear the hotshots, like a Robinhood, or an Interactive Brokers, or somebody who comes in, how do you guys measure up? How do you think of them as competitors?

RICK: We feel great about our positioning. Being number one or number two in the two fastest-growing segments of our space is a great starting point. Having the breadth of capabilities that we have, which we don't think can be matched, in a period where people value that more because they value ease, and they want to get things done in one place, having that breadth of capabilities is very helpful. Having the lowest expense base in our industry relative to client assets is a big advantage. And being able to work with clients in multiple ways. We often find that as clients' lives change, big moments, whether it's paying off their college debt, whether it's buying a home, whether it's having their first baby or getting married, all of those things, people tend to want to come into one of our branches and have a discussion about it, or talk to one of our experts on the phone. And being there for them in multiple ways, I think, is what sets us apart. It stems from seeing through clients' eyes, and doing right by them.

BECKY: So do you get frustrated when you see the stock gains of somebody like a Robinhood?

RICK: No, listen, I think we're focused on delivering for our clients. So I don't look at, you know, with envy at anyone else's stock price. I look at nailing it for our clients. And what I feel great about… you know, we had a lot of outstanding quarterly numbers that we just reported on Tuesday. The number that gave me the greatest satisfaction was the fact that our clients' satisfaction scores across our major businesses are all at all-time highs. That's what I'm excited about.

BECKY: Let's talk about some of those other numbers. Net interest income was up 19% to 2-1/2 billion. That's the biggest portion of your revenue. What happened there? Why did it ramp up like that? Net interest income, obviously, is the difference between what you are paying, or the interest that you have to pay to people to get them to keep their deposits there, versus what you get paid on your interest.

RICK: We've seen a real stabilization of cash deposits at Schwab, and that's what drives our net interest margin. And if you look back the past couple of years, what has happened is clients have been at our suggestion finding places to put their cash where they could earn more. And now we're down to levels of cash where it's really about their transactional needs. And so we saw in the last four months client deposits grow by about 52 billion. And so that has added to our net interest margin.

BECKY: And the net interest margin, again, with rates, let's just talk about what the Fed has done right now, is it harder for clients to find more attractive places to put their money? And that's just a broader example of where the Fed stands right now.

RICK: I think it's a great time to be a fixed income investor right now because you can find yield. It wasn't too long ago we were talking about zero rates, and now clients can find great rates in a lot of different places. You know, for me, if you're a retiree right now, buying 30-year TIPS, you can get a 2-1/2% real yield. Not really any inflation risk and not a lot of risk generally to be able to go out and earn 2-1/2% real. It's as high as they've been in a long time. It's a good time to be a fixed income investor.

BECKY: You all have talked about some opportunistic buybacks at this point, stock buybacks. We haven't seen that in about a year. What are you looking at? Because it would have been more opportunistic, maybe, at the end of last year than right now, just given where the stock has taken off. What would make you do the share buybacks at this point?

RICK: Well, we've been building capital, and we've been building capital towards what we expected to be the new Basel III regulations. And we're now at a place where we meet the new Basel III regulations should they take place, and we're at a point now where we do think we're getting ready to be able to opportunistically buy back our stock.

BECKY: And if Basel III goes away, you would buy more aggressively?

RICK: Well, I think we would want to think about the safety and soundness of our firm and what the right level of capital is, but certainly we would be well above the capital targets that we shoot for.

BECKY: And Basel III, in your opinion, was that… I mean, most bankers will say that they thought that was too aggressive.

RICK: There were elements of it that I think made sense and other elements that didn't. We commented on it, like many other financial institutions, and I know the Fed is thoughtfully looking at it and likely to re-propose some form of it. And I think it's been a good example of being able to have a voice and share collectively our industry's thoughts with the Fed. And they've been responsive.

BECKY: You all have been looking at having spot crypto trading later this year. What has to happen before that comes out?

RICK: Well, first, crypto has been of incredible interest to our clients. We had a 400% increase in traffic to our crypto site in the fourth quarter alone, 70% of whom were prospects that we don't work with. So what's exciting to us about crypto right now is there's a lot of interest. And when there is interest, they come to Schwab because they know it's a place they can trust. And we offer lots of ways to invest in crypto at Schwab. We don't yet offer spot crypto because of the regulatory environment. We think that is likely to change, and when it does, we're going to be quickly… we'd like to be quickly into the market.

BECKY: Because you want to be able to offer everything if somebody is interested.

RICK: We want to be able to meet someone's crypto needs in a variety of ways. Today, they can invest in ETFs. They can invest in futures. They can invest in closed-end funds. We'd like to add spot crypto at the right time.

BECKY: What did you see post-election, additional interest in trading, additional optimism from the retail traders that you're dealing with?

RICK: We did. We saw one sentiment increase. So we saw in November and December… we measure sentiment among our trading activities, seeing what they're buying and selling… trading activity increased in November, and then increased again in December. And then we saw activity increase. And so our December daily average trades were up about 30% over the prior December, and up over the prior months. So there definitely has been an increase in sentiment and activity.

BECKY: Rick, I want to thank you very much for joining us here in-house. Rick Wurster, again, the CEO of Charles Schwab. Thank you.

RICK: Thank you for having me.

BECKY: It's great to see you. Andrew, we'll send it back over to you.

This interview contains forward-looking statements, which reflect management's expectations as of the date hereof. Achievement of these expectations and objectives is subject to risks and uncertainties that could cause actual results to differ materially. Important factors that may cause such differences are described in the company's most recent reports on Form 10-K and Form 10-Q, which have been filed with the Securities and Exchange Commission and are available on the company's website (https://www.aboutschwab.com/financial-reports) and on the Securities and Exchange Commission's website (https://www.sec.gov). The company makes no commitment to update any forward-looking statements.

The information here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

All names and market data shown above are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security.

Investing involves risk, including loss of principal.

Past performance is no guarantee of future results.

Cryptocurrency- related products carry a substantial level of risk and are not suitable for all investors. Investments in cryptocurrencies are relatively new, highly speculative, and may be subject to extreme price volatility, illiquidity, and increased risk of loss, including your entire investment in the fund. Spot markets on which cryptocurrencies trade are relatively new and largely unregulated, and therefore, may be more exposed to fraud and security breaches than established, regulated exchanges for other financial assets or instruments. Some cryptocurrency-related products use futures contracts to attempt to duplicate the performance of an investment in cryptocurrency, which may result in unpredictable pricing, higher transaction costs, and performance that fails to track the price of the reference cryptocurrency as intended. Please read more about risks of trading cryptocurrency futures here.

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