The Charles Schwab Corporation is an American brokerage and banking company, based in San Francisco, California. It was founded in 1971 by Charles R. "Chuck" Schwab, as a traditional brick and mortar brokerage firm and investment newsletter publisher. In 1973, the company changed its name from First Commander Corporation to Charles Schwab & Co., Inc The company started offering discount brokerage on May 1, 1975, and became one of the world's largest discount brokers.
Schwab operates in four main divisions: investing, wealth management, banking, and trading. The company serves 7.9 million client brokerage accounts, with $1.65 trillion in assets (as of September 2011), from over 300 offices in the U.S, one office in Puerto Rico, and one branch in London.Clients can also access services online and by telephone. In 2009, Chairman Charles R. Schwab received the inaugural Tiburon CEO Summit award for Maintaining a Focus on Consumer Needs.
In 1963, Charles R. "Chuck" Schwab and two other partners launched Investment Indicator, an investment newsletter. At its height, the newsletter had 3,000 subscribers, each paying $84 a year to subscribe. In April 1971, the firm was incorporated in California as First Commander Corporation, a wholly owned subsidiary of Commander Industries, Inc., for traditional, brokerage services and to publish the Schwab investment newsletter. In November of that year, Mr. Schwab and four others purchased all the stock from Commander Industries, Inc., and in 1972, Mr. Schwab bought all the stock from what was once Commander Industries. In 1973, the company name changed to Charles Schwab & Co., Inc. In September 1975, Schwab opened its first branch in Sacramento, CA, and started offering discount brokerage. In 1977, Schwab began offering seminars to clients, and by 1978, Schwab had 45,000 client accounts total, doubling to 84,000 in 1979. In 1980, Schwab established the industry’s first 24-hour quotation service, and the total of client accounts grew to 147,000. In 1981, Schwab became a member of the NYSE, and the total of client accounts grew to 222,000. In 1982, Schwab became the first to offer 24/7 order entry and quote service, its first international office was opened in Hong Kong, and the number of client accounts totaled 374,000.
U.S. Trust In 2000, Schwab purchased U.S. Trust for $2.73 billion. In 2001, less than a year after the acquisition of U.S. Trust, the U.S. Trust subsidiary was fined $10 million in a bank secrecy law case. It was ordered to pay $5 million to the New York State Banking Department and $5 million to the Federal Reserve Board. On November 20, 2006, Schwab announced an agreement to sell U.S. Trust to Bank of America for $3.3 billion cash. The deal closed in the second quarter of 2007.
SoundView Technology
In November 2003, Schwab announced the $345 million acquisition of SoundView Technology Group. The acquisition was intended to integrate SoundView's equity research content with Charles Schwab's trading execution capabilities, although the equity research business would come under increased regulatory scrutiny in the following years. SoundView had received a 57% premium to its market price before the announcement.
Return of Charles R. Schwab
David S. Pottruck, who had spent the majority of his 20 years at the brokerage as Charles R. "Chuck" Schwab's right-hand man, shared the CEO title with the company's founder from 1998 to 2003. In May 2003, Mr. Schwab stepped down, and gave Pottruck sole control as CEO. Just a year later, on July 24, 2004, the company's board fired Pottruck, replacing him with its founder and namesake, Charles R. "Chuck" Schwab. News of Pottruck's removal came as the firm had announced that overall profit had dropped 10 percent, to $113 million, for the second quarter, driven largely by a 26 percent decline in revenue from customer stock trading.
After coming back into control, Mr. Schwab conceded that the company had "lost touch with our heritage", and quickly refocused the business on providing financial advice to individual investors. He also rolled back Pottruck’s fee hikes. The company rebounded, and earnings began to turn around in 2005, as did the stock. The share price was up as high as 151% since Pottruck’s removal, ten times since the return of Charles Schwab. The company’s net transfer assets, or assets that come from other firms, quadrupled from 2004 to 2008. In the fiscal year 2008, the company generated $5.1 billion in revenue and recorded a net income of $1.2 billion. For the first quarter of 2009, Charles Schwab Corp. reported $1.1 billion in revenue and $218 million in net income. Due to the company's relatively low exposure to mortgage backed securities, the company has largely been able to escape the turmoil of the 2007–2010 financial crisis that seriously damaged many competitors. It did however market to clients a "money market" called YieldPlus that had subprime exposure leading to massive losses to investors.
Walt Bettinger named CEO
On July 22, 2008, Walter W. Bettinger was named chief executive, succeeding the company's namesake.
Bettinger has been the heir apparent since he was named president and chief operating officer in February 2007. Charles R. Schwab remained executive chairman of the company and said in a statement that he would "continue to serve as a very active chairman." Bettinger came to the company in 1995 when it acquired the retirement-plan services firm (Hampton Co.) that he had founded at age 22. Bettinger, in the company’s statement, seemed to nod to the idea that some Schwab shareholders might worry about another succession going awry. "Chuck and I have worked closely together over the years preparing for this transition," he said, "and we will continue to work closely together in our respective roles as executive chairman and CEO."
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