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Charles Schwab CEO: Actually, We're Killing It With Millennials

Matthew Heimer
Charles Schwab CEO: Actually, We're Killing It With Millennials

At 58, Charles Schwab CEO Walt Bettinger is demographically a baby boomer. Sartorially, too: Speaking to a casually dressed, tech-oriented crowd at a beachside resort on Wednesday, he joked, “I fit in really well with my suit and tie.”

But in an onstage interview at Fortune’s Brainstorm Finance conference, Bettinger disputed the conventional wisdom that his legacy brokerage firm was at a disadvantage in serving the hoodies-and-Allbirds crowd. “The math backs it up: We’re bringing in hundreds of thousands of millennials every year,” Bettinger said. What’s more, “If you map out [the investing needs] of Gen Y and Gen X, they don’t look very different” in the products and services they seek. “The behavior of millennials is quite consistent with other generations.”

“About 53% of our new-to-firm accounts are millennials,” he said. “What’s really important is that it’s not just any millennial…our average retail household has in the vicinity of $350,000 [in assets]. So the average millennial we’re winning has that level of affluence today already.”

Bettinger (whose tie, by the way, was baby blue) has been Charles Schwab’s CEO since 2008. The brokerage has logged significant gains in recent years under his leadership after weathering a tough patch during the financial crisis. Originally a discount brokerage specializing in inexpensive stock trades, Schwab has evolved into a broader operation over the years—offering “high touch” wealth management and advice services alongside dirt-cheap mutual fund and ETF trading. (For more, read “How Schwab Got Robots to Play Nice With Humans.”)

Revenue growth has averaged 13% over the past three years, falling just short of $11 billion in 2018; and profit growth was 20% annually over the same span. The firm has just under $3.7 trillion under management, in about 15 million brokerage, bank and retirement accounts.

‘Let’s not kid ourselves…nothing is free.’

Schwab has recently rolled out the kinds of leading-edge fintech products and services that some millennials have gravitated toward. The firm is considered a pioneer in using artificial intelligence to steer customer service and, in some cases, investment advice. Its Intelligent Portfolios robo-adviser service has been growing steadily, though it accounts for only around 1% of Schwab customer assets.

Schwab faces competition in both the robo-adviser space and in its stock- and fund-trading businesses from startups offering very-low- or zero-commission trading, including Betterment, Robinhood and Brainstorm Finance participant Wealthfront. Bettinger had some praise for those operations: “The consumer probably wins at the end,” he said. “Models like a Wealthfront or a Betterment in some cases do better for consumers than many consumers could get from an investment advisory model in years past.”

At the same time, Bettinger was skeptical that those companies would be able to pressure Schwab to lower its own prices over the long run. “Let’s not kid ourselves: Everybody’s paying, nothing is free…it’s just a matter of how you pay,” he said. “If you are an accountholder at a firm that is charging a zero commission, you’re just paying in other ways—whether it’s in yields on cash, whether it’s in quality of execution.”

Venture capital funding is enabling those startups to keep fees low or nonexistent, he noted, but that wouldn’t be sustainable in the long run: “We’re planning for a multi-decade time frame.”

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