Newscasts - Reuters NEXT Newsmaker- Charles Schwab CEO Rick Wurster 1

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04/05/2025 06:47

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Description: On the anniversary of May Day, Charles Schwab CEO Rick Wurster will discuss how he has steered the company through market turbulence since taking the helm in January. Reuters U.S. Finance Editor Lananh Nguyen talks with Wurster about the economic outlook, the proliferation of retail trading and Schwab’s growth plans in Texas, exchange-traded funds and cryptocurrencies.

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Video Transcript:

>> Standby. >> Hello, everyone. Thank you very much for joining us. I am Lananh Nguyen, US finance editor at Reuters in New York. And with us today for this Reuters live newsmaker event is Rick Wurster. >> He is the CEO of Charles Schwab, the largest publicly traded investment services firm in the US. The firm has 10 trillion in client assets and almost 37 million brokerage accounts. So Rick has a front row seat on what's been going on in the equity markets in the last month and we're very thrilled to have him with us here today. Thanks, Rick. >> Thanks for having me. It's a real pleasure to be here. >> So we've got to start with what's happening in the stock market. It has been hugely eventful. You've had some record days. Just give us a bird's eye view of what your last month has been looking like. >> It has been a period where investors have been very engaged. We've seen record levels of trading at Schwab. We've had our two highest trading days ever this month. Tariff Monday, we had 14 million trades. Friday before that, we had 13 million trades. It's been a busy month. In general, what we're seeing from retail investors is engagement in the market, some slight pullback in risk taking. We've seen our margin levels come down. We've seen net equity selling. But in aggregate, it hasn't been very dramatic and most investors are staying the course. >> You talk about investors staying the course, but I think some of your data, especially your client retail sentiment data is showing that people are becoming a little bit more bearish, that bearishness jumped over the last month, and that's not a surprise given the minus signs we're seeing on the screens. Talk a little bit about the sentiment now as we get these tariff announcements, some reversals, some changes. >> I think clients are engaged. They're trying to figure out where this is going to go, and initially in the month, I think the high level of activity we saw were clients that were repositioning themselves, trimming their risk a little bit, making sure they were well diversified. And then as the month has gone on, we've seen a little less trading volume. I think people are sitting this out a little bit. They want to watch how this plays out before they reengage. So we have seen trading activity peel back during the month. >> And talk a little bit also about the types of trades. Are there a lot of tactical opportunistic trades? Are people buying the dip? What's happening in terms of how people behave in this period? >> Well, we've got 45 million client accounts across our brokerage business, our retirement business and our bank, and we see all kinds of activity. We've got a group of active traders that are actively trading. We've got a lot of dip buying among those clients. We also have some that are taking money off the table, and then we have a large group of clients that I would describe as more long term-oriented investors. They've got a financial plan. They stick with that plan, but even those investors are more engaged. They're calling us more than they did before, we set an all time record for the number of login. So they're calling, they're digitally checking their balances, figuring out what they should do but the majority of those longer term investors are staying the course, sticking with their plan, and being invested. And we know over the long term, markets tend to work themselves out and that approach, I think, works well. >> So when you have a day with 14 million trades, talk to us a little bit about what it looks like at the Schwab Command Center, what it looks like on your desk, who are you getting calls from? Who are you calling? >> On a day with 14 million trades, our primary focus is making sure we nail it for clients. On days when we have that much trading, clients want to know they can log in. They want to know they can trade quickly and get excellent execution. We get high levels of call volumes because when clients want to trade, one of the great things about Schwab is they can call in and talk to someone about what they might want to do and think through the impact on their portfolio and all the positions that they have. So for us, on days like that, it's busy across the board, and our sole focus is making sure we're nailing it on behalf of clients. We talk every day about delivering the brilliant basics to our clients. With 45 million client accounts, if we wake up every day and we nail the basics of the everyday interactions, clients are going to trust us, they're going to keep their money with us, and they're going to thrive in their financial life. >> Did you see hiccups in the markets? Did you see hiccups in exchanges? Did regulators call you during those periods? Because it's just this huge flood of trading. >> Thankfully, the exchanges in our company's technology all worked really well. So we had very clean days on those days where we did 13 and 14 million trades. Everything went well, which is great to see. We plan for that. We expect that to happen. We've invested a lot over the last 10 years in our infrastructure to make sure we could handle really high levels of trading volume. We acquired a merit trade, I guess, six years ago now at this point, and they brought a lot of more active traders to the business, and we wanted to make sure that we could support the level of active trading we may see from that group, and it was terrific to see that in an all time record number of trades, our technology operated flawlessly. We handled the call volume and the increases we saw there really well. So it was a successful day, and regulators definitely check in because their concern is, are you up and available for retail investors. And during that day, I know there were a few firms that ran into some challenges and regulators want to know about those things, but thankfully we were clean. >> So now that you have a huge day like that, do you have to change your resilience planning for the next time, or do you have to multiply how much capacity you think about testing in future? >> Well, we always want to plan for the next event, make sure resiliency is top of mind in everything we do. So we felt great about how we came through this and we're preparing for the next one and make sure we're even more resilient then. >> So let's dig into a couple of different client segments because I think our audience will be very interested in how your retail traders are doing things these days. Like, if you talk about, for instance, previous instances of stress in markets, are they doing things differently than they did say in 2008 or in other market disturbances? >> Well, one of the things we measure is the percentage of clients that are making a large asset allocation shift, and I would describe that as someone who has more than 75% of their wealth invested in stocks and then goes to have less than 25% of their wealth invested in stocks. So that's a sign of people making a meaningful asset allocation shift and taking money off the table. Back in the financial crisis, we saw a decent percentage of people that made that big shift. In this environment, we've seen a tiny fraction of our clients that have made a big shift. So the vast majority of our clients are largely sticking with their plan, and that's encouraging for us because we guide our clients to have a plan and to stick with that plan. And if you're an active trader, that may involve lots of trade. If you're a long term investor, it may not. But either way, having that plan, sticking to it, we think is really important. >> So obviously, no one knows where this is all going to end up in terms of tariffs. Obviously, the administration is negotiating trade deals, but talk to us a little bit about what you tell your clients when they call you, when they have these longer phone calls with your advisors, when they're looking up your research about where the tariff environment lands and where this economic uncertainty goes. >> We tell our clients to stick to their plan. We believe in the power of long term investing. Markets have tended to go up over time, and if you've saved consistently and invested consistently, that's been a powerful way to grow your wealth. And in periods where you have more volatility, like we've been through, where there is more client nervousness or at least questions and engagement about what should I do? We try to remind them about the power of time and diversification. And one of the nice things about the market environment that we've been in is, I think the power of diversification has really paid off. For 15 previous years prior to this, we've really been in a US-dominated market where US equity returns outmatched any other region by a wide margin. And in this period, even though we've had a lot of volatility in US stocks and some downward pressure, if you've owned a balanced portfolio this year of global stocks and bonds and some commodities, your portfolio is up this year, and that's because commodities have had a positive return, the GSCI and bonds have had a positive return. So combine that with global equities which have held in there and you've done well. So it's nice to see the power of diversification work, and then we talk to them about the power of time. >> So in terms of diversification, you and I were speaking about this earlier, what does it look like? Does it look like people are selling US equities and bonds and moving into European equities or Asia? Where are the other places that investors are looking now for value? >> I think clients are using this as an opportunity to rebalance their portfolio, and so they've had large run-ups in their US stocks over the past 15 years and we've been over that 15-year period talking to them about the power of global diversification, and they should consider having some stock exposure outside the US. And now with the relative outperformance of some of the non-US countries, in particular, Europe this year, clients are more willing to have that conversation about global diversification, and so we do see some rebalancing from US equities to non-US stocks. >> And what about, bonds or other asset classes, you mentioned commodities, how much are those getting bid? >> I think bonds have become cool the last couple of years. Prior to two years ago or two-and-a-half years ago, it was hard to get a client to engage in a conversation about bonds because yields were so low and there just wasn't return there, and stocks, of course, had pretty much consistently gone up for a long period of time. So trying to talk to clients about bonds even though it was good for them, it was like trying to tell someone to eat their broccoli, and now broccoli and bonds are back, and clients want to talk about the value of having bonds in their portfolio. And I think it's great for long term investors to have that balance because then when they get into periods like this and stocks may be having some volatility, having a portfolio that's a little more balanced gives them the confidence to stick with their plan. >> As a markets nerd, I always thought bonds were cool, but I understand not everyone agrees with that. In terms of bonds, though, they obviously have gotten more expensive. So what does that mean in terms of clients and investor behavior with regard to say, margin costs, etc? >> Well, in terms of bonds being expensive, I think yields are still relatively attractive. If you look at the 10-year, it's got roughly a 2% real yield, which to be able to earn 2% after inflation without any risk is pretty appealing. And I think it's pretty appealing in particular for retirees to be able to earn inflation plus 2% is very appealing in addition to owning stocks, and so it just provides you with that allocation that you can count on for the 2%. So I do think that's appealing. >> We have seen obviously some bumps in the treasury market, which the investors and also the government is looking at very closely, as well as regulators. How concerned are you about volatility and turmoil in the treasury's market? >> Treasury markets are really important part of capital markets for a variety of reasons. A lot of our assets, as an example, sit in treasuries, and so what happens with treasuries impacts us. I think it impacts the discount rate that everyone applies to equities. It impacts the way most companies fund themselves in terms of taking out investment grade debt and things like that. So I think the treasury market is key. Rates in general have been for a long time, fairly contained, and I think the treasury market is the most efficient and liquid market in the world, and I know there's been some periods this month where there's been speculation about large sellers of treasuries, but then the market bounces right back. And I think that's a testament to the strength and size of the treasury market. It really can't be matched globally, and so when people want a risk-free asset, I still think treasuries are the place they turn. >> You talk about risk-free, maybe it's a little bit less risk-free than it previously was. Are you hearing concerns about that either in your network of retail traders, wealthy people, or the policy community and fellow CEOs? >> I don't think yet there is a risk premium built into treasuries. We have been a successful country for a long time. Treasuries are backed by the taxation power of our government. I don't think there's a risk premium built into treasuries. I think there is a little bit more volatility in treasuries just because there's more uncertainty from a macro standpoint, and so if treasuries price off inflation expectations and growth expectations, those two things have been changing quite a bit over the last period here. So I think what's happening in treasuries is just people trying to price in inflation expectations and what's going to happen to growth, which is how treasuries get priced. >> And what is going to happen to growth? What are your economists saying about the economic outlook and the potential for further inflation and recession as a result of the tariffs. >> It's always hard to predict those things. We counsel our clients to focus on the long term. The power of being invested over the long term is substantial on one's wealth, and so our primary advice is stick with the long term. Don't try to time markets. Now, that said, we have a group of very active traders that every day are engaged in the market. They're trying to look for an edge, and we do provide a lot of research to them, and clients are engaging in that. In fact, in April, we've had a 40 times increase in the amount people are reading our research. So clients are looking for a direction, and we're trying to provide it to them. >> So you talk also about risk, so obviously your traders are managing risk. You as a firm are also managing risk. Can you tell me a little bit about what you need to do in terms of holding margin, making margin calls on clients during this period of unprecedented volatility? >> Well, margin calls, it's a great example of, I think, what distinguishes Schwab from many other firms. So margin in our business, we have a team of thousands of people every day that when clients are running into a margin issue, we proactively reach out to them. We let them know they may have a margin call coming. >> How do they want to handle that? Most firms, when a client runs into a margin issue, they take the client out of that position. That has really differentiated us in periods like we've just been through because clients appreciate the opportunity to say, "You know what? I love that stock. I don't want to get taken out of the position. I'm going to bring money in to meet that margin call." And we've had thousands of those calls over the last month where clients have done that. And that's been beneficial because we were calling them on the Friday before tariff Monday saying, "Hey, you're going to have a margin call here." And they brought money, and it's allowed them to hold the stocks and ride it from wherever we were on the S&P 4,900 ish back to 5,600 plus. So not automatically taking them out of margin, I think is a great benefit and a testament to the power of what we do because we have actual people that serve our clients and are looking out for their needs every single day. >> So it's a pre-margin call call? >> It's a pre-margin call call. I like that. I might use that around the office. >> [inaudible 00:40:35] to do more of those and how frequent have they been? And has there been more of those conversations? >> We absolutely have had to do a lot more of those because as stocks go down, people's margin gets impacted and so we've had to call out a lot. And the fact that we've got a team of 33,000 people that wakes up every day with a single mission which is to enhance our clients' financial lives. That allows us in periods like this to get a lot of people on the phone to have those conversations and figure out how we can do the right thing by the client and help maximize their financial life. This is not just an app where a client trades and gets taken out of a margin position. We stand side by side with our client, try to make a real difference in their financial life, and do the right thing for them. >> So it's interesting. We talked about bonds, which are often something that maybe older investors are interested in. And then we also want to talk about the millennials who have also signed up to Charles Schwab in droves and Gen Z as well. Tell me a little bit about how different client segments by age are behaving right now if there's a way to generalize that. >> We see a lot of engagement across the age spectrum. We're doing really well with young investors. A third of our new-to-firm households, so new clients coming to Schwab are under the age of 30 and 60% are under the age of 40. And the reason we're having so much success with young investors is we're meeting them on their terms. We're in all kinds of places where they're spending time: TikTok and Instagram, and we did a Twitch video with gamers, where we talked about in the middle of these great gamers gaming, we had a little plug in there about how great Charles Schwab is. We've got a lot of views on that. So we're trying to find them where they are, get them to Schwab because we think when young investors come to Schwab, we have an opportunity to make a real difference in their life. This is not about entertaining them. This is about how do we help them figure out how to pay off their college loans? How do we help them save for their first house or prepare to have enough money so they can start a family. >> So do they do? Do they buy Mag 7 stocks? Are those too expensive for them? How do they behave? >> Like our broad client base, we see them invest in a lot of different ways. Many young investors are in passive index funds and well diversified because they are aspiring to buy their first house. At the same time, we have a lot of young investors that are very active traders, and they are invested in the Mag 7, and they've been leaning more into the Mag 7 as stocks go down and they view it as a good long-term buying opportunity given the time horizon that they have. So we see a range of behaviors. Our main thing is we want to be there to support them. And for each one of them, they are an individual. It's hard to find them just by their age. And as an individual, we want to help them meet their financial goals to the best of our ability. >> What about the boomers? >> I think the boomers are sitting in a position where their portfolios might be off their max values, but if you look at the runup in their wealth, it's been pretty powerful, particularly the last couple of years, stocks have really run up. So the conversations we're having with boomers often are about they have more money than they might have expected for their retirement. And one of the counterintuitive things we often have to spend time with on our clients is or we enjoy spending time with our clients on is making sure they're comfortable spending some of the money they have. That's been, I think, a theme that we've really spent time with our boomer clients. >> So if the baby boomers are writing the US exceptionalism trade and that has come off quite a bit, does that mean that people are delaying retirement because they see this correction in the market that's happened? Are they spending more time in the markets and invested because they want to recoup some of those losses? >> I think you look at people that have ridden that wave the last 10 years, I don't have the number in front of you, but US stocks are probably up in the teens percentage a year for the last 10 years. That's pretty good returns far in excess of what we would have planned for with that client 10 years ago. So I think they're sitting in a pretty strong position as a result. >> What about your wealthy clients? I know you have a lot of financial advisors and maybe wealthy clients can withstand a bit more market turmoil. How are they behaving? What types of assets are they looking into right now if you can generalize? >> I think wealthy clients want to talk to an advisor just like a young client that's figuring out how to save for their first home. Regardless of the wealth you have, when you see disruption in markets and you see markets going down, the ability to talk to someone and have a conversation about where you are with your plan and to reinforce the confidence with the client in the power of diversification and of time and markets and of being invested, I think those things are important regardless of wealth. With our wealthy clients, we're having just as many conversations like that as we are with less wealthy clients. >> So talked about your call centers being inundated by client calls and the phone calls are longer. What are these phone calls discussing? What are your clients asking you? What's top of mind? And how are they sifting through all of this noise? >> What am I going to do? What should I do? That's the very simple question that we get more and more in periods like this. In a normal period of markets, clients will call in because they want to move money or they want to set up a new account for a child. Whatever it may be, they're calling in for, I would call, more tactical reasons. In periods where there's more market volatility, they call in with a very simple question. "Hi. This is Barbara from Indiana. I've been a teacher for 40 years. I've got this money sitting here. I'm watching the market go down. What do I do?" And the power of Schwab is that we've got a group of people that wake up every day inspired to answer Barbara's question and to help her get where she needs to be. >> So I know you're plugged into the policy community because obviously you represent a lot of retail investors. We've seen, over the last few weeks, commentary about Wall Street and the fact that the stock market doesn't represent Main Street, but I think there's a little bit of pushback there because there are huge numbers of Main Street investors in the stock market. Talk a little bit about what that says to you in terms of the policy landscape and how representative the stock market is in the real economy. >> I think you make a great point. Main Street is absolutely invested in the stock market, and it's a big part of their wealth. And we are the number 1 brokerage for retail Main Street investors in our country. So we feel an obligation and have for 50 years to work with our regulators to make sure the US economic system and the markets work for the Main Street investor. So for 50 years, we've spent time with regulators, with politicians, making sure that we create the most investable market in the world for retail investors. And I think we, collectively as a system, have been very successful at that. I do think it's the best place for Main Street investors to invest in the world in terms of the efficiency of investing, no costs to invest, no commissions. It's a great place to invest. And it actually started 50 years ago on this day back in May 1 of 1975, investing was inaccessible to most Americans. If you were very wealthy and had millions of dollars, you could buy stocks, but if you had less wealth, it was too expensive. If you had $1 million, it would cost you 1% of your portfolio to get invested on May 1st of 2075. If you had 100,000, it would have cost 10% of your portfolio to get invested, so you really couldn't invest. And what Chuck Schwab did back on May 1 when commissions were deregulated in our country and most brokerages took that opportunity to raise their commissions, Chuck brought commissions down and began a 50-year journey to make this the most investable market for Main Street investors in the world. >> And now, anyone who has one of these invest. >> Absolutely. >> And so I'm curious, when you hear members of the administration, President Trump or the treasury secretary say, "Listen, the stock market plunge is a Wall Street issue," what's your response to that? >> I think the markets do have linkages to the economy because people's wealth are tied up in the market. So the extent the market goes down, I do think that affects the real economy. I think what some of the thinking behind those comments are that wealthy have benefited the most from market gains, and it may affect the everyday person less. And there probably is some truth in there, but from my perspective, there's no question that the performance of markets impacts the real economy. And if you look at most recession predictors, you'll see or read about a 30% probability of recession or a 40%. One of the key variables in those models typically is the stock market. So I do think the stock market has an impact on the real economy. >> Got it. So, Rick, I want to move to some of the more Schwab-specific strategies and investments that you're making. First off being based in Texas, you are not on Wall Street. You're in Texas, so maybe you're plugged in more to the rest of America and how it trades. Why are you investing in a Texas exchange? >> It's really about providing more options to our clients down the road. We've got great exchanges today, but I think another one that competes, there are not that many exchanges. So having more, I think competition is good and having it located in Texas, we think makes a lot of sense. And Texas is our headquarters, and it's a place where we've been really since Chuck started the firm. One of our first branches was opened up in Dallas, so we've had a long history in Texas, and this is just another sign of our commitment to the state. >> And how are you going to try and compete and challenge the incumbents? Nasdaq and NYSE are right around the corner. How do you muscle in on that territory? >> Thankfully, that's not our job. That's the Texas Stock Exchange job there. They're going to try and make their way. We're just an investor in their efforts. We think it's good to have a range of options and for there to be competition amongst the exchanges, but I'm not giving any of my time to think about how they're successful. They need to do that. We're invested in them. We think it's great that they're doing it, and we support them, and we've made an investment, but on a day-to-day basis, I'm not thinking about how they win. >> And in terms of that investment, though, do you think that they would be able to compete on listings, for instance? >> That's their goal. I think they want to be thought of as one of the big exchanges. And over time, I know they aspire to do that. >> That's a very, very tough hill to climb. >> It is a tough hill to climb, but there's a lot of businesses moving to Texas. I think there's a lot of momentum in Texas. We moved our headquarters there. It's conveniently located. One of the great things about Texas is I'm on the road a lot. I can get to any part of the country in a day quickly and make it a day trip if I have to. So I think businesses are moving there. It's a business-friendly climate, and I think it's setting up an exchange that builds on that momentum and works with some of the companies moving there, I think that'll give them a little bit of a head start. >> Got it. And another area that you are trying to expand in is 24-hour trading. Talk to us a little bit about why you're encouraging US investors to trade over a longer time horizon. What's the upside there? >> We're providing them the opportunity to trade 24/5, and it's really an opportunity for the clients. You mentioned US investors. I think as much as we did it for US investors, we also did it for non-US investors. We've got a lot of clients in Europe and in Asia. And if you're sitting in Asia, trying to trade during US market hours is very difficult. And so we wanted 24/5 trading to support our global set of clients. And the feedback we've heard from overseas in particular has been terrific because it's made their day-to-day life a lot easier. >> How do you think that evolves? What are going to be the growing pains in terms of proliferating that across the industry? >> I think the big thing we want to make sure happens with 24/5 trading is that the liquidity and the pricing and the efficiency of execution is there. The last thing we would want is someone who's sitting in Asia during their day, placing a trade during what's the nighttime here, and there's not a lot of liquidity and they don't get a great fill. And so we've really tried to work with the exchanges and to make sure there is liquidity and efficiency in those time periods. >> So not just that they don't get a great fill, but someone can really move markets if they want to when the liquidity isn't there as well. So what does that mean from a supervisory perspective? >> I think if they're moving the market, they're probably not getting a great fill, so I think large investors are likely going to be focused on trading during the open and the close in the day here in New York and less focused on the 24/5. The activity we see in 24/5 tends to be retail investors and there is a predominance of non-US. >> Clients. That's where we've seen the activity so far. >> So moving gears to Donald Trump again, he has definitely vowed to be the crypto president, and we have already seen some moves to roll back some of the harsher or tougher regulation on crypto. You have signaled your intentions to get bigger and crypto. Talk to me about what your latest crypto business looks like and where you see things going. >> We think we're the premier destination for investors interested in investing in crypto. We custody the most crypto ETF assets in the industry. We are working on a plan to launch spot crypto in the next 12 months, ideally, this year but in the next 12 months. We have lots of ways for clients to get invested in crypto. They can buy the ETFs, and again, we're the number one destination for doing that. They can buy Bitcoin futures. They can buy closed-end funds which track the price changes of crypto. So there's lots of ways to get invested, and we have education around that. And what we saw in the fourth quarter of last year when there was a real uptick in interest in crypto, is we saw a 400% increase in the traffic to our crypto site at Schwab. Seventy percent of those people were prospects. And so what that says to me is that when clients become interested in crypto and they've learned more about it, the first place they want to turn is Schwab because they trust us and they know we'll give them unbiased advice and that they can keep their assets safeless. >> How do you get to spot crypto, given the regulatory environment? What do you have to do? What do you need to hear from regulators for you to get comfortable with launching that? >> I think there's a very clear path for firms like us to be able to launch crypto. There was a rule called SAB 131. What that rule did is it mandated that for every dollar of client crypto assets, we had to hold capital against that. Of course, client equities and client fixed income assets, we don't have to hold any capital against but because people were particularly worried about crypto, as a bank holding company, we would have had to hold capital against it. That made it impossible for us to be in the market. That rule has been changed and other regulatory bodies have followed that guidance. And so I do think there is a clear path for getting this done. And we've spoken with our regulators, and again, we feel like we're on the path to get crypto launched. >> Yeah, certainly the guidance has changed and has been rolled back for crypto, so it makes big firms like yourselves more comfortable, perhaps. Are you comfortable being the first mover to get into crypto in big size? >> I think for us what's most important as it relates to crypto is making sure clients understand the pros and cons, the risks, and the potential upsides of being invested in crypto. What I like about being crypto is that I think we can do it the right way for clients. We can support them in the journey. We can help them understand what it is. We can help them think thoughtfully about how to position it broadly in their portfolio. The more education and insight we can bring to how people use crypto, I think, better off investors will be. So that's what gets me excited about being in crypto is that more and more clients may do it with us, and when they do, they're going to benefit from the breadth of how we advise them and make it available to them. >> So if you were to assess the stop lights from regulators right now, do you have a green light or is it an orange light? >> I call it pretty green. >> Interesting. And so the next steps will be more custody and spot crypto. >> Well, if we're going to focus on spot crypto, we're going to start with the two biggest coins that trade Bitcoin and Ethereum, and we'll make those available to clients. We're focused on doing that in the next 12 months. We believe the majority of volume in crypto and the majority of interest is in those two coins. That'll be how we start. We can broaden that out over time, depending on client interest, but that's where we'll start, and we're excited to have spot crypto but we feel also great about where we are today and being able to offer clients the range of ways to invest in crypto today, and we're seeing clients engage in it because we are the number one custodian for ETFs that are crypto ETFs. >> What are the risks there? >> With crypto? >> Yeah, with crypto. >> I think there's meaningful risks with crypto, and I think we want to be the firm to describe to clients what those potential risks are. I mean, price volatility, to me, is the biggest risk. And the thing about equities, with equities, there are dividends. There are earnings. And so if a stock falls dramatically, you can say to yourself, well, hey, now it's eight times earnings. I have confidence it's going to go back up based on the earnings. Or, I was earning a 3% dividend yield before, and now it's a 5% dividend yield because it's fallen so much. So there's that dividend, and there's a way to value it. With crypto, we could wake up tomorrow, and Bitcoin could be 200,000. We could wake up tomorrow, it could be 25,000. So I think at either point, it would be hard to justify and come up with a strong rationale why it's 200,000 or why it's 25,000. And so I think that makes it hard for investors to understand how to allocate to it. And to me, that's the big risk. It's the volatility risk. And one of the reasons I feel it's so important for us to be in crypto is to make sure clients understand that price risk. They size it in their portfolios proportionally, and they think about it from a diversification standpoint. >> This is a big growth area for you. How much are you investing in the crypto business? Can you give me a ballpark? >> As a firm? As a firm, our expense base is $12 billion a year, in terms of that expense base, this is a small portion of our expense base. >> Why is it so small? Is it easier to launch crypto? I mean, do you think, technically, from a technical perspective that it's not a heavy lift, or is it, why. >> We're able to leverage the scale of our firm. >> Crypto trading will go up on our Think or Swim platform first. It'll then go to schwab.com and our Schwab mobile applications quickly after. But it's just adding another capability on those platforms. So we're not having to create a whole new platform. So from an expense standpoint, that hasn't been the barrier to us moving faster in crypto. It's been the regulatory environment for bank holding companies that has held us back previously, and that's becoming unlocked. >> It's tantamount to adding another asset class, or another. >> Yeah, another security. Yes. >> Got it. >> It's a little different because there's some unique rules and things, but it's akin to that. >> How can you compete with crypto native companies that are already doing crypto and that's their bread and butter, and they've been doing it as their main reason for existing? >> I think there's different types of crypto investors. There's some crypto investors that are primarily traditional investors that want to invest in equities and want to invest in bonds, and they're intrigued by crypto. They might not completely understand it or know whether it's going to go up, but they feel like they should own a little bit. And I think those investors primarily focus on the two big coins. I think that group, we have 45 million of those clients, and they want to stay at Schwab and be able to own crypto here. And they are because we're the number one custodian for ETFs. There are a group of say, crypto aficionados , which they want to own 40 different coins. That might be the primary way they invest their assets is via crypto, and they're buying all kinds of coins that we are not going to support in the near term. And likely over the long term we'll never support. Those crypto investors are likely to go somewhere else. But it's that main street investor wants a little bit of crypto is intrigued by it. We want to make sure they stay at Schwab. Those 45 million clients should stay with us. They love us. They want to keep their assets and their crypto with us, and we're going to be able to provide that to them. >> If they're trying to dabble, then that might be an area where they start. >> It's dabbling. It's the breadth of their crypto investing. There are crypto investors that love crypto. They're buying all kinds of coins I've never heard of. We'll leave that for someone else. We want the investor that is broadly thinking about stocks bonds and maybe a little bit of crypto. That's our sweet spot. >> Got it. Rick, as we close, I want to talk a little bit about leadership because I think you have taken the seat at such a fascinating time in markets. You started on January 1, but you were the president of the company for three years before that. You also have a very unique position in that your two predecessors are the co-chairmen of the board, Walt Bettinger and also Charles Schwab, whose name is on the door of your building. So talk to me a little bit about what it's like to run this company with so much institutional knowledge and maybe people looking over your shoulder, and how you're going to do things differently from those two guys. >> It's an incredible blessing to have Chuck and Walt involved. They've been mentors to me and help guide me through my career, and I admire them both deeply. And I admire them both personally and professionally. They're both great people that I'm proud to call friends. I think, they're kind to others. They're generous. They're good people that I aspire to be like. And from a business standpoint, for 49 of our 50 years as a company, the two of them have been the CEO of our company. So the knowledge that they have about our clients, about how our business operates is unmatched. And so the opportunity for me on any given day to call up either one of them to check in and share with them what we're facing on that day and to get their insights from having led the company for 49 of the last 50 years is just a true blessing. And periods like the more volatile periods we've been through, I've spoken with them more than usual and as always, they've given me incredible guidance. >> Do they call you? >> They absolutely call me. Both care deeply about the success of our firm and about each of our clients. >> So what do they ask? >> You know, on our busy days, they want to know, Hey, how are we doing for clients? What's happening? Are we nailing it for clients? And thankfully, I've so far this year been able to tell them yes, and that makes them happy. So that's number one is sort of tactical check-ins. The second is they want to make sure we're going after opportunities. They want Schwab to be the strong independent company it's been for the past 50 years, making a huge difference, democratizing investing for investors. They want to make sure we do that for the next 50. >> So what happens when you disagree? >> I think we all have our own opinion. The great thing about our relationship is that we're able to put on the table what we believe, why we believe in it, and then work that through so that we can come up with alignment around the strategic direction of the firm. There's so much knowledge among those two. If they have a different point of view, I'm not going to dismiss that and say, Oh, I'm the CEO. Let's just go in the direction I believe. I want to understand why they may have a different point of view and get to the heart of that, and then make sure we're aligned going forward. So I appreciate when they have a different point of view than me because it allows me to understand things from another perspective. My sole goal as CEO is to make sure we deliver for clients and to make sure we thrive as a company. And if someone with that level of experience has an insight that can benefit our clients and our firm, I'm going to take it. There's no prizes for doing this on your own. >> This is about making sure we deliver for our clients. >> So those two guys and yourself now, you've seen a lot of market disruptions throughout your careers, and we are in a period of volatility in markets now. How should investors navigate this period going forward? That's my closing question. When you get questions, when Walt or Chuck get questions, what do you tell people? >> I tell people have a plan and stick to it. I think it can be challenging to time markets. It's unsettling when you go through periods where you're seeing your balances go down. I don't like it. I'm sure you don't like it, and it causes people to be concerned. The power of Schwab is that I think we can be there for those clients in there in that moment. To remind them that they have a plan, that they have someone to talk to when they get nervous here at Schwab. That we believe in the power of time in the markets, we believe in the power of diversification, and that collectively we were prepared for this moment. The reason we've been working with the clients for so long and talking about diversification, and the reason so many of our clients have a financial plan is we wanted to be prepared for this moment. And so that's why I think in periods like this, we really shine for our clients, and we see it in our net new assets that we had in the first quarter. We see it in our client promoter scores, which have been at all-time highs in terms of our client satisfaction. So I think we are doing well as a company because of the way we serve our clients and the way we've worked with them. With our clients at the forefront, trying to see through clients' eyes and making sure we help them get to where they want to be in their financial life. >> And right now, are they panic selling or they stayed the course? >> Clients are engaged, and most clients are sticking with their plan. There's some that have been dip buyers. In aggregate, we've seen a slight de-risking, less use of margin, net equity selling, a slight build in cash. Although, a lot of cash has moved to pay taxes. We've also seen an inflow of cash. So that's been the general trend across all 45 million is a slight de risking, but largely staying the course. >> Great. Well, thank you so much, Rick. This has been a really great conversation. Thank you for giving us a lens into what your retail investors are doing. It's been really, really interesting. >> Pleasure is all mine. Thanks for having me. >> Thank you very much. Thank you very much for joining us for this Reuters next newsmaker with Rick Wurster, the CEO of Chuck Schwab.