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With its integration of TD Ameritrade clients into its platform completed, Charles Schwab (NYSE:SCHW) is looking forward to continuing its typical 5%-7% per year growth trajectory in net new assets, Schwab President Rick Wurster said on Wednesday during the company’s first Institutional Investor Day.
"It's organic growth driven by the trust that our clients place in us," said Co-Chairman and CEO Walt Bettinger.
He called the TD Ameritrade "the largest most complex, best-integrated acquisition in the history of the industry." He noted that the company received 55 complaints for each 1 million of TD Ameritrade clients about the transition.
Can the firm, now with more than $9T in assets, continue growing at the same pace it did when it had $2T of assets at the end of 2013?, posited Wurster. He expects that Schwab can achieve its pattern of growing 3%-5% from its existing clients then 2%-3% by attracting new clients.
Wurster said Schwab started 2024 strongly, resulting in almost $100B in core net new assets gathered through Q1. "Our growth trajectory remains intact even as a much bigger company," he said.
The company is focusing on four priorities to achieve that growth: scale and efficiency; win-win monetization, or doing more to help existing clients; client segmentation; and what it calls “brilliant basics” to retain its clients. "If we can nail the basics day-in day-out, we're going to have a growing and robust business," Wurster said.
Most of the expense synergies from Ameritrade have been realized, Wurster said. There’s less than 20% of its $1.8B-$2.0B run-rate expense synergy target remaining Those will be realized by the end of 2024.
The firm expects that there’s $500B+ asset capture opportunity by introducing Ameritrade clients to Schwab’s (SCHW) broader capabilities. In addition, “We have a meaningful expense advantage vs. our peers. We’re going to increase that advantage,” Wurster said. AI is one lever to use. The Schwab Knowledge Assistant can reduce the time that Schwab reps take to search for answers. “It helps our reps get up to speed more quickly,” he said.
One area for growth under its “win-win monetization” pillar is lending. The company has introduced a mortgage product and pledged asset line. It has put in the hard work to prepare for when the environment for lending improves. So he sees potential for stronger growth once interest rates drop and loan demand increases.
Schwab (SCHW) transitioned the remaining ~10% of Ameritrade clients in its final May 2024 transition group, said Chief Operating Officer Joe Martinetto, who headed the effort. The integration encompassed $1.9T of client assets and 17M accounts.
"We are on track to complete the remaining integration-related work by the end of 2024," he said. The company still needs to decommission remaining systems and data centers and retire duplicative platforms.
Client attrition is trending below the company's initial projections, Martinetto said. Client promoter scores improved ~30 points in the first two quarters after the transition, he added.
In the past year, Schwab (SCHW) stock has climbed 52%, outpacing the S&P 500's 27% increase and the Financial Select Sector SPDR ETF's (XLF) 30% rise. In Wednesday morning trading, SCHW slipped 0.5%.
The SA Quant system rates Schwab (SCHW) at Hold.