Charles Schwab

Topics: Charles R. Schwab, Charles Schwab Corporation, Stock broker Pages: 15 (5251 words) Published: November 14, 2013
Case Report on

Company Background
The Charles Schwab Corporation is an American brokerage and banking company, based in San Francisco, California. It was founded in 1971 by Charles R. "Chuck" Schwab, as a traditional, brick and mortar brokerage firm and investment newsletter publisher. In 1973, the company name changed from First Commander Corporation to Charles Schwab & Co., Inc. The company started offering discount brokerage on May 1, 1975, and became one of the world's largest discount brokers. Company over the years: 1971 – In April, the firm is incorporated in California as First Commander Corporation by Charles “Chuck” Schwab with two other partners. 1973 – Charles Schwab bought all stocks and change company name to Charles Schwab & Co., Inc. 1975 – Launch discount brokerage and opens its first branch in Sacramento, California, USA. 1982 – First to offer 24 hours phone service.

1983 – Bank of America acquires Schwab for $57 million.
1987 – Management leads a buyback from Bank of America for $324 million. 1995 – Activates its first website at
1996 – Add web trading to
1998 – Reach the first place in stock market capitalization. 1999 – Launch after hours trading that trade order can places online or by phone. 2000 – Acquires U.S Trust and also acquires CyberCorp, Inc. 2001 – U.S Trust was fined $10 million for failed to comply the rule to disclosed financial report. 2004 – Schwab announces the resignation of David Pottruck and the reinstatement of Charles Schwab as CEO. Schwab sold its seats on the NYSE and then launched Charles Schwab Bank. 2006 – Sold U.S Trust to Bank of America.

How has Charles Schwab’s business changed since 2002? Is the company moving in the right direction? Originally company was set up as discount broker. The company started to operate in the mid-70s and trades were closed by phone. The process was inconvenient and unproductive. Company was immediately looking for improvement and implemented system for automate trade clearance and settlement. In the mid-80s company introduced PC software for online trading using dial up connection and later automated voice-response telephone service. When internet emerged in 90s Schwab started to work on Interned brokerage platform. In 2000 Schwab acquired Cyber Trader a direct access broker with their unique software described as easy to use advanced technology platform with access to many markets. That software became the engine for new Schwab's trading platform StreetSmart Pro. At 2001 Schwab was operating over 13 million online accounts and ranked as number one discount broker. Most of the business was done online. Events in September 2001 had huge influence to economy and financial markets together with many company bankruptcies (Enron, WorldCom, Tyco) in early 2002 investors behavior was changed a lot. Investors started to look more for safe investment rather than high return and started to seek the help of professional advisors more. Analyst saw Schwab branch staff under qualified (they were originally taken as order takers) and necessary to change with more experienced and more expensive financial advisors. As a result company launched an alternative for investment research, Schwab Equity Ratings, and two new advisory services for affluent investors, Schwab Private Clients and Schwab Advisor Network.

The late of 1990s Schwab get the tremendous growth in Trade Volume and grew to eclipse leader in this market, Merrill Lynch in 1998 Business in Schwab exploded. Commission trades were up 90% in Q1 2000 from the year prior The company seemed to lose the focus on customers, one of strategy that made the company success. During increase in trade volume that caused service levels at Schwab to plummet. Customer can’t or delay to reach telephone reps and in some cases trade failing to execute due to computer glitches The market downturn in 2000 and hit the company hard. By the August 2001,...
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