Charles Schwab Term Paper

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Founded over 25 years ago, Charles Schwab is a financial services company, one of the largest firms of its type in the United States. The company provides financial services, including brokerage service, to more than 8.0 million accounts. The entities for the accounts include individuals, international investors, domestic investors, investment managers, dealers, institutions and 401 Ksponsors. The company's mission is to "provide useful and ethical financial services to the world" (Charles Schwab). To do this, the company has taken the lead in helping the average person invest, thus placing investment opportunities at the grassroots level (Charles Schwab).

The company advertises that it does not have high commissions or pressure for investors to buy. There are "no hidden fees" and/or "conflict of interest" (Charles Schwab). People who are employed by Charles Schwab are not paid based on what they sell. The employees are charged with giving their investors the best advice to meet their personal or institutional investment goals (Charles Schwab).

The company opened in 1963 with a mere "discount brokerage" so that people who wanted to buy and sell for themselves can do so without high expenses or needless charges (Charles Schwab). The company has sense changed its business model over the years so that it now provides several different financial services so that people may now use technology to trade. Anyone from investors who buy and trade full time, to people who need others to manage their entire portfolios use services by the Charles Schwab organization (Charles Schwab).

When Charles and is friends opened the firm, in 1963, the company had one of the first investor newsletters with more than 3000 subscribers (Charles Schawb). The subscription cost was about $84 a year (Charles Schwab). With that number of subscribers, the newsletter was highly successful for that day and age. Almost 10 years later, in 1974, the SEC ordered deregulation and when most firms raised their prices, Charles took advantage of the situation, opening the first discount brokerage firm (Charles Schwab). The company opened its first branch in 1977 in Seattle. The company was one of the first to take advantage of technology. Charles "bet the company" in 1979 and bought a mainframe computer (Charles Schwab). Bank of America later bought Charles Schwab in 1983 for $57 million. The company later opened its 500,000th customer account (Charles Schwab). Later, in 1984, the company opened several programs for online brokering, SchwabQuotes®, Financial

Independence® and The Equalizer® (Charles Schwab). A year later, more than 1 million customers had opened Schwab accounts. A "manager led buy-back" was completed in 1988 from Bank of America for $280 million (Charles Schwab). By 1992, the company had opened a call center in Phoenix, Arizona and the Charles Schwab Corporation had established the Charles Schwab Trust company®. The company also open its doors to a Latin American Center in Miami. By that time, the company held more than two million investor accounts (Charles Schwab).

The company introduced a telebroker service in which Spanish language speakers could access the services in their native language on the phone. The company, at this time, was also awarded acknowledgement for its employee involvement in community service. The Asia Pacific Center became one of the first 24 hours service centers in that area and a multilingual service was added so that the company to respond to the needs of a diverse customer base (Charles Schwab).

Charles Schwab on the Web was launched in 1995. The company also expanded its services in retirement planning buy acquiring the Hampton Company and Trustmark. The company further expanded its worldwide presence with the acquisition of ShareLink, a discount brokerage in the United Kingdom (Charles Schwab). Schwab began its live online trading a year later, in 1996. By 1997 there are more than 1 million online accounts. Charles Schwab soon opened subsidiaries in Europe and Hong Kong and the Cayman Islands (Charles Schwab). The company in 1997 gave its customers the ability to work with IPOs (Charles Schwab). Forbes Magazine also in 1997, called Schwab the "King of Online Brokers" (Charles Schwab).

The company, in 1998, added a service to its phone call center so that customers may activate certain options by merely speaking into the phone. In order to reach a diverse audience, Charles Schwab broadcasted its first commercials during the Academy Awards in 1999 (Charles Schwab). And in 2000, the company began a program that would motivate women to invest. A learning center was begun and Charles Schwab also expanded its service to include financial related news in Chinese (Charles Schwab).

Also in 2000, a program that could screen stocks, software improvements, and a program so that Schwab representatives could communicate with customers live on the Web were introduced (Charles Schwab). Representatives could now hold online seminars where they teach investing strategies and money management skills to people in online community forum workshops (Charles Schwab). In 2002, the company introduced further strategies for affluent traders. There are now 395 branches of the Charles Schwab and 33 U.S. Trust offices.

Schwab's Enterprises are divided into the following categories:

Retail Services

Online Services



Corporate Services

Services for IMS

Schwab Capital Markets

Technology Services

U.S. Trust

Charles Schwab)

In 2001, Charles Schwab had more than $4,353 million in assests. Its operating income was $407 million. The net income was $199 million. The stock price was $15.47 as the end of the year. The diluted earnings per share was $.14. Client assets were $846 billion. There were 7.8 million active client accounts by the end of the year (Charles Schwab).

The company was named the best online brokerage by Gomez, an Internet measurement firm, in 2001. The Web site was rated number one in the online relationships category and was rated number two for its "ease of use." The site was acknowledged for providing its customers with "real time" information, charts, news, and information from analysts., the Web site for Charles Schwab was praised in Forbes Magazine that same year. Barron's praised the site's streamlined approach as well (Charles Schwab Named Best Internet Brokerage).

In September 2002, financial reports the company had $4.4 billion in net new assets and the client assets were $767.6 billion. That number was down 7% from August the year before. The total client daily average trades were reported as 168.2 thousand in August of 2002. The trades were up four person from the year before was down 25% from July 2002 (Charles Schwab).

This year, George Bush, the president of the United States listened to a recommendation by Charles Schwab -- called the "man who revolutionized the financial markets in the 1990s." Schwab suggested that capital gains taxes be cut to help investors (Moore). Schwab said that investors are not panicking, they are just more cautious during the recession in 2002 (Moore).

The company, however, had to lay off between 11 and 13% of its employees due to a declining economy and the lack of trades. Charles Schwab also reported that it will cutback the capacity on its computer system.

The company reported, at that time, that the majority of the cutbacks would be to its more than 500 contractors. Charles Schwab had more than 26,000 employees (Schwartz). The company wasn't likely to make cutbacks to its spending on technology because of the need to be prepared when the market volume returns (Schwartz). The daily trades were down severely from the company's hey day during the dot-com era with daily averages down 32% in February of 2002 from what they were reported a year before (Schwartz). The stock price was also down 65% in March 2001 from its reported price the previous March (Schwartz).

In the July/August issue of the Quill, a publication of the Society of Professional Journalists, reported that CBS refused to run Schwab commercials because the company accused…[continue]

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