The Charles Schwab Corporation 2026 Q3 Earnings Call

Hi, good morning everyone, and welcome to Schwab's 2026 Fall Business Update. This is Kartik Sharma, Head of Investor Relations. I am joined in Westlake today by our President and CEO, Rick Wurster, and our CFO, Mike Verdeschi. A few housekeeping items before we get started. The slides for today's business update will be posted to their usual spot on the IR website at the conclusion of the call. Q&A remains at one question. If you have more than one, please simply hop back into the queue and ask another if time allows. As always, the IR team is available to assist with any questions following today's update. Finally, please review our forward-looking statements page and remember that outcomes may differ from expectations, so please stay up to date with our disclosures. With that, I'll turn it over to Rick.

Thank you, Kartik, and good morning, everyone. Thanks for joining the Fall Business Update. I hope you've had a chance to review our results and agree that Schwab is in a position of strength. We are winning today and uniquely positioned among our peers to continue winning well into the future. There are four overarching messages I hope you take away from the call. One, our Through Clients’ Eyes strategy endures the test of time and is fueling our record performance and growth. Two, we have an unmatched no trade-offs value proposition that positions us at the center of our clients' financial lives. Three, we have a clear strategy and we are delivering client-focused capabilities at a fast pace as a powerful combination of people and artificial intelligence amplifies our advantages. Four, we have a diversified financial model that drives durable earnings growth across market cycles.

We are growing our client base. Clients opened 1.2 million brokerage accounts in the third quarter. We attracted $190 billion in core net new assets in the third quarter, up 38% over last year and representing an annualized organic growth rate of nearly 6%. We are deepening relationships with clients as they continue turning to Schwab for more of their financial lives. Managed investing net flows reached a quarterly record of $24 billion, and bank lending reached $72 billion, up 35% year over year. This translates to another quarter of record financial results with total net revenues of $7.2 billion and adjusted earnings per share of $1.69, up 29% over last year. Most importantly, our Through Clients’ Eyes strategy is delighting clients. Client promoter scores and Easy Scores continue to climb, and we continue to earn industry recognition. Those measures reinforce what we see in the business every day.

Clients value the combination of service, ease, capabilities, and trust that Schwab delivers. We remain the trusted platform of choice for investors and registered investment advisors. We are number one by total client assets, number one by RIA custodial assets, and number one in daily average trades. Year to date, clients interacted with us a record 1.8 billion times in the channel of their choice, whether digitally or in our branches. Our firm-wide transfer of assets ratio is approximately 1.8, reflecting continued improvement over time. Notably, clients are actively and intentionally conducting their day-to-day financial lives with us month in and month out, moving nearly $4 trillion in cash every month to invest, trade, pay bills, hold collateral against positions they hold, and otherwise execute the day-to-day cash transactions that make up their financial lives.

We are adding new product solutions and capabilities to help our clients consolidate more of their financial lives at Schwab. We are building, acquiring and partnering where each approach makes the most sense, and we are delivering at a rapid pace. We have launched single stock futures and binary options related to the financial markets for our trader clients. All clients can now access Schwab Crypto. We are rolling out the ability for clients to transfer their crypto holdings to Schwab, and we are launching access to three new coins by the end of the year. For our RIA clients, we have collaborated with Anthropic and are proud to be the first RIA custodian included in Claude for Financial Advisors. We just introduced Charlie, our new AI-powered conversational assistant, that will be available to all clients in the coming months.

We are not slowing down as we continue to innovate across our businesses. I want to spend a moment talking more about our investments in AI. AI is an opportunity for Schwab. It is attracting more people to investing while amplifying our strengths. It will help us create more personalized experiences for our clients while improving the productivity of the team serving them. 77% of U.S. investors use AI today, and at the same time, more than 90% prefer human involvement alongside AI technology. That combination of people and technology has always been central to Schwab and cannot be underestimated. It is and has been a key source of our differentiation. If you look at growth across the industry and at Schwab, relationships and trust still matter a lot.

While there is no question AI is going to make our clients' financial lives easier, it has to be safe and secure, which is why we will bring AI to our clients in the following ways. First, we are blocking unauthorized agents who try to log in on behalf of clients. It is not a safe way for our clients to access Schwab, and we are blocking it to protect clients and our firm. Second, we are bringing the power of AI to our clients through Charlie. For our retail clients, Charlie combines best of third-party LLMs with Schwab's trusted data and security. Charlie uses a constellation of underlying LLM models and is designed to select the one most appropriate for the task at hand.

Today, Charlie is primarily a source of information and synthesis and can take action on a client's behalf for some administrative tasks, like changing an address or naming a trusted contact. Over time, Charlie will do a lot more, ultimately becoming an important front door to Schwab. Third, we will also allow clients to use their LLMs to connect to our MCP servers. Claude for Financial Advisors, which I mentioned earlier, is just one example of how we are using an MCP layer to bring the power of AI to our clients. We are also using it with our retail trading clients as we can secure authentication and control or limit access to the riskiest actions, like moving money. Enhancing the client experience is only part of the AI equation. We are using AI internally to help our developers and professionals work more effectively and efficiently.

We've already seen developer productivity increase by about 25%. That is the future we are building. Our people and AI working together to deliver better outcomes for clients. As investors consolidate their financial lives and our clients increasingly want to do more with their trusted Schwab relationship, we are uniquely positioned at the center of the investing ecosystem to meet their needs. Our breadth across investing, wealth, trading, banking, and lending allows us to simplify clients' financial lives and serve them in the ways they prefer. By combining our people, technology, scale, and value, we're creating a differentiated experience today while building the platform clients will need tomorrow. That is a powerful advantage and one that is very difficult to replicate. We have a clear strategy, and we are delivering for clients at a rapid pace.

I'll spend the next few minutes highlighting some of the opportunities we have ahead and how we are positioned to continue driving diversified and durable earnings growth through the cycle. We have two equally powerful growth opportunities in front of us, serving more clients and deepening the relationships that we already have, and we are delivering on both. Core NNA have grown significantly over the past several years, reaching record levels in 2026, supported by strong momentum from both individual investors and RIAs. More clients are choosing Schwab. More clients are bringing us a greater share of their financial lives, and we are building deeper, longer-lasting relationships over time. We have built our advisor business around helping independent advisors grow, compete, and succeed.

Today, we serve more than 16,000 firms, representing $5.8 trillion in assets, with a platform that brings together custody, trading, banking and lending capabilities, technology, and dedicated service and support. This business requires scale, trust, operational excellence, outstanding service, and the breadth to support advisors as their businesses and their clients' needs become more complex. That is why we win. Advisors of all sizes are turning to Schwab when they start their firms, and they're relying on us as they grow, move upmarket, and serve increasingly sophisticated clients. Last year, more than 1,100 advisory firms added Schwab as a custodian, more than three times the number of the next closest provider. We are continuing to invest in this business to meet advisors' needs. Turning to our retail business, we are serving individual investors who span the investor spectrum.

Our retail business is built to win across generations, wealth tiers, investing styles, and engagement preferences. We are attracting younger clients. Approximately 70% of new to firm retail households are Gen Z and millennials. At the same time, investors of all wealth levels continue to turn to us for more of their financial lives. Roughly 80% of retail assets are held by ultra-high net worth and high net worth households, and we are well-positioned to continue serving future generations when that wealth is passed on. Our retention rate around wealth transfers is extremely high, and we are winning assets with all generations. Retail clients who have a dedicated financial consultant generate approximately three times the household NNA, five times the managed investing net flows of comparable unassigned households, and three times the transfer of assets ratio.

Relationships continue to matter. That is why we are investing in both people and technology so we can continue building, deepening, and retaining those trusted relationships now and for the decades to come. Our second growth lever is deepening existing client relationships and helping clients conduct more of their financial lives here at Schwab. Today, I will highlight two of our opportunities, wealth and trading. Client demand for advice is accelerating. Managed investing net flows reached another record of $24 billion in the third quarter, up 22% from last year. Within that total, Schwab Wealth Advisory net flows increased 55% as we continue to delight these clients who have given us a client promoter score of 84 in the third quarter. Our opportunity and wealth remains compelling. Schwab has approximately 2% of the $37 trillion U.S. advice market.

While only about 5% of Schwab retail households currently use an advice solution, 31% say they are willing to pay for advice. Trading is another area where our leadership position creates meaningful opportunity. We remain the industry leader in trading, supported by a world-class trading platform, more than 1,200 expert trading specialists, and research, education, coaching, and service for traders at every level of sophistication. Traders value what we deliver. Trader client promoter scores increased seven points year over year. Traders are also highly engaged. Trader households generate approximately seven times the NNA and two times the revenue on client assets of the retail average. A subset of traders are already using AI to support their trading goals, connecting their LLMs to Schwab via our APIs and our MCP server.