In a future dictionary, “innovation” and “Charles Schwab” may well be synonyms.
Check out the company’s history: when Charles Schwab & Co. Inc. became a discount brokerage firm in 1974 and offered low-cost stock trades, the concept was unheard of and scorned by the industry. Later, when the firm started its now successful mutual fund marketplace in 1984, which allowed investors to choose from a wide array of funds, skeptics frowned then, too.
The San Francisco-based firm continues to profit from its success in the marketplace. In the first quarter of 1999, Schwab gained 388,000 new accounts, bringing the total to 6.2 million. Customers’ assets have grown by $55 billion-$23 billion of that from the influx of new money-to more than $592 billion. Due to the seesawing of the stocks of Internet companies and online brokers, the firm’s shares have taken a beating as of late, down to $43.06 from their all-time high of $77.50 a share. As the firm moves into the 21st century, it faces several challenges. Perhaps its most daunting is what the firm refers to as its “clicks-and-mortar” strategy-fusing the old-fashioned, people-oriented portion of its business with the Internet.
Spearheading this effort is David S. Pottruck, 51, president and co-chief executive officer of Charles Schwab. Pottruck works closely with founder Charles Schwab, now 61, and is slated to succeed him when he retires. And he is committed to making this blend of high-tech know-how and old-fashioned horse sense work.
Personal Finance Editor Ivan CintrÃ³n sat down with Pottruck at Schwab’s headquarters to discuss, among other topics, how the discount broker intends to successfully marry its burgeoning online brokerage services with its more traditional people-centered approach; renew efforts to recruit African American brokers and customers; and its view of turbulent market conditions.
BLACK ENTERPRISE: With the market so volatile, sparked by fears of rising interest rates, what is Charles Schwab’s long and short-term view of the status of the market?
DAVID POTTRUCK: We are very optimistic in the long term. We like the macro trends toward deregulation and technology that enhance productivity. These things result in a more competitive market, more free-flowing capital, and that always creates a more vibrant business climate. That kind of business climate is going to result in more and more investing and an increase in the value of companies.
I think we start with the notion that investing is not like going to Las Vegas. It’s not a zero-sum game. You sit down at Las Vegas and at the end of the night, there’s no more money than you started with. It’s just changed hands. Some people have more and some people have less. Investing is different from that. Over time, values increase because of economic activity and the growth of enterprise. And so the stock market is simply a valuing mechanism of our economy, which we expect to continue to go up. Now, what happens is sometimes [the market] goes up too fast, and then it corrects down, and sometimes it doesn’t go up fast enough, and