The company's problems of three years ago are well behind it, and its shares looked poised for more gains. By Andrew Welsch
A few years ago, Charles Schwab weathered a storm over its sweep accounts and came through the other side. Its stock now looks like a buy as the company leans into its traditional strengths and adds new ones.
Both were on full display in early November, when Schwab CEO Rick Wurster hosted thousands of independent financial advisors, who collectively keep trillions of dollars in assets at Schwab, at a multiday conference in Denver. In the middle of the conference, Schwab announced it was acquiring Forge Global Holdings, which links investors and private companies. If independent advisors -- and the retail investors they serve -- are cornerstones of Schwab's business, the Forge Global acquisition is a sign of how Wurster wants to build on that foundation. "We want to democratize private investing just as we did public investing," he says.
The Forge deal comes as Schwab strives to win more wallet share with customers by expanding its brokerage and advice offerings and branching into cryptocurrencies.
The company has made a "clear shift from defense to offense," writes UBS analyst Michael Brown, who recently initiated coverage of Schwab's stock with a Buy Rating and $119 price target; the shares were trading around $101 on Tuesday. "Execution is key, but the strategic pivot to offense reinforces our confidence in Schwab's ability to rerate."
That Schwab was on defense speaks to the turbulent waters the company had to navigate two years ago when a sharp rise in interest rates motivated clients to move money out of its highly profitable cash-sweep accounts and into money-market funds and other options that paid clients more interest but were less profitable for Schwab.
Schwab's stock took a hit when the company piled on costly short-term debt as outflows exceeded its cash on hand. That debt subsequently weighed on earnings. Schwab was able to weather the storm until the Federal Reserve started lowering rates and the problem subsided. Today, the company has largely paid down its short-term debt, providing a profit tailwind in the quarters ahead.
"SCHW's self-help recovery story via repayment of expensive wholesale borrowings drives more durable revenue and earnings growth [in the] next few years with greater confidence in estimates," writes Morgan Stanley analyst Michael Cyprys, who has a Street-high $148 price target on the Schwab stock.
Now, Schwab can focus on what it does best: serving its customers. Clients are opening new accounts and putting more investing dollars into stocks. The bull market has pushed Schwab's total client assets to $11.8 trillion as of the end of November, up 15% year over year. Schwab has seen new brokerage account openings exceed a million for four consecutive quarters. And Schwab has raked in more than $440 billion in core net new assets this year through the end of November.
By comparison, Robinhood Markets' total platform assets are just $325 billion, meaning Schwab is basically onboarding one Robinhood a year. "They are still a great asset gatherer with one of the strongest positions in the market," says Jeff Schmitt, analyst at William Blair, who has an Outperform rating on the stock.
Investors like what they see. Shares of Schwab are up 36% this year, compared with a 17% gain for the S&P 500, and are on pace for their largest annual gain since 2021. Despite that, shares trade at a below-market multiple of just 18.2 times 12-month forward earnings, well below the 23.5 times it traded at five years ago. That's a more-than-reasonable multiple given Schwab's strengths.
"This is a scale business and when you are the scale leader you have a cost structure that is dramatically lower than anyone else's," says Alex Fitch, portfolio manager for the Oakmark Select fund and the Oakmark Equity and Income fund. "It's a much more durable franchise than investors appreciate."
Investor Base Is Growing
Working in Schwab's favor are enduring long-term trends: More Americans are trading stocks, and more are seeking out financial advice. Nearly four in 10 investors have both advised and self-directed accounts, according to Broadridge Financial data.
To win more business from DIY investors, Schwab must compete against stalwarts such as Fidelity and upstarts like Robinhood Markets, which recently upgraded their active trading platforms. Other financial services companies, like SoFi Technologies and Coinbase Global, have been moving into self-directed brokerage. Schwab recently expanded its trading hours and is allowing more personalization on its platform. The goal is to become clients' one-stop shop for all their financial needs.
One way Schwab hopes to be where clients consolidate their assets is through its forthcoming cryptocurrency offering, set to launch in 2026. The company will finally allow investors to directly hold Bitcoin and other digital assets and may consider launching its own crypto fund to add to its large low-cost exchange-traded funds business. "The game isn't about individual products," says Citizens JMP Securities analyst Devin Ryan, who has a Market Outperform rating on the stock. "It's about being able to get clients to consolidate their assets all in one place."
Even as Schwab leans into digital assets and trading capabilities, it's doubling down on the in-person experience by adding more locations to its 400-plus branch office network. Wurster says customer satisfaction typically increases when a client has a relationship with a Schwab financial consultant and that satisfied clients are more likely to consolidate assets at Schwab. The company is also having success attracting younger investors. About two-thirds of new customers this year are millennials or Gen Zers.
Notably, Schwab is steering clear of prediction markets, which have experienced tremendous growth. Prediction markets allow investors to wager on the outcome of events, such as sports. Wurster has warned against the commingling of gambling and investing. Other brokerage firms -- and gambling companies -- are embracing them.
The rise of prediction markets comes as investors have increasingly embraced risk. If the bull market turns into a bear market, that could hinder Schwab's growth. But in a downturn, investors may increase their cash holdings in profitable sweep accounts and seek out financial advice -- an area the company continues to lean into.
Bull Market for Advice
Schwab sees rising demand for advice from investors, especially as they near retirement. "Only about 5% of our clients pay us for advice today," says Neesha Hathi, head of Wealth & Advice Solutions at Schwab. "That speaks to the opportunity not just broadly, but just within our client base."
The company's internal wealth management offering includes a robo-advisor and Schwab Wealth Advisory, its full-service wealth management offering. (It is phasing out its hybrid robo-advisor that offers access to human advisors.) Schwab also refers customers to registered investment advisors that use Schwab as an asset custodian and its trading platform and technology. Schwab is the nation's largest custodian, far outpacing No. 2 Fidelity, and $81.7 billion of Schwab's $134.4 billion in net new assets reported for the third quarter came via RIAs. Schwab continues to maintain that lead even as new competitors, such as robo-advisor Betterment and tech start-up Altruist, see the growth in the RIA sector and try to take market share from Schwab.
Plus, advisors continue to choose Schwab when they leave national brokerage firms to launch RIAs. In September, a group of Merrill Lynch advisors who oversaw $129 billion in assets launched OpenArc Corporate Advisory -- and selected Schwab as its custodian. Emily Fletcher, OpenArc's chief operating officer, cited Schwab's capabilities and Wurster's efforts to innovate, including the push into private markets, as among the reason for the firm's choice.
Next Up: Private Markets
As more companies choose to remain private for longer, more investors and advisors are interested in owning shares of privately held companies. Schwab sees an opportunity to scale up Forge's marketplace, through which investors have bought and sold more than $17 billion in private company shares, according to Schwab's announcement of the $660 million deal.
Wurster says Schwab could also give investors access to private assets through a fund structure. Plus, the Forge acquisition could help Schwab expand its workplace business. But the real key is bringing more investing customers and advisors to the platform, says Ryan, the Citizens analyst. "It can be a customer acquisition tool but also a wallet share acquisition tool," Ryan says.
When Wurster started his tenure as CEO, he used his first earnings call in January to talk up the company's potential. Growth was to be the byword for 2025. His message for next year? "Keep our foot on the gas and continue to deliver for clients."
It just might work out for shareholders, too.
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January 02, 2026 21:30 ET (02:30 GMT)
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