Charles Schwab Corp. in 2017

Charles Schwab Corp. in 2017

By
Robert Siegel, Julie Makinen
2017|Case No.SM282| Length 19 pgs.

By almost any measure, Charles Schwab Corp. appeared to be killing it in 2017. The wealth management, banking, custody and brokerage firm’s stock was trading near its all-time high. It was posting unprecedented levels of new client accounts, net new client assets, revenues and profits and had a record $3.12 trillion in client assets under management. Schwab was taking customers and assets from old-line wire houses like Morgan Stanley, while fending off challenges from young Fintech upstarts by being a fast follower. Despite its relatively large size, Schwab saw itself as a disruptor. Schwab was attracting more net new assets than any other publicly traded full-service investment firm and its operating costs were lower than competitors like Merrill Lynch and Morgan Stanley. Still, there was no doubt that challenges loomed on the horizon.  For example, how could Schwab maintain or improve trust in an era of intense cyber-threats and increasingly sophisticated technology that some consumers found invasive or even creepy?  Were its products elegant and simple enough? In the era of Uber and Amazon, customers’ expectations were rising.  And what if a big tech company like Google or Amazon started to move onto Schwab’s turf? Key to staying ahead, CEO Walt Bettinger felt, was maintaining a laser focus on the customer, and being willing to cannibalize Schwab itself to find new growth.  Schwab, he thought, had repeatedly proved its willingness to do so over the previous four decades, most recently by introducing a robo-advising product. “Disruption occurs when someone listens more carefully to customers, or better anticipates what customers might want before they even realize it themselves. Most companies are disrupted because they lack the will and courage to disrupt themselves first,” Bettinger said. Could Schwab stay vigilant and keep up that courage? Or was it already being disrupted and didn’t realize it?

Learning Objective

1. Assess Charles Schwab Corp.’s self-perception—is it accurate in seeing itself as a disruptor? Or is failing to appreciate prospective disruptive forces?

2. Evaluate Schwab’s strategy. Where should it look for growth? Is Schwab making, buying and partnering for the right things to keep it ahead of the pack? Where should they focus on partnering and where should they build products internally?

3. Predict where Schwab will be in 10 years, using data and other supporting material.

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