Charles Schwab (SCHW.US) recently held its FY25Q4 earnings call. Company management mentioned that it still plans to launch spot trading for Bitcoin and Ethereum in the first half of 2026; it will also launch a high-touch trading service for block trades in Q1. Regarding alternative investments, the acquisition of Forge is expected to be completed in the coming months and is viewed as a potential driver for attracting high-net-worth clients and boosting asset aggregation. Schwab stated that growth accelerated across all business lines in 2025, with net new assets reaching $519 billion, a 42% year-over-year increase. Breaking it down, the retail segment grew approximately 33%, while the adviser segment grew slightly above 42%, showing strength in both areas. A highlight in the retail segment is its broader reach: the company is successfully attracting younger clients, active traders, long-term buy-and-hold investors, and retail high-net-worth clients. Over the past decade, the average age of the company's clients has dropped by about 10 years and now sits in the 40s; approximately one-third of new clients who joined last year were from Generation Z.
In its business assumptions, the company believes the momentum from 2025 will continue into 2026, with new account openings remaining strong, and it expects full-year organic growth for core net new assets (core NNA) to be around 5%. Regarding trading volume, considering the exceptionally strong trading activity in 2025, the company's 2026 scenario allows for a slight moderation, with full-year daily average trades estimated at around 7.4 million, closer to levels seen earlier in 2025. Under these assumptions, the CFO provided the following core financial guidance for 2026: total revenue growth of approximately 9.5%–10.5% year-over-year. For net interest income, the company expects the full-year net interest margin (NIM) to be in the range of 2.85%–2.95%, adding that even if the federal funds rate were to decline by an additional 50 basis points within the year in their scenario, the average NIM in Q4 2026 is still projected to be above 2.9%. Interest-earning assets are expected to see slight year-over-year growth for the full year, primarily achieved after the repayment of supplementary borrowings on the banking side.
Q1: What is the next phase for the balance sheet? After the normalization of supplementary funding, what is the focus for asset reallocation? Will the securities portfolio grow again, and if so, when, and what are the views on size and duration? A1: The company confirmed it actively repaid supplementary borrowings in 2025. Going forward, the focus will shift more to the "asset side": lending momentum was strong in 2025 and will continue in 2026 as the company seeks robust lending opportunities, encompassing both banking-side loan products and margin lending; thus, loan growth is expected to persist. As funds become available following the repayment of supplementary borrowings, the company will not only be able to continue supporting loan growth but will also have room to reinvest in the securities portfolio. The securities portfolio is emphasized to serve two purposes, one of which is acting as a liquidity reserve, so allocations will maintain high liquidity; the majority of funds will be directed towards U.S. Treasuries, primarily with short durations, possibly supplemented by a small amount of high-quality ABS, but the core will remain Treasuries. Regarding duration, the company reiterated that the overall securities portfolio duration range is roughly 2–4 years, with a preference for placing new Treasury allocations at the short end of the curve. Overall, the company is satisfied with the direction of the balance sheet evolution, believing this pace supports both client needs and future earnings growth.
Q2: What is the progress of the alternatives platform? Is there any disclosure on client participation or asset scale? Is the pricing attractive enough to draw new clients or additional asset inflows? A2: The company stated that the alternative assets initiative is growing and making progress, with the key being positive client feedback, particularly its ability to "delight" higher-net-worth clients. Management frames alternative investments within the context of continuously enhancing high-net-worth client service capabilities in recent years: including the launch of tax-related services, stronger financial life integration capabilities like concentrated position management, and hiring more experienced wealth advisors. Currently, there is a waiting list for alternative investment consultations, indicating demand is stronger than expected. Regarding asset scale, the company is not disclosing specific figures yet, citing the early stage of the rollout. In terms of long-term product form, the company aims to become a significant platform for UHNW clients to access alternative investments: on one hand, by introducing leading alternative investment managers; on the other, by offering indirect, one-stop access to a basket of alternative or private assets through investment in a professionally managed fund product; concurrently, with the Forge acquisition, the future goal is to also allow some clients to directly purchase individual private equity stakes. Management believes that over time, this suite of capabilities has the potential to boost net new assets: both by attracting new clients to Schwab and by encouraging high-net-worth clients to consolidate alternative assets previously held elsewhere back to Schwab.
Q3: Why has recent growth accelerated? What are the trend differences and expectations between Advisor Services and Investor Services? How will investments in high-net-worth clients impact Investor Services? A3: The company stated that growth is accelerating across all lines: 2025 net new assets reached $519 billion, up 42% year-over-year. Breaking it down, the retail segment grew about 33%, while the adviser segment grew slightly above 42%, showing strength in both. A highlight in the retail segment is its broader reach: the company is simultaneously winning over younger clients, active traders, long-term investors, and retail high-net-worth clients. Over the past decade, the average client age has dropped by about 10 years and is now in the 40s; about one-third of new clients last year were Gen Z. Therefore, management emphasized that customer acquisition and outreach methods are more aligned with younger demographics (e.g., promoting concepts of compound interest, saving, and investing through channels like TikTok, Instagram, YouTube). Looking ahead, potential "accelerators" for net new assets in the Investor Services segment were identified as: first, after the full rollout of crypto services, including asset transfer capabilities, some long-time clients who currently hold crypto on external platforms may bring those assets back; second, scaling up the workplace business will bring incremental growth; third, continued expansion of branches and financial consultants, based on the rationale that "NNA significantly accelerates when there's a dedicated relationship," aiming to play a stronger "financial management" role in clients' lives, thereby driving further asset consolidation. The Advisor Services segment was described as having clear competitive advantages across multiple dimensions: scale, breadth of capabilities, ongoing optimization of custody products, consulting and professional support for advisers, and services helping them drive towards independence, making it difficult for competitors to match, thus sustaining strong organic growth (the company mentioned this business grew organically about 6.5% last year), with room for further acceleration in the long term.
Q4: Lending is a key growth area; what is a reasonable penetration rate among existing clients over the next few years? A4: The company believes lending still has significant upside potential, not only for existing products but also potentially for new products in the future. Using the pledged asset line (PAL) as an example, the current PAL penetration rate among retail UHNW clients is only about 9%, which management believes can be significantly higher, as it is a convenient and easy-to-use borrowing method for clients; simultaneously, the interest rates clients can obtain when they have assets at Schwab are competitive, and for the company, it still provides leverage on securities, making it a win-win. For the adviser/RIA side, the company stated that feedback from a large number of advisers indicates one of the most common requests is for Schwab to offer more banking and lending services. Management views PAL as a great starting point, with penetration already at 23% and expected to rise further; more importantly, the company will explore more ways to provide banking and lending to RIAs' clients over the next few years. The logic is that RIAs' fiduciary duty and independence are key reasons for their share growth, but they also need stronger banking capabilities to compete with full-service brokers, and Schwab is seen as a natural provider. The company also cited 85% growth in PAL originations over the past year to illustrate momentum, emphasizing that its "banking journey is just beginning."
Q5: How should capital returns in 2026 and beyond be understood? What is the assumption for buybacks in the 2026 performance scenario? A5: The company clearly stated that the derived 2026 scenario results do not include buybacks. The capital management framework remains unchanged: capital is first used to support the long-term growth of the core business and client needs, after which it will be returned to shareholders opportunistically in various forms. Regarding dividends, the company still uses a 20%–30% payout of GAAP earnings as a reference range. The company also mentioned it will evaluate disposal options (redemption, retention, or replacement) for certain preferred securities this year, depending on the desired capital structure. Regarding buybacks, the company did not provide a fixed path, instead emphasizing that decisions will be based on the capital ratio position and business growth needs; however, against a backdrop of strong earnings momentum, the company is positive about returning capital in various forms in 2026.
Q6: Tax-advantaged investment strategies are growing fast but have low spreads; can penetration be further increased in the RIA channel? How do you balance returns with balance sheet opportunities? A6: The company explained this strategy as a tactical tool for advisers serving high-net-worth clients, enhancing returns by configuring "long + short" portfolios. Management acknowledged that such balances contribute to NII but the lift is relatively low; simultaneously, it emphasized that from the company's perspective, this is "providing a service," and the asset size is not "grossed up" on the balance sheet, with the company earning revenue through service fees. The strategy is also seen as meeting multiple client needs, including tax optimization and reducing concentration risk. The company expects this business to continue growing in 2026. Further elaboration emphasized that such capabilities are not just a single product but an entry point for deeper wealth relationships: when clients have large concentrated positions or tax gain management needs, it leads to broader wealth conversations, thereby supporting fee-based revenue growth in the wealth business and aligning with the company's strategy of "deepening relationships and increasing client satisfaction."
Q7: What is your view on prediction market products? If they evolve towards more "investment-related" contracts, would the company launch them? What is client feedback? Why not offer sports betting? A7: The company provided two assessment principles: being client-needs-centric and helping clients achieve financial goals with integrity. Based on this, the company is open to prediction markets "related to portfolio construction," for example, those linked to macroeconomic variables like employment or inflation, or future developments allowing positions on the rise or fall of certain asset classes, and would provide them if client demand exists. However, based on current observation, such demand is not high: communication with active trading clients has not revealed prediction markets as a high-priority request, and the company noted that about 95% of observed industry volume is actually sports betting, unrelated to the investment attributes of so-called "prediction markets." The company stated it will continue to monitor and would follow up with offerings if client/industry interest emerges. On the other hand, the company explicitly stated it will not engage in betting, citing a conflict with its mission of "helping clients grow, protect, and manage their wealth," and referenced data showing a very low percentage of participants on betting platforms ultimately profit and exit (mentioning less than 5%), thus leaving such business to dedicated betting platforms.
Q8: The 2026 guidance assumes 5% organic growth for NNA, why? Does the long-term 5%–7% target still hold? If buybacks are limited, could the Tier 1 leverage ratio rise significantly, and has the target range changed? A8: The company stated that long-term, it still considers 5% or higher a reasonable expectation, but focusing on 5% near-term is a more realistic target. Management emphasized not to overlook the higher base: total client assets grew 18% year-over-year, so even if the growth target number seems similar, the absolute size target is actually larger. Longer-term, if workplace investments bear fruit, crypto is fully launched, and retail relationships deepen further, achieving above 5% is still considered possible in favorable market conditions. Regarding capital ratios, the company reaffirmed that an adjusted Tier 1 leverage ratio of 6.75%–7% remains the target range, and noted that this ratio is affected by interest rate movements: rate changes cause valuation changes in the securities portfolio, which in turn affect the adjusted Tier 1 leverage ratio, so temporary operation above the target range is possible but does not indicate a change in the target.
Q9: How has the legacy Ameritrade client base been performing recently? Is it still noticeably slower than the original Schwab base? Could the 5% target see acceleration in Investor Services versus Advisor Services? A9: The company stated that the Ameritrade client base's performance is now "back to where we want it to be." Net new assets and participation in the platform/other solutions have clearly accelerated. The company provided a quantitative insight: the Ameritrade client base accounts for roughly one-third to 40% of inflows into wealth solutions and lending solutions. Management recalled that the transition phase was indeed challenging, during which net new assets for this group were slightly negative; but it has now turned clearly positive and is gradually converging with the behavior of the Schwab client base, aligning with prior expectations. Regarding the discussion on 5% organic growth, the company did not provide more detailed breakdown numbers during the Q&A, instead emphasizing that long-term growth accelerators still include workplace, crypto, retail relationships, and the wealth business; simultaneously, it reiterated that "doing more for existing clients" is itself a huge source of growth, capable of enhancing client satisfaction, strengthening asset consolidation, and leading to a more balanced revenue structure and stronger client stickiness.
Q10: What is the 2026 margin guidance? Where are the quantifiable revenue or efficiency gains from AI? What key KPIs should be watched? A10: The company believes continuous margin expansion comes from a combination of "revenue diversification + balanced expense management," rather than chasing a fixed ceiling. On one hand, a richer product suite encourages deeper client engagement, leading to better revenue diversification and resilience; on the other hand, while investing in strategic priorities, the company also invests in efficiency initiatives to maintain low-cost service; the combination creates operating leverage, supporting margin expansion. Management indicated that further expansion remains possible in the future, but there is no preset hard cap. Regarding AI, the company emphasized that realized benefits so are more evident in efficiency: by using AI in client servicing, the increase in client-facing representatives can be controlled even as client accounts and assets grow, demonstrating productivity gains; future efforts will expand AI application in technology and service. For external tracking metrics, the company identified EOCA (expense on client assets) and cost per account as two key indicators, emphasizing the commitment to maintain and further reduce service costs.
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