1-on-1 with Charles Schwab

Spring always flips a switch for me. I love cleaning out closets, reorganizing my space. It makes me want to spread that over to my financial life, and you know I love a clean and tidy financial life. That's where Monarch can be a game-changer. Let Monarch do your financial spring cleaning for you. One dashboard that gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place, and you can get your first year of Monarch for half off, just $50 with promo code Jill on Money. And what's cool about Monarch is you can see your cash flow laid out. You might be surprised just how much of your income is quietly seeping out towards random spending. Monarch makes it obvious, and you'll likely adjust your spending because of it. And there's a great weekly AI recap, which flags spikes before they become habits. That's huge. Monarch isn't just tracking, it helps you plan ahead, set goals, and actually understand your money with AI that's tailored to you. Use code Jill on money at monarch.com to get your first year half off at just 50 bucks, 50% off your first year at monarch.com with code Jill on money.

Ever feel like you need one app for sales, another for inventory, another for accounting, and the list never ends? Managing a business shouldn't feel like a full-time job just to keep your software in check. That's why Odoo exists. Odoo is the only business software you'll ever need. It's an all-in-one, fully integrated platform that handles everything, CRM, accounting, inventory, e-commerce, HR, and more. No more app overload, no more juggling logins. Everything works together seamlessly, so your team can focus on what really matters, growing your business and serving your customers. Beyond simplifying your workflow, Odoo also saves you money. Instead of paying for multiple expensive platforms, you get one system for a fraction of the cost. And whether you're just starting out or managing a large company, Odoo scales with you. It's easy to use and fully customizable. It streamlines every process, giving you more time and freedom to focus on the parts of your business that matter most. Thousands of businesses have already made the switch. Why not you? Try Odoo for free at odoo.com. That's odoo.com.

Welcome to the Jill on Money podcast. It is Saturday, November 7th, the day after the big jobs report. Okay, it wasn't that big because it kind of got dwarfed by the whole election stuff and the counting and all that. But let me tell you what happened. It was a really interesting report because we got 638,000 new jobs in October. A really good number. The unemployment rate dropped a full percentage point to 6.9% and for the right reasons. More people entered the labor force and many of them got jobs. So, we've got six consecutive months of gains. Great, right? The labor market has now recouped 12 million of the 22 million jobs lost due to the pandemic. Before you get too excited, of course, I'm going to be a total buzzkill. The pace of job growth is definitely slowing down. And despite all the gains, we still have more than 10 million fewer jobs than in February. The job losses are still 15% worse than those that were experienced in the 2008-2009 recession. So, there are some problems there. We've got long-term unemployment, an extra 1.2 million people of the total number of unemployed, about a third of them have been out of work for more than six months. So, let's get this election settled up and let's get Congress back to work because there are millions of people who are going to need help. All right? Okay, so now we've got a great guest for the show. We recorded this before COVID, so there's no mention of it. I know that might sound weird, but when you get someone like Chuck Schwab, as in Charles Schwab, yeah, that one, you run the interview because he is a legend. So, here's our interview with Chuck Schwab.

What is the best financial or career decision you've ever made?

And what was the view of the street or these big brokerage firms when you opened your doors almost 50 years ago?

And so what led you to think about the customer first? I mean, you come from a different mold. You don't come from a big Wall Street family. You come from lawyers, right?

And yet, when you started this company in the 70s, the vast majority of Americans were able to claim that they were part of a pension. They didn't have to feel like they had to invest. So, talk a little bit about how the world of investing changed with the advent of the 401k and that more people were just becoming, I guess, introduced to the concept of investing.

So, when you started the company, talk about the beginning and when you felt like it's catching on. So, if you're in the early 70s, you start this company, is this crazy guy Chuck. When did you feel like, okay, this is going to work?

And then what led you to think you should sell the business?

Which is looking back is pretty funny, but many of them wish they had now because stock price did really well over the next ensuing years. But at the very beginning, the money was a struggle, always trying to raise money, friends, relatives, and so forth. And that was not always completely successful, but we scraped along. And I convinced certain people that we had a great future. And maybe they ought to think about an investment in the company. So, eventually we did get there, but always that pressure. And so, when Bank of America came around to buy us and they flashed a couple numbers in front of me and I came from nothing. I thought, "Oh my god, is that a heck of a lot of money. Maybe I should consider that because it really improved my net worth going from zero to a lot, 20 million."

What happened when they make this investment in you? Are you allowed to run Charles Schwab as a wholly owned sub or did they try to integrate you?

Itself. The bank separate of you.

Did that happen? That happened 1987. Oh, what a funny year to have something big happen.

Exciting is not the word I would have used because I was a young pup trader on the floor of the commodities exchange. My father was a specialist on the floor of the American Stock Exchange. My uncle was a specialist on the floor of the New York Stock Exchange. So, it was a dramatic time. That's what I would say. And it was intense. You experienced that loss, that dramatic day. Do individuals who are trading at Schwab jump ship or do they stand?

How was the advent of online trading? What did that mean for your company?

Which is a mind-blowing concept. I'm so sad that my father's not alive to see this because I remember he used to say, "We're on our way to zero." And people would be like, "What are you crazy, Albie? Like, you're not zero. They got to make money, right?" So, now you went from was it 4.95 and now it's less? But, let's just call it five bucks to trade. Now it goes to zero, and people are thinking, "Wait a minute. How are these guys making money? What are they going to do to make up for that five bucks that they're losing?"

What do you think about the advent of robo-advisors? You have a service through Charles Schwab where you can put your money into an account and basically take your risk profile and an algorithm's going to do the rest. What do you think of that?

So, I guess the question is, if we watched you guys be the ones who broke through and pushed down trading costs to zero, could you ever see a time where advice pricing starts to drop in a similar way? I mean, now there's no guy sitting in a big fat Merrill Lynch office who really can get away with charging 8 and 1/4% for a mutual fund anymore, right? Okay, so I would presume that if Charles Schwab and Vanguard are both making the jump into advice, that that is going to put price pressure downward. Do you agree with that?

Is the age of a managed mutual fund coming to an end?

Do you think that there is a danger? There are some folks who are running around saying, "Hey, you know what? Everybody's in the index. Market goes down. Everyone's going to try to get out at the same time. It's going to be a cascading downside risk that we've now all piled into."

You think that it was helpful that you were outside of like the New York Wall Street crowd that you could think beyond the way business was done.

I interviewed Michael Lewis a while back, an interesting guy. He lives in Oakland. Yes, he does. And we had this very funny conversation because he said, we were talking about how so much of investing there is an element where people start talking as if it were gambling. And he said, you know, it's not gambling. He said, you know, if you talk to really old-time traders and investors, they'll never tell you about their best trade. They'll always tell you about their worst trade. And he said, and that's what I found interviewing golfers. Professional golfers never tell me about their best round of golf. They tell me about the three holes that blew the whole tournament.

And so I'm wondering for you, what you feel like is misunderstood among the investment community about that this is not gambling. So what is it? How should we be thinking about this?

We've been getting some questions. We take listeners, they call up and they want to ask us questions and they will often say things like, "Well, I want to get 100% out of the market or I want to put all my money in." Can you talk a little bit about your experience with trying to time the market?

So, how do you look at the landscape now? You are in the Bay Area. There's a lot of innovation. We're hearing so much about many of these companies, these unicorns who are remaining private for much longer than say folks who did in your time when you were before you went public. What is the upside and downside of being a public versus a private company? And is there any lesson that we should take in observing it?

Talk about the financial services landscape. Is there anything at this point in your career that keeps you up at night? Is there anything that you're worried about?

What about these fintech companies that were really looking like hot and then folks like Schwab jumped in and sort of ate their lunch. So if I had a fintech company 5 years ago that I thought was like, "Oh my, I'm on the way to getting a billion dollar valuation." Now you're in the business and Vanguard's in the business, is my fintech company now not worth quite as much?

How would you decide whether to buy that or to create it?

Do you have an insurance arm as part of Schwab?

Yeah, well, I was thinking that it would be great if someone like, let's say, Chuck Schwab could say, "Yeah, the idea of an annuity is so appealing, right?" Because in your brain, in your little human brain, you say, "Yeah, I just want someone to pay me with my money. I want my own pension." But, of course, the insurance industry, I'll say, you don't have to, is a bunch of pigs and they charge too much. Way too much. Oh, it's very, annuities are incredibly expensive and not only that, then you get locked in if something changes in your life, something dramatic happens and you want to reverse it all.

Wait for that. Will you come back or maybe your daughter will come back?

Your daughter Carrie's in the business, right? Anyone else? Any other kids?

Four kids were very smart not to go into the business?

And they're all in the Bay Area? Everyone on the West Coast for you?

What do you think right now about let's sort of big picture economy? You know, part of your business is, as you said, collecting the spread between what you pay out on your money market and that that flowed and what you're using it for. How will that business fare if interest rates continue to go down?

We started the interview and I said, "What was your best career or money decision?" You said, "Your best career decision was starting this company." What was your worst?

Well, thanks so much for listening. That was just a great interview. I loved meeting Chuck Schwab. He actually had come into the studio at a time when we could be in the studio together. Remarkable. All right. Remember, it's a Saturday and you probably need a little rest, but maybe you're starting to see some of your friends and family after a long week. Don't forget to wash your hands, wear your masks, maintain your physical distancing, and try to do something nice for someone else today. We'll talk to you tomorrow.

Hi, my name is Lloyd Lochridge, and I'm the host of a new podcast from Odyssey called Family Lore. In this podcast, I'm going to have people on to tell unusual and sometimes far-fetched stories about their families.

I've heard my whole life that she invented the margarita. And then, we're going to investigate those stories and find out how much of it is true. He gets a patent one month before the Wright brothers. Oh my god. Please follow and listen to Family Lore, an Odyssey podcast available now on Apple Podcasts, Spotify, or wherever you get your podcasts.