Charles Schwab Executive Summary

In: Business and Management

Submitted By TheGr3atSantino
Words 687
Pages 3
Introduction/Key Issues
With the deregulation of commissions in 1975, Charles Schwab created the discount broker. With new rules set in place commissions would now be set by market competition. While competitors like Merrill Lynch and Fidelity raised their fees, Charles Schwab chose the opposite route. For so many years the cost of trading stock was so high it limited the investment opportunities available for Americans. Schwab envisioned that individual investors would jump on the opportunity to be in control of their trading at a discounted rate. By focusing on the principle of providing the best customer experience across all channels CS revolutionized the brokerage industry.

With the introduction of online trading in the late 90’s, CS became one of the top financial services firms in the nation while doubling profits. However, a dynamic marketplace posed new challenges. The stock market crash of 2001 and competition from new Internet discount brokers cut into CS’s transaction fees, which was their main source of revenue. With high trading volumes likely coming to an end CS has to focus on other sources of revenue.

CS’s decision to become the first discount brokerage firm was a great strategy to cement them as a force in the brokerage industry. However, this image was hurting them for future growth. While CS offered many of the same services affluent investors ($1MM + investable assets) sought from full-commissioned brokerage (FCB) firms, they weren’t known for them. As seen in the case study, Charles Schwab Corp.: Introducing A New Brand, the high net worth (HNW) segment of investors was valued at $8.8 trillion in 2000 and projected to reach $13 trillion by 2005 (p. 71). Through market research CS discovered that FCB clients did not believe the FCBs were reliable or trustworthy leaving them unsatisfied (Lal, p. 78). If customers are made…...

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