Charles Schwab is a savings and loan holding company that operates in several areas of financial services through its subsidiary companies, including discount broker services, and asset management and advisory services. Its closest competitors in the discount brokerage sector include T. Rowe Price and TD Ameritrade. Schwab's asset management and advisory services pit it against larger firms in the sector such as Goldman Sachs.
Read on to find out more about the firm and how it compares to its major competitors in the marketplace.
Charles Schwab: History and Financials
In its early days, Charles Schwab was aimed at discount broker services, and these remain a large part of the company's business. The company continues to offer a full array of brokerage services through its subsidiary, Charles Schwab & Co. It also operates Schwab Bank, a federal savings bank in Reno, Nevada, which was established in 2003.
Schwab now also manages its own line of mutual funds and exchange-traded funds (ETFs), all of which are available to its clients alongside third-party offerings. These funds can be purchased through any of the account types Schwab offers including full-feature brokerage accounts, individual retirement accounts (IRAs) or its 529 college savings accounts. Schwab serves customers over the phone, online or in any of its 345 branch offices.
Schwab expanded aggressively into asset management and investment advisory services. As of the 12 months ending Dec. 31, 2018, these services were responsible for $3.2 billion of the company's $10.1 billion net revenue, with net interest accounting for another $6.9 billion. Its trading services constituted only $763 million for the year. For Q4 of 2018, Charles Schwab reported net revenue of $2.7 billion — a 19% increase from the same period of 2017.
The company's closest competitors in the discount brokerage sector are T. Rowe Price and TD Ameritrade. As of Feb. 1, 2019, Schwab had a market capitalization of $63.5 billion, more than the combined market cap of its two closest discount brokerage competitors combined. T. Rowe Price has a market cap of $22.4 billion and TD Ameritrade had a market cap of $32 billion.
Assets Under Management
Schwab also leads its competitors in total client assets under management (AUM). As of 2018, Schwab manages over $3.25 trillion in client assets, while T. Rowe Price has only $1.03 trillion in client assets and TD Ameritrade has $1.3 trillion in client assets.
Schwab's expansion into additional market sectors means it will face increasing competition from established larger players, including investment banking firms such as Goldman Sachs.
Goldman Sachs' market cap on Feb. 1, 2019, was $73.1 billion, significantly more than Schwab's $63.5 billion during the same time period. However, for Q2 2018, Goldman Sachs had just over $1.54 trillion in assets under management, roughly half of Schwab, which has $3.25 trillion.
Mutual Funds and ETF's
Schwab clients have access to 175 commission-free ETF's and more than 3,500 OneSource mutual funds, which carry no loads and no transaction fees. By comparison, TD Ameritrade offers 296 commission-free ETF offerings and access to more than 11,000 mutual funds, of which nearly 2,000 carry no transaction fee and no load. Meanwhile, Fidelity offers more than 10,000 mutual funds, 3,375 of which have no transaction fee, and many of those have no load. Fidelity traders also have access to 84 commission-free ETFs. Ally Invest offers 8,095 mutual funds to new investors. Of those, 1,672 funds have no load. In addition, customers making 30 or more trades in a quarter get their trading commission knocked down to $3.95 for stock and ETF trades and just 50 cents for options contracts.
Through Schwab, customers gain access to free stock reports from Morningstar, S&P Capital IQ, Thomson Reuters, Credit Suisse, and others. Fidelity also offers a suite of research tools with high-quality research. But TD Ameritrade offers the largest selection of independent, third-party investment research from 13 total firms (Standard & Poor's, Morningstar, Jaywalk, TheStreet, etc.)
As for charting, Ally Invest's website boasts a great offering. Upper and lower technical indicators can be added to a chart, along with company events, such as splits, earnings, and dividends. Comparisons can be made to stocks, indexes, and commodities — a rare feature. Customers have their choice of graph styles, which include mountain, OHLC bars, and candlesticks.
Schwab customers can get support via an online chat system, phone, fax, or e-mail. The phone service is staffed 24 hours a day, 7 days a week, and the reps are typically well trained.
By contrast, Ally offers 24/7 phone customer service and an online chat function. TD Ameritrade also offers 24/7 phone service. Spanish-, Cantonese-, or Mandarin-speaking reps can be reached at certain hours during the day. The brokerage also has more than 600 physical branches located across the United States. Fidelity offers an online chat system or phone support. The phone service is staffed 24 hours a day, 7 days a week. Online chat service is available from 8 a.m. to 10 p.m. EST.