Charles Schwab CEO and President Rick Wurster said he sees artificial intelligence becoming a “front door” for clients to interact with the firm, with the potential to serve mass-affluent investors with less than $1 million in assets.
“In the future, AI will benefit that group,” Wurster said in a call with media before the firm’s investor day on Thursday. “We’ll be able to deliver to everyone those personalized insights.”
Wurster said clients with $1 million or more in assets qualify to work with a Schwab financial advisor. AI, he said, will be able to provide more advice and resources to the client pool with below $1 million.
Wurster also hit back at market fears that AI would erode Schwab’s business, saying it was creating an “overhang” on the firm’s stock and an area he would address in depth at the firm’s investor day.
“We are trading like a value stock, but growing like a growth stock,” Wurster said. “We feel the AI threat is incredibly overblown.”
Wurster’s comments added to Schwab’s focus on AI and its forecasts of further investment, both internally and for clients, during its first quarter earnings in April.
On Wednesday, he spoke via video from the firm’s headquarters in Westlake, Texas, highlighting the workplace as one area of growth for the large brokerage and custodian.
He said the firm’s stock plan business contributes “a lot of net new assets to the firm,” adding that Schwab manages the stock plans for four of the country’s eight biggest technology firms. The firm did not immediately respond to a follow-up request for which four companies Schwab works with.
Wurster said the firm was on a “multi-year journey” to bolster its workplace presence, with a particular focus on serving retirement plan participants.
“Our retirement business is a huge opportunity, because that is where many people invest for the first time, and we want them to be lifelong Schwab clients,” he said.
Jon Beatty, head of Schwab Advisor Services, said during the investor day on Thursday that Schwab is benefiting from the overall growth in the RIA channel, with more than 1,000 of the roughly 16,000 advisors on its platform now managing over $1 billion in assets.
“RIAs are gaining on the wirehouses,” Beatty said, showing a slide by which Schwab expects RIA assets to overtake wirehouse competitors. “Assets are in motion in this industry.”
Beatty also spent time focusing on Schwab’s investment options for advisors. He noted growth in areas including the firm’s bank credit lines, alternative investments and trading services such as options and ETFs.
“We think this is the big opportunity,” Beatty said. “Advisors are using more of our platform, and that is driving sustainable monetization for Schwab.”
During the Wednesday call with Wurster, in response to a reporter’s question, the CEO confirmed that Schwab would move forward on June 1 with instituting a $5 trading fee for advisors using its high-touch block trading desk. Wurster said most advisors understood the move to charge for the high-touch service rather than for other, technology-driven trading options that are free. He said the firm delayed the rollout of the charges, in part, to give advisors time to adjust.
“The majority of the reaction has been that this adds tremendous value, and I have to pay for this at your competitors, so I’m not shocked you’re asking us to pay for it,” Wurster said. “This is part of our effort to monetize our advisor business in a way that works for advisors and for us.”
He added that the firm is not charging for request-for-quote trades at the moment, which he said was raised as an issue for “heavy” ETF traders.
During the investor day, Beatty was also asked whether a focus by competitors, advisors, and clients on yields from investment cash sweeps would eventually drive Schwab to start charging custody fees to offer higher-interest cash sweep programs.
Beatty answered that the topic had not come up in conversations with advisors and that the firm has no plans to charge for custody.
Separately, he said Schwab believes advisors will pay fees for areas such as investing and trading that “bring value strategically to help them with clients.”
