A Sit-Down with Rick Wurster, CEO of Charles Schwab

15:04Rick Wurster:And I think that's an important distinction. We have an important wealth business that absolutely we're trying to grow, but we're using it to serve our existing Schwab clients. We've got six and a half trillion of retail client assets sitting on our platform, many of whom would be better off served by having more comprehensive advice.

15:21Michael Batnick:We agree on that. You recently doubled the asset minimum for companies that are in the referral program to$500 million, and you increase the threshold. It used to be you needed that$500 ,000 to make that referral. Now you increased it to$2 million. Why did you do that?

15:38Rick Wurster:It's a little bit like if anyone loves to play golf here, then when you redesign a golf course, you try to bring it back to the original intention of the designer. Maybe the trees have grown in a little bit too much. You need to cut them back. Maybe there's more trees than they used to be, so the greens aren't getting as much sun or wind as they need to to thrive. And I'd say that's what we did with our sand program. And we thought, what is best for our clients? And what do we need to do in order to make this successful? When we started the program,$500 ,000 was a lot different then than it is now.

16:07Rick Wurster:And so we really were adjusting the program for the asset growth that we've seen and for the distinctiveness that we think our advisors can bring to the program. What we see amongst the RIAs in this audience and the RIAs that we support is they are really distinctive at all wealth levels, but particularly distinctive relative to what we can offer as wealth levels go up. And so we really are trying to focus the program on that. Second thing is the growth of that program has accelerated. Two years ago, we had referrals of around$14 billion. Last year, we had referrals of around$38 billion. So in two years, it had gone up quite a bit.

16:44Rick Wurster:And so we want to make sure the program grows in a reasonable way. The final point I would make is that this gets a lot of attention, this referral program. Less than half of 1 % participates in the referral program. And six firms out of the 16 ,200 firms that we support and whose businesses we try to make a difference in, there's about six firms that gather more than a billion dollars in that program.

17:09Michael Batnick:That announcement got a lot of media attention, financial media attention. Was there one thing or anything that you felt was misreported or misrepresented within this announcement?

17:22Rick Wurster:Well, I hope not. I think what we were trying to do is really do something that made sense for clients, which is focus the RIA in on the clients that they can be the most impactful for and grow the program in a responsible way. So I didn't see all the media attention, but we feel good about the actions that we made. We do want to serve clients that have been clients of Schwab for 10, 15, 20 years. Absolutely, we want to be able to provide wealth services to them. At the same time, we couldn't be more supportive of the 16 ,000 advisors that we serve and their growth.

17:52Michael Batnick:I guess dialing up the heat a little bit, because this is tricky.

17:55Rick Wurster:We're Nick Celtics. Bring it on.

17:56Michael Batnick:But you keep saying the client, and yes, the end client is your client, and we're also your client. And that's a hard thing to balance. Is it not?

18:05Rick Wurster:I don't think it's a hard thing to balance at all. We've done it every day for 35 years. We've supported the needs of retail investors for 50 years. I don't think we've gotten to over$12 trillion of assets roughly split between our two businesses. See, Josh, I told you. Yeah, you were right. By not putting the best of interests of both at the forefront. It is very rare where we come across a situation where we're in conflict. And I think if the RAs that work with us, I think they know how much we care about their success. And how much we, you've seen this industry flourish. And I would like to think we've been a part of making that happen.

18:39Downtown Josh Brown:Rick, we live in an age of mega RIAs. Some would say, in some cases, I would not say this. Some would say, in some cases, it's hilarious to watch a bunch of breakaway brokers 15 years later rebuild the wire houses they came from, but just change up the cap table. So now they're the owners. it's a little bit animal farm a little orwellian to see uh uh you know uh some of some of the revolutionaries now become the thing that they rebelled against but be that as it may it's just the reality of the industry when schwab looks at the landscape and sees 600 billion dollar rias that frankly raised a lot of their first 10 billion through the referral program is there any regret um or are you proud of them and and happy to continue to support them like what is the dynamic with such gigantic firms that they now can almost dictate terms to all of their

19:40Rick Wurster:partners if they so chose i'd say incredible pride in the fact that they've gotten to be that big and that successful if you come back to our mission as a company our goal is to help the end investor be as financially successful as they can be. Everything we do from our platforms to our research, our education, our service, our support, everything is built around trying to make the end investor successful and live their best financial life. And so to see firms that have flourished through the independent model and are making a huge difference, like this entire audience in the lives of their clients, that's incredibly gratifying because we do feel like we've played a part in that.

20:22Rick Wurster:And ultimately, people are living better financial lives as a result.

20:26Michael Batnick:I wish I brought this chart. My bad, I didn't. I've used this in the past. I just thought it was so emblematic of the environment that we're in. So in 2022, Schwab's market cap was 22 times the size of Robinhood. And recently, that fell to 1.2 in October. And I think that was a little bit ridiculous. No disrespect to Robinhood. But that kind of sound that felt nuts that you guys are almost at parity. Now, last time I checked, you were back up to 2.4 times the size. But there is a lot of competition. It is not just you and the other one anymore. There is a lot of competition. So how are you thinking about staying ahead of the curve, investing appropriately, not overinvesting?

21:07Michael Batnick:We haven't seen a cycle. We haven't seen a downturn in a while. So how are you thinking about the services, the competition, all that sort of stuff?

21:13Rick Wurster:I think you asked about Robinhood. I think we're$12 trillion. I think there's something like$300,$350 billion. So I think we're more like 30 times the size. I'm at the market cap. I understand. I just wanted to clarify that for the audience. The second thing I'd say is that I don't particularly consider them to be a competitor, and that's not because of their size and I'm dismissing them. I think they're in a different business than we are. They're more of a transactional business. Try to get people into the casino, get them to transact, get them into these prediction markets. We're in the outcomes business.

21:46Rick Wurster:We're in a business of making you successful. We're in the business of making your end clients successful through you. And we're in the business of making our retail investors successful. So when I think what we need to do to stay apart from the competition, it's stay focused on what's going to drive long-term results for our investors and how are they going to be successful. If they do that and they're thriving, they're going to stay with Schwab and they're going to be a part of us.

22:08Downtown Josh Brown:To that point, one-third of your new client on boards last year were Gen Z. I don't think everyone understands that or gives you guys enough credit for that. The average age of a Schwab client has fallen by 10 years. It's now a mid-40s demographic. And that flies in the face of some of the narrative out there that every young investor is defaulting to one app. And it's not Schwab. You guys are proving it's the opposite. So what I want to ask you is, you guys are obviously winning market share amongst Gen Z, amongst this new class of investor. Do you want to talk about that strategy that's enabling you to compete there and still remain differentiated and not open a casino, so to speak?

23:01Downtown Josh Brown:Do you want to talk about how you thread that needle?

23:03Rick Wurster:Yeah, we're winning with, we're crushing it with the young investor. And the reason we're crushing it with them is because we've got the combination of the platforms. We've got Thinkorswim, which I think is the leading trading platform. Great charting. I know you both love charts. It's best charts on Thinkorswim, I think. It's also more simpler trading venues if you want to trade on Schwab.com or in our mobile app. There's a trading venue for everybody at Schwab. There's research and education. That young investor that's looking to place their first options trade, We've got 1 ,000 ex-traders that wake up every day ready to answer the phone for that investor to walk them through how to place that first options trade.

23:42Rick Wurster:We've got service. We answered the phone for advisors on average last year in an average of nine seconds. Wow. For the retail investor, it was 26 seconds.

23:52Downtown Josh Brown:That's too long.

23:54Rick Wurster:We need a walkie-talkie. That's two rings just for the record. So we've got that combination. I think one of the mischaracterations of Gen Z is that they're all looking to go to the casino and try to make money fast. And certainly there are a number of Gen Z who are doing that. But there's also a lot of thoughtful Gen Z investors. And they're coming to Schwab. We're the most followed financial services firm on YouTube. And that's where they go to learn how to do anything, invest, change a tire on a bike. I mean, that's where they go. And they're finding us. And they're gravitating to Schwab. one third of our financial plans that we did last year for clients were for people under the age of 40.

24:34Downtown Josh Brown:Is part of your agenda, I'm sorry, is part of your agenda to make sure, or do you, maybe, maybe you don't care, but I was thinking, given that's those stats, do you want to be more vocal in the media about the fact that you are winning Gen Z, or do you just let the results speak for themselves and not worry about the prevailing narrative?

24:55Rick Wurster:I do think we try to be vocal. I think one of the things that I've personally tried to be vocal on is the difference between investing and gambling. What I worry about, I don't worry about the success of some competitors who are doing well with young investors. That's fine. I want young investors to get invested, to make money, to make investing a part of their life like it is a part of your life. Think how much investing has done for each of your lives. And if we could get every young investor come out of college or in college to begin to think that way, it would make a huge difference. But what I worry most about is that the message some are getting is, hey, the way to win is come bet on the 10-game parlay of football this weekend, maybe buy a little crypto, and off you go.

25:35Rick Wurster:Can we pause on that?

25:37Downtown Josh Brown:I think you took out a full-page ad in a newspaper saying something to the effect of that's the difference between gambling and investing. Was that you guys, or do I have that wrong?

25:54Rick Wurster:I think you're thinking of public.com. They said something about don't find your bookie, come to us or something. I know the ad you're talking about.

26:03Downtown Josh Brown:Wealth isn't one in a bet or something to that effect.

26:05Rick Wurster:But we would agree with that kind of message.

26:07Downtown Josh Brown:Well, I was going to say, you guys did not jump all in on the circus when the circus was in town in 2021. You guys sort of seemed to just stay the course and that ended up making you look very good in the aftermath.

26:21Rick Wurster:Yeah, I think I want to be clear. We have a lot of active traders that come to Schwab because we've got the best platform education research in the industry. And so we support active traders. But there's a difference between being an active trader, looking at the charts, looking at the fundamentals, having a point of view on a company, having a game plan for what you're going to do when things change, and, again, betting on what the first song Bad Bunny is going to sing is. Yeah.

26:47Michael Batnick:So one, I mean, one of the main differences between the actual casino and the stock market is, yeah, you could treat the stock market like a casino. You could, you could roll the dice 30, 30 trades a day. It's free. You could do that if you want. But the key difference is the longer you stay inside the stock market, the more likely you are to win. Where obviously the casino, it's the exact opposite. One of the things that has, I think, I think a lot of the people are frankly drunk on prediction markets. I understand why there's been a lot of early success. I understand, well, listen, it's 80 % of it sports betting at this point.

27:22Are you guys going to, and ever is a long time,

27:26Michael Batnick:is that on the roadmap, prediction markets?

27:28Rick Wurster:I'd break prediction markets. And by the way, it's 90 % plus sports gambling. There's three parts of prediction markets to me. Number one is the information you get from the odds embedded into different events happening. I think that's useful information for investors. So at some point, we may display that at Schwab. You know, what's the likelihood of the inflation report being hot? Like investors might want to know that.

27:50Downtown Josh Brown:You would display it, but not necessarily offer bets on it.

27:54Rick Wurster:Well, the second part of prediction markets to me and how they started was on financial related events. You want to take, you know, you want to buy. What's the Fed going to do? What are mortgage rates going to do if you're going to buy a house? Maybe you want to hedge yourself. That's how they got started. And then the election came along and volume went through the roof and they said, how do we replicate this? And then they got into the third part of prediction markets, which is all sports. And that's where all the volume is. So I think as we think about those three parts of prediction markets, information I think is relevant and we'll make available.

28:27Rick Wurster:Financial predictions at some point we may do. And sports we really want to stay away from because, again, our entire mission of our company, The reason all 33 ,000 people get out of bed every day is to make people better off in their financial life.

28:40Michael Batnick:So here's what I like about prediction markets. I do believe that there is wisdom in crowds.

28:45Downtown Josh Brown:You're such a junkie.

28:46Michael Batnick:No, listen. Well, yes, I am. Guilty as charged. I do believe that there is wisdom in crowds. And so, for example, if you were able to – because surveys are nonsense because there's no stakes. So if people are able to put their money where their mouth is and say for example So the Citrini research report a couple of weeks ago will unemployment be over 10 % by 2028 if no was at 97 cents I would feel a lot better if that was an active contract that you can monitor I would look at it if there was a way for investors to get so investors can't get access to SpaceX right all of these exciting companies where Getting into SPVs and SPVs.

29:24Michael Batnick:It's nonsense, right? We all understand that But what if there was a market where will SpaceX IPO at a$400 trillion valuation or whatever it was? Things like that where you can harness wisdom of crowds where it's not insider information. I think there's value there.

29:39Rick Wurster:Yeah, I wouldn't disagree with that. I agree. The only part I would disagree with, if you want SpaceX shares, go to Forge.com. We just bought them. And by the way, we are going to roll out their capabilities first to advisors before we bring it to retail.

29:50Michael Batnick:You can't get SpaceX on Forge. Come on.

29:53Downtown Josh Brown:they had yeah they've had spacex for the audience of uh forge similar to equity zen which morgan stanley bought these are platforms that allow people to buy and sell pre-ipo startup backed uh you know venture capital backed somewhat similar i think they're forge is three to four

30:11Rick Wurster:times bigger number one number two they're much bigger in direct share so equity zen is has a strong position in SPVs, whereas Forge is offering actual shares more.

30:23Michael Batnick:So private markets has been a thing, obviously. And we keep hearing from the suppliers of the private markets that there is so much end user demand. You are in a much better position than I am to say, is that true? Is there actually clients that really want, whether it's infrastructure or private companies or whatever. How much demand is actually there?

30:47Rick Wurster:I think there's demand. There's a long education cycle as it relates to alternatives, as you likely know, in working with your clients. We launched to retail an alternatives platform about 18 months ago. And what we have found is that the sales cycle, in order to introduce a client to it, to have them talk to one of our alternatives experts, it takes a long time. And so I think people need to be pragmatic about how long it's going to take for alternatives really to grow in retail. But I think it's great that they have the option. Over time, you should think that alternatives should deliver attractive risk-adjusted returns and be diversifying, and so in someone's portfolio, it could be additive.

31:25Downtown Josh Brown:I want to talk about another competitor coming in at the high end of the market. Goldman Sachs, very interested in RIA custody now. I get the calls and the emails, as I'm sure a lot of people in the audience does.

31:42Downtown Josh Brown:Does that change any of your plans for how you want to help advisors service the ultra high-end client that they currently work with at Schwab today? You guys look at that and say, you know what, this is good. It actually validates the opportunity. What's your mentality around a player like a Goldman entering?

32:03Rick Wurster:Well, number one, I think we always want to affirm why we're in this industry, which is to drive your success. This isn't about us. We're not trying to put product into RIAs. The only thing we are doing is trying to bring all of our energy to make RIAs successful. So I think that's the starting point. Number two, in order to have the market share that we have and the growth that we have, we've got to be great at every segment. And so I think that if there's if there's a gap in the ultra high net worth segment, we're going to close it. I mean, I haven't necessarily heard that. I think some esoteric lending capabilities, sometimes I hear the need for that.

32:42Rick Wurster:Maybe that's something Goldman will offer. But if it's about product, like you can get Goldman product as an RA at Schwab. The last thing I would say about competition generally in this industry is there's been a lot of tries to compete with us. But the challenge is with our size and scale and the economic model, which is we don't charge for custody, it's really hard for new entrants to gain traction. And if you're one of these big firms that, you know, like, you know, Robinhood bought Trade PMR, they got to be looking at the economics of this saying, why are we doing this? I mean, they make their average revenue on a client assets 1.6, 1.7 percent.

33:23Rick Wurster:We make 10 basis points in our advisor business. It's a thin margin business. And that's at our scale, five and a half trillion. So listen, we welcome all competition because ultimately it makes us better and makes the end investor better off. But I think as people enter, they've got to realize it's not easy.

33:40Downtown Josh Brown:So Robin Hood entering, they're coming into a business with lower margins than their bread and butter business.

33:49Rick Wurster:Without a doubt. I mean, I think you look at their revenue and divide it by their client assets. It's something like one point. So they earn$1.60 out of every

33:56Downtown Josh Brown:hundred dollars 10 and 20 cent business this is we would earn 10 cent we earn 10 cents on average

34:02Rick Wurster:with five and a half trillion dollars of client assets right so that's with far more scale than anyone else so it's just it's hard for competitors to enter and be successful which is why we've seen a lot try but then they go away and i understand i have a lot of respect for goldman and i'm friendly with john and and david and uh i understand i think they're if you're sitting there they they're an asset manager they're a wealth manager they want to get their product out there. And so it makes sense. But ultimately, I don't see them as a core competitor in the basics of the custodial business.

34:32Michael Batnick:Let's talk about AI. So in your latest earnings report, you said that you've got 220 plus artificial intelligence use cases. I'm curious, not just for what you're seeing in the wealth space, but also what are you using internally to drive efficiencies?

34:47Rick Wurster:AI is going to be huge. I think it's going to change things in our industry. It's going to change the way clients interact. We're using it in a, I'll describe a few ways we're using it today. Number one, we're using it to make our professionals more efficient. So when, when any of you call an advisor now that calls being recorded where we used to spot check calls and provide coaching to our professionals. Now we have AI that reads every transcript surfaces, opportunities to coach our people. So we're, we're making our people more efficient. How long did it take you to implement something like that?

35:19Rick Wurster:That was quick. And it's quick because we rely on external providers. I mean, one of the things, Josh, I know you and I have talked about is how there was that report on AI and how it hurt our stock and other stocks.

35:29Downtown Josh Brown:We're going to get to that.

35:30Rick Wurster:But what people don't realize is we love the innovation in AI because that means we put it on our platform and bring it to you. And we're leveraging all that stuff ourselves. So AI is making us more efficient in operating the business and answering phone calls. It will also change the way we interact with clients. There's no question that in five years, we're likely to have an agentic experience where you're coming on to sac.com, schwabadvisorcenter.com, and you're speaking to something and getting your tasks done. Or the way we deliver tax trusts and estate information is changing now. We've bought an ownership stake in wealth.com, which is an AI firm that delivers trust using AI.

36:11Rick Wurster:All this stuff is revolutionary and making a big difference. It's going to allow us to serve clients in a different way.

36:17Downtown Josh Brown:Were you surprised by the reaction in the stock market to some of the announcements coming out of both competitors within the wealth tech space, but just anthropic in general? And watching the share price movements in gigantic corporations like Schwab, did that catch you by surprise? And what do you remember from that moment? because it probably wasn't your favorite day of 2026.

36:46Rick Wurster:Well, the reaction was surprising to me.

36:49Downtown Josh Brown:Me too. Yeah, I looked at it and said, this is the craziest thing I've ever seen.

36:53Rick Wurster:Well, just the magnitude didn't make sense. I mean, we are ultimately someone that brings technology to our clients. We want technology innovation. So if there's a tax planning capability that's driven by AI that's great for clients, outstanding, that's not gonna hurt our business, that's gonna help our business. So the idea that there was this tax capability out there and that was going to undermine our business is fundamentally flawed because it's going to do nothing but help our business. So I think we're going to be a beneficiary of AI. We have the size and scale to make the investments to win.

37:24Rick Wurster:We know the RIAs are going to need to adapt to AI and use it to power their business and power their success. We also know you're going to be competing against agentic advisors in the future. and we think we have the size and scale to be able to deliver all of that to you, to make you successful in an AI world. That doesn't mean we have to build every piece of AI capability ourselves. It just means we need to bring it to you to empower you to succeed.

37:50Michael Batnick:I wanted to ask you, I think this is definitely relevant for people in the audience. You were asked about this on the call, on your earnings call, about the tax-advantaged long-short strategies. and Fidelity paused the onboarding, I think in December, and it doesn't sound like it's unpausing anytime soon. That's a big and growing part of our business.

38:12Downtown Josh Brown:These are the 130-30 funds.

38:14Michael Batnick:Yeah, so the long, short extensions that I think drive a lot of value for clients. What's your plans there?

38:22Rick Wurster:We are seeing tremendous growth in that area through all of you. I mean, all of you are seeing a lot of growth and it's coming to us because there's not really anyone else that can support it. You're not going to rug us, are you? No, no. I think, you know, we benefit from the fact that we've got a big balance sheet. We're a public company. We can access markets. And so we can support the balance sheet growth that supports the leverage behind the strategy. So we are supportive of it. And you can see why it makes a ton of sense and why I think it's going to continue to grow. We have, I'll speak to our retail business for a moment.

38:55Rick Wurster:We have 70 % of our retail clients that have a large concentrated position. And I'm sure a lot of your clients have benefited from single stocks that have gone well above where they expected. So they're sitting on these enormous gains. This portfolio makes a ton of sense. We're going to support it. And I just want everyone in this audience to know that it's an RIA. Bring your new assets to us. We'd love to support you. Good answer.

39:17Downtown Josh Brown:I want to close with some career stuff for the people listening at home and the people in the audience here and maybe industry specific but maybe just generally you must be in the midst of as many conversations as i am about the future of work the future of the advice business the future of the human advisor within the advice business what are you thinking what are you telling people what are you hearing um on this disruption theme which clearly is the predominant cause of both excitement and anxiety, I would say, in our industry in 2026.

39:56Rick Wurster:Well, I think you've got to embrace it, number one. I'm trying to embrace it, but then I get nervous again. But I think you've got to embrace AI, and it's just like the internet. The internet was coming along. If you didn't like it, you couldn't stop it. And if you were in a business that was going to be hurt by it, it didn't matter what you felt about it. You were going to be hurt by it. And so I think you've got to embrace it. Number two, you've got to have a strategy for it. I think there's going to be lots of ways that you can use AI to build your business.

40:22Downtown Josh Brown:What would you be doing then? What's the strategy? You're an RIA founder, have a few advisor employees, a couple of billion dollars. What would be your formulation of an AI-ready plan for that person?

40:39Rick Wurster:Okay, number one, I would be getting rid of a lot of the manual work that supports every part of the value chain of being an advisor. Rick said, fire all of your staff. Well, no, I want to be clear. I didn't say that. No, he didn't say that. What I mean is trust, tax, and estate work. You want to get your trust done today. You go out to an attorney, spend thousands and thousands of dollars, takes lots of time. We use, with our clients, something called wealth.com. It's completely driven by A. Start away. Yeah, it's a great product. Shout out to wealth.com. And that's going to be true across planning, research, tax, trust, estates, investing, rebalancing.

41:12Rick Wurster:Every part will have an AI component. And if I was an advisor, I'd be thinking about how to get that in my technology stack and then how to direct my people to the really important role an advisor plays about maintaining the relationship, being there for clients, working with them through the emotional part of investing because that's incredibly valuable. When you see the market tank and your client comes in and says, I want to sell everything, that's the moment where you shine. Maybe you'll be able to differentiate yourself on planning in the future, but it's probably going to be driven by AI.

41:42Rick Wurster:You might as well embrace it, focus on the relationship, focus on the emotions. And then I would be using it offensively because all of you likely work with wealthy clients because it scales your business. It makes sense. I think AI is going to provide the ability for you to start with clients younger and at lower wealth levels. It will ultimately become your wealthier clients that need more handholding as their life becomes more complex. So I'd be embracing it from an offensive standpoint.

42:10Michael Batnick:Are advisors ultimately going to be displaced by AI?

42:14Rick Wurster:I think there will be AI wealth advisors, and we all need to recognize that, plan for that, and have a strategy for how to address that, number one.

42:21Michael Batnick:Wait, what do you mean AI wealth advisors? Like literally robots that look like humans? Or what do you mean?

42:26Downtown Josh Brown:Agentic wealth management where the client is interacting with.

42:31Rick Wurster:Josh did a great job. Look, he's on TV all the time. He's better spoken than I am. Maybe just handsomer. I don't know. Probably not. But I think there will be advisors. Yeah. A advisors that you're just dealing with on your computer where there's not a personal. But but no different, by the way, than robo advising and robo advising has not displaced the growth of the RIA. I think we're the biggest robo in the world. We've got 100 billion. We've got five and a half trillion on our RIA platform. So but there will be, I think, some people that just want to deal with the agentic experience, particularly when they're young and their life is less complex.

43:06Rick Wurster:But that's going to change. But I think that's the opportunity. If you could build an agentic experience, get clients younger, less wealthy, some of those are going to become the big clients you're getting today. And I think making that transition and having that capability ready is going to be important.

43:19Downtown Josh Brown:That's pretty much exactly what I think. So we're on the same page in that regard. I think firms are going to be more open-minded to working with younger clients at lower minimums because so much of that process will be automated. So I completely agree. Guys, round of applause for Rick Worcester. All right. Nicole will kill me if I don't let you know that idontshop.com is the official compound merchandise store. If you don't catch a T-shirt, Rick, you're going to throw some shirts with us? Absolutely. All right. If you don't catch one, you can go there and grab one. You guys have been amazing.

43:54Downtown Josh Brown:Thank you so much for joining us. Give yourselves a round of applause. Thank you. We love you.

44:06Thank you.