Charles Schwab Stock

Hi. Good morning, everyone, and welcome to Schwab's 2026 Fall Business Update. This is Kartik Sharma, Head of Investor Relations. And I am joined in Westlake today by our President and CEO, Rick Wurster; and our CFO, Mike Verdeschi.

A few housekeeping items before we get started. The slides for today's business update will be posted to the usual spot on the IR website at the conclusion of the call. [Operator Instructions] Finally, please review our forward-looking statements page and remember that outcomes may differ from expectations, so please stay up-to-date with our disclosures.

And with that, I'll turn it over to Rick.

Thank you, Kartik, and good morning, everyone. Thanks for joining the fall business update. I hope you've had a chance to review our results and agree that Schwab is in a position of strength. We are winning today and uniquely positioned among our peers to continue winning well into the future. There are 4 overarching messages I hope you take away from the call.

One, our through client-size strategy endures the test of time and is fueling our record performance and growth. Two, we have an unmatched no trade-off value proposition that positions us at the center of our clients' financial lives. Three, we have a clear strategy, and we are delivering client-focused capabilities at a fast pace, has a powerful combination of people and artificial intelligence amplifies our advantages. And four, we have a diversified financial model that drives durable earnings growth across market cycles. We are growing our client base.

Clients opened 1.2 million brokerage accounts in the third quarter. We attracted $190 billion in core net new assets in the third quarter, up 38% over last year and representing an annualized organic growth rate of nearly 6%. We are deepening relationships with clients as they continue turning to Schwab for more of their financial lives. Managed investing net flows reached a quarterly record of $24 billion and bank lending reached $72 billion, up 35% year-over-year. This translates to another quarter of record financial results with total net revenues of $7.2 billion and adjusted earnings per share of $1.69, up 29% over last year.

Most importantly, our through client-size strategy is delighting clients. Client Promoter Scores and Easy Score continue to climb, and we continue to earn industry recognition. Those measures reinforce what we see in the business every day. Clients value the combination of service, ease, capabilities and trust that Schwab delivers. We remain the trusted form of choice for investors and registered investment advisers. We are #1 by total client assets, #1 by RIA custodial assets and #1 in daily average trades. Year-to-date, clients interacted us with us a record $1.8 billion times in the channel of their choice, whether digitally or in our branches.

Our firm-wide transfer of assets ratio is approximately 1.8 reflecting continued improvement over time. And notably, clients are actively and intentionally conducting their day-to-day financial lives with us month in and month out, moving nearly $4 trillion in cash every month to invest, trade, pay bills, hold collateral against positions they hold and otherwise execute the day-to-day cash transactions that make up their financial lives. We're adding new product solutions and capabilities to help our clients consolidate more of their financial lives at Schwab.

We are building, acquiring and partnering where each approach makes the most sense and we are delivering at a rapid pace. We've launched single stock futures and binary options related to the financial markets for our trader clients. All clients can now access Schwab crypto. We are rolling out the ability for clients to transfer their crypto holdings to Schwab, and we are launching access to 3 new coins by the end of the year. For our clients, we have collaborated within Tropic and are proud to be the first RIA custodian included in Claude for financial advisers. We just introduced Charley, our new AI-powered conversational assistant that will be available to all clients in the coming months, and we're not slowing down as we continue to innovate across our businesses.

I want to spend a moment talking more about our investments in AI. AI is an opportunity for Schwab. It is attracting more people to investing while amplifying our strengths. It will help us create more personalized experiences for our clients while improving the productivity of the team serving them. 77% of U.S. investors use AI today. And at the same time, more than 90% for human involvement alongside AI technology. That combination of people and technology has always been central to Schwab and can't be underestimated. It is and has been a key source of our differentiation.

If you look at growth across the industry and at Schwab, relationships and trust still matter a lot. While there's no question, AI is going to make our clients' financial lives easier, it has to be safe and secure, which is why we will bring AI to our clients in the following ways: First, we are blocking unauthorized agents to try to log in on behalf of clients. It is not a safe way for our clients to access Schwab, and we are blocking it to protect clients and our firm. Second, we are bringing the power of AI to our clients through Charley. For our retail clients, Charley combines best of third-party LOMs with Schwab's trusted data and security. Charley uses a constellation of underlying LLM models and is designed to select the one most appropriate for the task at hand.

Today, Charley is primarily a source of information and synthesis and can take action on a client's behalf for some administrative tasks like changing an address or naming a trusted contact. Over time, Charley will do a lot more, ultimately becoming an important front door to Schwab. Third, we will also allow clients to use their LOMs to connect to our MCP servers. [ Quad ] for financial advisers, which I mentioned earlier, is just one example of how we are using an MCP layer to bring the power of AI to our clients.

We are also using it with our retail trading clients as we can secure authentication and control or limit access to the riskiest actions like moving money. Enhancing the client experience is only part of the AI equation. We're using AI internally to help our developers and professionals work more effectively and efficiently. We've already seen developer productivity increase by about 25%. That is the future we are building. Our people and AI working together to deliver better outcomes for clients. As investors consolidate their financial lives and our clients increasingly want to do more with their trusted Schwab relationship. We are uniquely positioned at the center of the investing ecosystem to meet their needs.

Our breadth across investing wealth, trading, banking and lending allows us to simplify clients' financial lives and serve them in the ways they prefer. By combining our people, technology, scale and value, we're creating a differentiated experience today while building the platform clients will need tomorrow. That is a powerful advantage and one that is very difficult to replicate. We have a clear strategy, and we are delivering for clients at a rapid pace.

I'll spend the next few minutes highlighting some of the opportunities we have ahead and how we are positioned to continue driving diversified and durable earnings growth through the cycle. We have 2 equally powerful growth opportunities in front of us, serving more clients and deepening the relationships that we already have. And we are delivering on both core net new assets have grown significantly over the past several years, reaching record levels in 2026, supported by strong momentum from both individual investors and RIAs.

More clients are choosing Schwab. More clients are bringing us a greater share of their financial lives, and we are building deeper, longer-lasting relationships over time. We have built our adviser business around helping independent advisers grow, compete and succeed. Today, we serve more than 16,000 firms representing $5.8 trillion in assets with a platform that brings together custody, trading, banking and lending capabilities technology and dedicated service and support. This business requires scale, trust, operational excellence, outstanding service and the breadth to support advisers as their businesses and their clients' needs become more complex.

That is why we win. Advisers of all sizes are turning to Schwab when they start their firms, and they're relying on us as they grow, move upmarket and serve increasingly sophisticated clients. Last year, more than 1,100 advisory firms added Schwab as a custodian, more than 3x the number of the next closest provider. We are continuing to invest in this business to meet advisers' needs.

Turning to our retail business. We are serving individual investors who span the investor spectrum. Our retail business is built to win across generations, wealth tiers, investing styles and engagement preferences. We are attracting younger clients, approximately 70% of new-to-firm retail households are Gen Z and millennials. At the same time, investors of all wealth levels continue to turn to us for more of their financial lives. Roughly 80% of retail assets are held by ultra high net worth and high net worth households, and we are well positioned to continue serving future generations when that wealth is passed on. Our retention rate around wealth transfers is extremely high, and we are winning assets with all generations.

Retail clients who have a dedicated financial consultant generated approximately 3x the household NNA, 5x the managed investing net flows of comparable unassigned households and 3x the transfer of assets ratio. Relationships continue to matter. That is why we are investing in both people and technology so we can continue building, deepening and retaining those trusted relationships now and for the decades to come. Our second growth lever is deepening existing client relationships and helping clients conduct more of their financial lives here at Schwab.

Today, I will highlight 2 of our opportunities, wealth and trading. Client demand for advice is accelerating. Managed investing net flows reached another record of $24 billion in the third quarter, up 22% from last year. Within that total, Schwab Wealth Advisory net flows increased 55% as we continue to delight these clients who have given us a Client Promoter Score of 84 in the third quarter. Our opportunity in wealth remains compelling. Schwab has approximately 2% of the $37 trillion U.S. advice market. While only about 5% of Schwab retail households currently use an advice solution, 31% say they are willing to pay for advice.

Treating is another area where our leadership position creates meaningful opportunity. We remain the industry leader in trading supported by a world-class trading platform more than 1,200 expert trading specialists in research, education, coaching and service for traders at every level of sophistication. Traders value what we deliver. Trader Client Promoter Scores increased 7 points year-over-year. Traders are also highly engaged Trader households generate approximately 7x NNA and 2x the revenue on client assets of the retail average.

A subset of traders are already using AI to support their trading goals, connecting their LOMs to Schwab via our APIs and our MCP server. As an interesting aside, this group actually holds more cash than other active traders because they are focused on finding their next great investment. As we look ahead, we are rolling out an AI-powered thinker swim assistant and have started a pilot for traders to safely and securely connect to our MCP layer via the LLM of their choice. We've started the pilot with Quad and will expand to additional clients and LOMs in the coming months.

Finally, we remain focused on continuing to enhance our scale and efficiency. We have several goals with our scale and efficiency efforts to drive productivity, make Schwab easier to work with and keep our structural cost advantage, all of which allow us to reinvest in new capabilities and growth. We are simplifying and automating work. So a powerful combination of our people and technology can support more clients. That is the power of our model. Efficiency makes it easier for clients to do business with us, helps our people serve them more effectively, keep our cost to serve low and creates capacity to reinvest in the technology and capabilities that help our clients achieve better outcomes in their financial lives.

Given our position at the trusted center of the investing ecosystem, we are confident in Schwab's ability to continue driving diversified and durable earnings growth through the cycle. We are serving a growing number of clients. We are deepening existing relationships. We are enhancing scale and efficiency.

And I'll turn to Mike to talk about how we are pairing that operating momentum with disciplined financial management and capital return to generate record financial results.

Thank you, Rick. Good morning, everyone. During my time and momentum and strong client engagement translated into another quarter of record financial results. I'll also cover how we continue to deploy financial resources to support the evolving needs of our clients as they engaged across the range of investment solutions while maintaining strong capital levels and executing against our capital management framework.

Finally, I'll provide some additional perspectives on the financial scenario we provided last quarter and share some initial considerations as we look ahead to 2027. With that, let's begin with the third quarter financial results.

Third quarter revenue increased 17% year-over-year to a record $7.2 billion. Net interest revenue grew 14% year-over-year to nearly $3.5 billion reflecting sustained interest in our secured lending programs, including margin loans and the bank's pledged asset line. Asset management and administration fees increased 14% versus the prior year to a record $1.9 billion due to a combination of equity market appreciation, strong organic growth and continued client adoption of Schwab's wealth and asset management solutions.

Trading revenue totaled $1.2 billion, up 16% versus 3Q '25 as client engagement across our industry-leading retail trading platform remain robust, with daily average trades of $10.7 million. Bank deposit account fees were up 40% year-over-year due to continued improvement in the net yield.

Turning to expenses. Adjusted expenses were approximately $3.2 billion, up 9% from 3Q '25. The year-over-year increase reflected strong client engagement across the Schwab platform, which contributed to higher volume-related costs, including performance-based compensation, while underlying expenses were slightly better due to efficiency, and we intend to reinvest some of those savings. Putting the revenue and expense performance together, we delivered an adjusted pretax profit margin of 54.8% for the third quarter, which is an expansion of approximately 350 basis points versus 3Q '25. Third quarter adjusted earnings per share increased 29% year-over-year to a record $1.69.

Moving to the balance sheet. Demand for our secured lending solutions remained strong. Total margin balances ended the quarter at $187.9 billion, including continued growth in long short related activity. Total bank loan balances grew to $72.3 billion, up 35% from 3Q '25 driven primarily by demand for pledged acid line loans. Transactional sweep cash balances finished the quarter at $492.8 billion, up $7.1 billion quarter-over-quarter, reflecting an increase in the long/short strategy and organic growth partially offset by clients reinvesting in markets given improving sentiment. Given the growth of our secured lending programs, we utilize our diverse funding sources to support this client activity.

As we look forward, we expect to see continued cash bill through net new assets and the normal seasonal inflow through year-end. Capital levels remained strong with our adjusted Tier 1 leverage ratio, finishing at the upper end of our 6.75% to 7% range. The adjusted ratio ended at 7% as we allowed capital to build to support continued strong client activity against a backdrop of volatile rates where yields moved meaningfully higher in the quarter. Through the first 9 months of 2026, we have increased our common dividend, redeemed preferred stock and repurchased almost $4 billion of common shares.

Looking ahead, our capital management framework remains unchanged. Our first priority is maintaining capital levels that support ongoing business growth and the evolving needs of our clients across a range of environments. And beyond those priorities, we will seek to opportunistically return capital across multiple forms. Our third quarter results continue to demonstrate the strength of Schwab's model and our ability to support clients while delivering strong financial outcomes.

Looking ahead to the remainder of 2026. The strength we are seeing across these client and business metrics gives us confidence as we look to the remainder of the year. We expect many of the positive trends to continue in the fourth quarter, driven by strong client engagement and growth across the platform, including in lending and trading. Given the robust pace of lending this year, loan growth has outpaced deposit growth, which has resulted in greater utilization of our diversified funding sources. With these dynamics, we continue to expect strong full year revenue growth and NIM expansion. And with just one quarter remaining in the year, we would expect revenue and full year NIM to grow towards the lower end of the ranges that we provided at the summer business update.

At the same time, we expect expenses to come in at the low end of the range as well reflecting our -- while maintaining and adding investments in strategic initiatives to support long-term growth. Putting it all together, we expect to deliver strong business and financial performance for the year, including approximately 800 basis points of positive operating leverage, roughly double what we expected at the beginning of the year.

Regarding 2027, we expect to enter the year with strong business momentum. As always, the operating environment will be shaped by a range of factors, including the macroeconomic backdrop interest rates, equity markets and client engagement levels. We expect to continue investing in growth and other key strategic initiatives while leveraging our scale and emerging capabilities including artificial intelligence to drive greater efficiency. We remain focused on balancing these priorities in a way that supports clients advances the long-term growth of the franchise and positions us to deliver positive operating leverage across a range of environments. We look forward to providing a more detailed 2027 financial scenario at our winter business update in January.

In closing, our third quarter performance further demonstrated the strength of Schwab's model. We continue to attract new clients and assets while deepening existing client relationships and that sustained business momentum helped deliver record financial results. At the same time, we continue to invest in the products, services and capabilities that support the needs of our clients while leveraging our scale to enhance efficiency and maintaining disciplined approach to financial management. These are the same elements that underpin the financial framework we outlined at Investor Day to deliver mid-teens earnings growth through the cycle.

And with that, let's move on to Q&A. Kartik?

Thank you, Mike. Operator, please open the queue for questions.

[Operator Instructions] Our first question will come from Ken Worthington with JPMorgan.

Rick, I'd like to dig a little deeper into your AI comments. So maybe first, do you see revenue opportunities coming from AI either directly or indirectly and what are the nature of those revenue opportunities? And then two, you highlighted, I think, 2 or 3 times during the call that Schwab is allowing clients and traders the ability to connect LLM to the Schwab MCP servers. Is this about analytics? Or are you enabling the execution of investing and trading strategies with these connections?

Thanks for the question, Ken. Let me start on the first part around where we see opportunity in AI. Number one, I think the opportunity is to differentiate ourselves a combination of on technology the way we always have as a company, and I see that continuing. The second thing I'd highlight is that I think AI is already driving part of our revenue gains. And I'd highlight a couple of things. Number one, I believe client engagement is up because of AI, and that is fueling some of our continued that strength. And if you look at when LLM started and when DAT started to increase, there is some correlation there.

So we think that's already happening. The other place we're already seeing benefit is in our wealth business, where we're bringing AI to deliver tax insights and trust and estate insights to our clients. And that's helping us engage some more in wealth conversations, which is in part fueling our record growth in our wealth business, which is a great business for our clients because they have -- it's the highest client motor score of anything we do and it's a great business for us from an economic standpoint.

So I think AI is already happening. At the same time, I think relationships still matter. And if you look at the growth of our advisory business, if you look at the growth of our business when we have an FC relationship, those are all elevated relative to early technology-driven clients. I do think relationships still matter even though AI is fueling our growth. And we're also able to the last point I'd make before diving into the LLMs is we already aimed -- armed our client-facing professionals with tools to help them serve more clients and to serve them more effectively. And I think that is also part of what's driving our NNA, part of what's allowing us to have richer conversations about their wealth and driving some of the growth in our wealth and lending capabilities.

In terms of LOMs, we want to deliver AI to clients in a safe and secure way. And there's one way we think is not safe, and that's just an agent coming to our site and trying to log in on behalf of a client. We are not going to allow that. We are already blocking it. And by the way, I think not many people want to use an agent in that way. And I don't think the agents want and the companies want clients using it in that way. And I get a report every day tracking how many times we've had to block one of the different agents, and it's not many because I think we aren't using it in that way in their financial life.

We are blocking it because we want to have control over authentication and the experience. And so we have 2 opportunities, whether it's coming in through a LLM or your own LLM or coming in through Charley. Charley will over time give you the full range of things you can do on schwab.com and be able to do anything through a conversation via either text or voice. And I expect, over time, it will be the primary way to connect to AI at Schwab. We are allowing LOMs to connect, but we are controlling the experience. And so we control the authentication experience. We control what they can -- when they do when they can come in.

So we don't allow them to move money because we think there's too much risk there to the client and to the firm. We do have clients that are trading through LOMs and APIs, as I described earlier. That is growing. It's doubled in about the last 6 months. As I shared earlier, that higher level of engagement actually leads to more cash held by those clients. I know one of the fears in the market about us is that as AI takes off it will impact cash levels. We're actually seeing the opposite impact that the more people use AI, the more cash they hold because they're more active in buying stocks.

Finally, the last opportunity for AI has been on the efficiency front, and there we're seeing all kinds of wins. And for the reason Mike highlighted our ability to both reinvest in our growth at the same time as underrun our core expenses is because we're seeing lots of efficiency benefits from AI. Our technologists are 25% more productive this year than they were last year. We're handling more calls into our call center on the first call than we ever have in the history of the firm. We're getting fewer calls per client because they're using AI to have their questions answered. So there's -- we've realized plenty of efficiencies to date, which has fueled our ability to reinvest in our business and fuel the long list of innovative things that we've done this year that I highlighted earlier.

So in short, Ken, I think AI has been an enormous accelerant for the company. And I think our ability to bring AI and people to our clients to help them live their best financial life is what is going to power us in the future. And I feel great about our positioning there because no one can match that combination. We're moving really fast AI and are still backed by the -- I think the industry's best people and that combination is a winner.

Our next question comes from Alex Blostein with Goldman Sachs.

Couple of questions around just NII and the balance sheet. So I appreciate the seasonality in deposits. But as we look at your deposit trends, they've generally trended down over the course of the year despite pretty strong M&A growth. So can you maybe help connect the 2? And as you think about bridging from them of 304 in the third quarter, maybe just help us pencil out word Q4 and then will look like relative to your, I think, 325 to 330 was the prior guide.

Alex, thank you for the question. Maybe just starting with the NIM and then we'll unpack that cash point. We're in a favorable environment for NIM expansion. Rates are higher. We remain asset-sensitive. So we feel good about that NIM expansion. We'll expand NIM in the fourth quarter, and we expect to continue to expand NIM in 2027. In terms of the fourth quarter, and comparing that to 4Q '25, I would expect roughly 25 to 30 basis points of NIM expansion that year-over-year, 4Q '25 to 4Q '26. And so again, as I mentioned, and then heading into 2027, further expansion from there. So to me, it's more about timing of NIM expansion as you're asking the question about 4Q.

Let's unpack cash a bit. So what we saw in the third quarter with client sentiment improving more consistently through the third quarter, we saw cash go back into the market. And part of that was fueled by the activity in IPOs as well. If you go back to the first half of the year, normally, you see cash go back into the market in that first quarter. But in the first quarter, you tend to see cash remain on the sidelines. That was a function of geopolitical dynamics. Second quarter, even with tax payments you ended up the year-to-date through June, pretty flattish in cash.

What you then saw is a good amount going into the market in 3Q due to that pickup in sentiment, and IPO activity. Taking a step back, we do continue to see organic cash build. But again, that quarter-to-quarter you're going to see dynamics of seasonality. You're going to see sentiment play a role. And of course, as we head into the fourth quarter, we'll have that seasonal pickup that tends to be the mid-November onwards. So we feel good about cash. When we look at cash on balance sheet and money market funds as a percentage of total client assets, it's consistent.

So we feel good about where we're heading into the fourth quarter. In terms of NIM, I feel good about the NIM expansion. And as I think about the asset side, we now have lending balances have exceeded the securities portfolio. That's a good fact. It means our clients are engaged. We're meeting their needs. And of course, they're deepening their relationships with us through those lending programs. At the same time, those lending programs are far more favorable in terms of the economics relative to securities where we would otherwise be deploying that cash. So very favorable spreads. That is going to be supportive of NIM.

And then, of course, I mentioned securities, we still have $190 billion roughly of securities that are yielding sub-2% and given where rates are today as that portfolio continues to roll down, that cash will either be deployed into our lending activity. Again, we're seeing good demand, and we expect that to continue. But of course, even if we deployed it into securities relative to where those yields are today, that would be enormously accretive as well. So I do think about net interest margin as Fed funds plus again, for those reasons because we're making loan clients continue to engage in that activity, and those are at very favorable spreads. And we continue to expect to pick up that good growth rate of organic cash coming from the very strong NNA levels that we've been experiencing. Thanks for the question.

Our next question comes from Bill Katz with TD Cowen.

Okay. Maybe Mike, sticking with you. Just given the puts and takes of your NIM guide, and the puts and takes on the earning asset outlook. It seems like there's an opportunity here to drive a mix shift toward loans, more lucrative earning assets, but perhaps limit the growth of earning assets overall and yet you're generating significant ROE. So how do you think about maybe the pace of repurchase from this point forward, particularly since it seems like more limited growth in earning assets.

Thanks for the question. So we are seeing good growth in the lending portfolio, as you mentioned. As I highlighted, it's an activity that is meeting the client need. It's further demonstrable of them engaging across the platform. So we're going to continue to support that growth. That is going to be important. The capital, first and foremost, is going to be there to support clients. And as you highlighted as well, it's not just the loan onto itself. It is, again, the broader engagement of these clients in loans in trading, seeking advice. It's how the platform is coming together. We're seeing further evidence of clients engaging across that platform.

You're seeing it in a very healthy revenue growth overall, but also you're seeing healthy revenue growth in terms of mix as well. So you're seeing drivers across all those line items. In terms of capital, we ended the quarter very favorably top end of that range. Of course, the combination of being at the top end of that range as well as the strong earnings momentum that we have gives us a lot of flexibility to continue to support the growth of the franchise. That is the first priority, but also it puts us in very good shape to be flexible about how we're returning capital to shareholders as well. So again, we see that activity very accretive when clients are coming on to the platform. We're going to continue to support that, but we will have flexibility to return capital as well.

Our next question comes from Dan Fannon with Jefferies.

Rick, I was hoping you could talk to your confidence on the sustainability of organic growth and M&A that you've seen across your channels? And then also, if you could talk to the contributor or the contribution from some of the long/short strategies, which you've seen significant growth year-to-date in terms of how that's shown up in M&A?

Absolutely. Thanks for the question. I feel great about the momentum in our NNA because it's coming from every one of our 3 client-facing businesses in every demographic within each of the businesses. So -- and the momentum continues to accelerate. Starting with retail coming out of tax season in April. Every month gets a little bit stronger. I think for the quarter, we were up [ 39-ish ] percent NNA over the prior third quarter set an all-time third quarter high for retail NNA, and it was strength really across the board. And we continue to see strength with our where we have client-facing relationships through FCs, which was the fastest-growing area of retail NNA, which is why we continue to invest in new branches and adding client-facing professionals.

With all the technology out there, more people want to come in and talk to a client to confirm the direction of their big financial decisions. So great about retail NNA growth. On the adviser front, I see strength across the board. There's no question the long short program helped drive some of the NNA and some consolidation to Schwab. And at the same time, as we look to October, where we have changed the minimums for long short and modeled growth to some extent, the growth has in no way slowed at all in terms of ASA. I feel great about our position there.

Our Client Promoter Scores have never been higher. The intent to bring new assets to Schwab that we survey among our adviser clients has never been higher. The ease of doing business for advisers at Schwab has never been higher. The breadth of what we can offer. We offer so much more than just long short, which is why we are the preferred custodian from most RIAs in the industry. So I feel great about our positioning in the adviser space and with or without the long short program. And then our workplace business has been strong as well, both on the stock plan side, where we've added new capabilities through our private stock plan administration capability that we launched earlier in the year.

We've already seen some nice wins there, and we're seeing actually increased momentum in our retirement plan business. So I couldn't be more thrilled about the momentum we're seeing in NNA. I do see it continuing. And at the same time, there is. Certainly, some of the AS NNA that's been driven by long short, but the breadth and the strength of our NNA across our businesses, I think will help fuel continued NNA growth.

Our next question comes from Steven Chubak with Wolfe Research.

So wanted to ask a follow-up on the cash outlook amid higher rates. We saw the decline in September cash balances. Mike, you attribute that to an uptick in client buying activity we saw a similar trend elsewhere. But it also coincided with the recent Fed rate hike. And with the markets currently pricing in 3 additional hikes through '27, I was hoping you could speak to how your scenario planning for different cash growth outcomes or potentially contraction amid further hikes? And how does this inform your outlook for both deposit betas as well as the changes in liability or funding mix?

Steven, thank you for the question. So in terms of cash, just to be clear, even with those higher rates, this is not cash sorting in any way. Keep in mind, those short-term rates, it's just this time last year, where we were at those similar rates. And we know that our clients are pretty well allocated in terms of their allocations between what they keep on balance sheet versus money funds. And so what we're seeing here, again, is cash going back into the market, given that pickup in sentiment, and regarding the outlook for rates, again, as we've said, we've been back at these rate levels just this time last year.

We expect to continue to pick up cash organically, again, good NNA growth. And we will see that seasonal inflow in the fourth quarter that we're expecting as well. Over time, as the rate market continues to evolve, we do expect that to be a favorable environment for us overall for our financials. And we know that because clients have been allocating their cash already. From here, the increase in rates is not going to have that much more of an impact simply because you're not moving rates from 1% or 2% anymore, you're already at rates, which has meant clients have allocated the way they had wished to allocate. So from here, again, a favorable environment for us for our financials. We maintain a lot of flexibility around our different funding programs. We built these wholesale programs exactly for the reason to give us flexibility to meet the dynamic needs of clients.

We've seen strong engagement in areas like margin lending. But those programs will give us flexibility to continue to meet client needs and provides us the flexibility to generate good financial returns as well.

Our next question comes from Ben Budish with Barclays.

Mike, you gave a lot of color on the moving parts for NIM going into '27. Maybe just one more question on that. So outside of the maybe changing balances in interest-earning assets outlook, could you maybe talk about the current level of rate sensitivity? And I think you guys put on some rate hedges earlier in the year. And so as we are thinking about changing rate expectations, how do we think about flow through the timing it takes for that benefit to kind of make its way into your NIM? Any color around that would be helpful.

Ben, thanks for the question. So again, we remain asset sensitive. So this higher rate environment is favorable for us. We do enclose sensitivity, so that $250 million to $300 million sensitivity that we included in our materials is still the level of sensitivity. And again, the idea of those hedges against the loan book is a far more efficient way to deploy our resources, the lending activity that we're doing with clients, again, it's meeting their need they're engaging in the platform.

Those loans are floating rate. In the past, we would have otherwise just purchased fixed-rate securities. So because we're seeing good engagement in those lending programs with clients, it allows us to meet the client need, the economics are far more favorable. And because of their floating rate, we use some portion of that to convert those floating rate loans into fixed to match up with our deposits the way we've always matched up before. And again, that sensitivity remains favorable to us in that higher rate environment.

So this is a good outcome. We're going to continue to support that strong loan growth, and it's a much more efficient way to manage the ALM aspect as well.

Our next question comes from Brennan Hawken with BMO Capital Markets.

I was curious about the long short program that you have. You guys changed the limit here recently. And I was curious about whether or not you've seen any behavior or take-up changes since that happened? And what impact you would think around the growth in that program going forward?

A couple of thoughts. First, it's clear there is demand for long-short strategies in the marketplace in it. Saving money on taxes is something our clients love to do and it's likely going to be something that -- for which demand will continue. Our goal is to find sustainable ways to meet that demand here at Schwab. The program did grow exceptionally quickly this year. One of our big competitors that we respect had less availability to support this program and so our growth accelerated at a path. We like we didn't anticipate at the beginning of the year, but that we were able to support and be there for our clients.

It's important to us to throttle growth for a period of time to make sure that we can support this from an operational standpoint, from a capacity standpoint and we've done that. And as we look forward, we're looking at multiple ways of supporting our clients' needs around long short because we know there's demand for it. That demand is likely to continue and we've got to find ways to meet that demand in a sustainable way, and that's where we're at. In terms of the behavior we're seeing, one of the concerns I know people are raising is this really going to impact our NNA.

What we've seen since we've rolled the growth in mid-September is not any signs of deceleration in our adviser services M&A. And I think that's because we did a lot more than long short, and we are the #1 provider in the space. Our capabilities are hard to match in terms of the service we provide, the breadth of capabilities that we provide, our banking and lending capabilities that we provide alongside our custody, the AI innovations that we're making on behalf of clients, the advice and consulting support that we provide to clients, which is unique and differentiated. You add that all up, it's the reason we are #1 in the space, continue to see an acceleration of our NNA and the reason why our [ EOA ] this year is as high as it's ever and only accelerates.

So we want to be able to support the long/short program in the future. We've throttled growth so that we can do that in a sustainable way and have multiple solutions for clients. And at the same time, we're seeing no impact on M&A there.

Our next question comes from Mike Cyprys with Morgan Stanley.

I just wanted to ask about prediction markets. You've talked about having interest on the financial side of prediction markets rather than sports or entertainment. So just curious how you're thinking about the opportunity set today, whether it's economic events or even company KPIs. What might be potential time frame look like? What sort of work is required in order to make these products available? Is there anything on the regulatory side? Just curious how you're thinking about all that now.

Thanks for the question. Yes, we already are in the prediction markets in a limited way through binary options that we offer on the S&P. We will expand upon that in the coming year or so to financially related events at KPIs. So yes, if you want to take a view on earnings and I think it's going to be or not be, maybe the number of cars delivered in the quarter for a car company, there will be the opportunity to take positions on both financially related events and KPIs.

We will stay away from sports gambling, which is where all the current activity is, but we want to be able to offer financial events and KPIs because we are the #1 trading firm in the country. Our traders have interest in it, and we want to bring a responsible set of capabilities that will allow clients to participate in prediction markets in a way that's related to their portfolios and in a way that can help them improve their financial lives over time rather than purely gamble. So that's the path I would expect us to build on our current capability over the next 12 to 18 months and eventually have a pretty broad suite of ability to predict and participate in different financial events and KPIs and political events. So that's the current plan and more to follow in the coming year.

Our next question comes from Devin Ryan with Citizens Bank.

I have a question on platform monetization. Rick, at the Investor Day, you discussed opportunities to earn a fair share of the value that Schwab's platform creates. So it'd be great just to hear about how that work has been progressing whether there's any obvious areas emerging where you feel like the economics aren't commensurate with the value Schwab is providing and your owner monetizing. And then just more broadly, kind of connecting that back to current monetization model overall, obviously, still conversations around monetizing transactional cash. And just want to get a sense of whether that thinking is evolving as you look at the full picture.

Thanks for the question. First, on the monetization front, we have actively found and we'll continue to find many ways to monetize our platform. And ETF monetization is certainly one, but there's others we pursued and implemented and feel good about those. We're also expanding into new areas that create additional transactional-based revenue streams that are beneficial to our clients, things like crypto, things like prediction markets. So I expect us to be able to monetize our clients' trading behavior that they want to do, that's helpful to their financial lives. I think there's multiple ways for us to monetize that. We can monetize our product platforms better.

So there's lots of things we're doing. We continue to grow wealth. We continue to grow lending to make sure we fully monetize our balance sheet capabilities, integrated clients' financial life, make those assets stickier. There's numerous ways that we are pushing on this. And the underlying concept to it is that we are at the center of our clients' financial life, providing them with an incredible value proposition that we don't think they can find elsewhere in terms of the service, the dedication to them, the combination of people and technology, the breadth of our product capabilities, the fact that we see through their client size and always put their interest in their financial well-being first. And you can see it if you track the returns of our clients versus other firms.

So I feel good about what we're doing, and we have lots of ways to monetize that. As it relates to cash, it doesn't impact how we're thinking about cash. I like our cash strategy. It's very simple. When a client comes in, until they tell us what they want to do with their cash, we keep it liquid, and we keep it in the most secure spot available. And that aligns with the interest of our traders, and we make it very easy and transparent how much cash you're sitting on and what other ways they could, what other ways they could invest that cash. And that strategy has worked. I think we'll continue to work. And at the same time, we'll innovate around how we help clients make those decisions. And I'm sure AI will be a helpful part of that.

But all in all, I see multiple ways for us to monetize our platform, some of which we've already implemented, some of which we will implement in the future. And as a result, I feel great about the growth of the economics of our business.

Our next question comes from Brian Bedell with Deutsche Bank.

Great. Maybe just back on trading and just one on the company KPIs. I think, Rick, you mentioned a 12 to 18 month time line of rolling things out as what would company KPIs be on the sooner side of that, especially if you saw a traction at other e-brokers? And then just more broadly in terms of your initiatives and trading, how are you envisioning the take-up of [ 2355 ] and eventually potentially [ 2427 ] trading and then also on the usage of AI within directly connected with the [ LPP ]. Just your view on to what extent you might develop internal AI trading solutions for clients at some point and your view on the take-up of that.

Thanks for the question. I'll touch on each of those. As it relates to KPIs, we're going to move as quickly as we can. We're working with the CBOE who is rolling these out as they roll those out, we will roll out our experience. We're building within thinkorswim. We've already done the first elements of the design of all that. And so it's on its pay. And again, in the coming year, we expect to have more functionality there and are excited about that offering to clients. And I think that capability will help clients hedge or accentuate their positions and can play an important role in their portfolio.

In terms of the extension of the trading day, we see somewhere between 1% and 2% of trading activity outside of market hours and we tried to sort of control or look out for the clients and how things -- how they trade outside of those hours because there's not as much liquidity. We are both benefits and drawbacks to around-the-clock trading. One of the great things about market hours is it attracts a lot of participants all at the same time. And so you get tight spreads and good execution. And so we want to make sure that we do this in a thoughtful way for clients. And we think we've done that to protect clients in their execution quality.

But we're seeing limited interest in trading outside of market hours. That said, we want to make them available. We have any of overseas clients or folks that are working during the day, the 2 value participating outside those hours, and we're going to be at the market in terms of providing access on when our clients want it. So we will -- if we need to go to 24/7, we certainly will. We're ready for that capability when our clients want it. At the moment, we're not seeing tremendous uptake and outside of market hours.

In terms of usage of AI and I think what you're getting at is are we sort of going to build an automated trading capability for our clients through an Agentic experience I think clients may be able to do that through LOMs at some point, be able to research a certain factor that they have interest rate trading strategies. We already have clients doing that through APIs through thinkorswim today. So clients are doing that. In terms of us providing the content or the algorithms I think that is highly unlikely for a bunch of reasons.

Number one, if there was some magic recipe, Dow performing markets through quantitative analysis, they'd be a lot more money in quantitative strategies today than there are. And so I don't think we want to be in the game of trying to produce quantitative output for our clients. We want to be in the game of providing them education, the best research the best support. We've got thousands of people every day, ex traders who wake up ready to answer the phone for brand-new traders, for experienced traders to help them think through positions, to help them think through risk, to help them think through their trading strategies.

We are rolling out an AI managed capability to help clients think through their trading strategies so they can clearly articulate and have a plan for how they're going to trade. So we want to empower clients and help them, but I don't see us getting into the business of trying to create trading strategies on behalf of clients. I think it's a fool's errand and could lead to a lot of trouble. But we're going to do everything we can to support traders and their ability to outperform the market, and we know they've done really well in our platform because of the combination of what we bring to the table.

Operator, we have time for just one more question. Thank you.

Our last question comes from Mike Brown with UBS.

Maybe just one more on the long/short products. Obviously, the tax advantage long/short products have been a meaningful driver of client demand and asset gathering across the industry. There's an increasing number of funds coming to market. And so given Schwab's positioning and client interest in the category, do you see an opportunity to launch a proprietary solution? And if so, what would you incur in terms of investments into entering that market? And maybe how would Schwab have kind of differentiated product, if that were to be the case?

Thanks for the question. I do expect us to have an offering. We already have a great direct indexing capability today that has had a wonderful performance in terms of tax alpha and delivering for clients and I expect us to be able to deliver an extended version of that on long short. The reason that is so appealing is because we will be able to run that product in a very efficient way from a balance sheet and operational standpoint that will help us sustain the ability to deliver long-short capabilities to our clients. So we are thrilled to have something on a platform that is a proprietary long short.

Certainly, another way we can deliver monetization. But more importantly, it's a way we can deliver sustainable long short strategies to our clients in a way that is operationally and financially manageable over the longer term. So we're thrilled about that, working on it, and we'll give more updates on future calls as to when that may launch.

And with that, I will wrap up. Thank you for your time and questions today. And I'll leave you where I started. One, our through client-size strategy endures the test of time and is fueling our incredible momentum. By putting clients at the forefront of every decision, we continue to deliver record performance and growth. Two, we have an unmatched no trade-offs value proposition that positions us at the center of our clients' financial lives and the investing ecosystem. Three, we have a clear strategy, and we are delivering client-focused capabilities at a pace as the powerful combination of people and AI amplifies our platform advantage. Finally, we have a diversified financial model that drives durable earnings growth across market cycles.

Taken together, we are in a position of strength, hard for any competitor to match and we have compelling growth opportunities ahead. Thanks again.

Good morning, everyone, and welcome to Schwab's 2026 Summer Business Update. This is Jeff Edwards, and I'm joined this morning by our President and CEO, Rick Wurster as well as our CFO, Mike Verdeschi. Hopefully, you all had an opportunity to review our second quarter earnings release that crossed the wire earlier today. Similar to [ Waha ] on the pitch this past Sunday, I don't think it is a stretch to frame Schwab's strong results as trophy worthy. Slides for today's business update will be posted to the IR website at the conclusion of today's prepared remarks.

[Operator Instructions]

Lastly, [indiscernible] in every deck, the forward-looking statements page, reminding us all that outcomes may differ from expectations, so please stay up-to-date with our disclosures.

And with that, I'll turn it over to Rick.

Thank you, Jeff, and good morning. Thank you for joining our summer business update. We'll spend our time this morning sharing details on our record performance. Diving into the reason, Schwab is incredibly well positioned to deliver for stockholders and clients well into the future. The financial services landscape is becoming increasingly driven by investment. We occupy the trusted center of the investing ecosystem. We're both leading today and uniquely positioned to win in the future.

There are several reasons for our confidence. First, our record results speak for themselves. Our Through Clients' Eyes strategy continues to fuel growth on all fronts. Second, Schwab is the trusted industry leader today. Our no trade-offs value proposition is unmatched in the industry as people increasingly consolidate their financial lives in one place and become even more engaged in investing, our unique combination of strengths puts us in the center of clients' financial lives. Third, we are winning today and our best days are still ahead of us. We have a clear strategy, and we are innovating for clients at a rapid pace. We are continuing to attract new clients, deepen client relationships, diversify our revenue, lower our cost to serve and reinvest in our growth. I'll share more today about the opportunities ahead of us. Finally, our diversified financial model supports durable earnings growth across market cycles. And Mike will dive into this along with our outlook for the year.

In the second quarter of 2026, we delivered record results and growth on all fronts. We're attracting new clients and assets with 1.4 million new brokerage accounts and 120 billion in core net new assets, up nearly 50% over last year. We're continuing to deepen relationships. Managed investing net flows increased 53% over last year. Bank lending balances reached $67 billion, up 33%. All of this translated to record financial results. We delivered $7.1 billion in total revenue and adjusted earnings per share of $1.62, up 42% over last year.

We are increasing our pace of innovation and adding to our breadth of capabilities as clients want to manage more of their financial life at Schwab. We've continued to expand our branch footprint and hire financial consultants, wealth advisers and relationship managers for our RIA clients while advancing our AI capabilities. Our clients are happier, achieve better outcomes and engage more with our combination of people and technology. AI is expanding our client capabilities and enabling us to serve our clients more efficiently. We are delivering new products and solutions across our platform at a rapid pace. There are several examples on the page, and I'll call out a few.

Our Schwab crypto rollout is going as planned, and we are on track to start piloting our crypto transfers capability by the end of this month. We believe this capability creates an attractive NNA opportunity over time. We closed the Forge deal and are making progress on bringing their private market capabilities to our clients. When complete, we will be a premier destination for clients interested in investing in private markets whether via a leading private manager an index strategy we're investing directly in private companies. The scale of Schwab will allow us to become the destination of choice for private companies and venture capital firms seeking liquidity options. We've made lots of progress in serving our clients' wealth and banking needs.

We've got a deal or a complete tax filings for clients through our third-party tax prep introduction program and we've added to our banking capabilities, including the ability for clients to leverage private assets. With Wealth.com, we'll expand our tax capabilities and introduce tax planning in addition to the insights we already provide today on client trust, and we've made an investment in Paxos, a firm that is supporting the delivery of Schwab Crypto. These efforts continue to delight clients and earn industry recognition. Client Promoter Scores are at all-time highs in both Investor Services and Advisor Services, all of which solidifies our role as a trusted platform of choice for investors and RIAs.

We are the trusted platform where investors, traders and RIAs continue to turn. We are #1 in total client assets, RIA custodial assets and daily average trades. Focusing on trading, we are the undisputed leader with the most activity on our platform and are growing faster than our peers. We're #1 in daily average trades by a wide margin. We execute 1/3 of retail brokerage trades in the industry, and we're #1 in options contracts. Our clients remain highly engaged, and we're continuing to invest to maintain our edge as the destination for traders.

Leadership at this scale creates advantages that compound over time. As we look to the future, there is a convergence of forces reshaping our industry, and we are uniquely positioned to lead. I discussed these trends at our Investor Day, and we continue to see them play out. As we go through today's discussion, I will share how these forces are creating opportunity. The bull market for convenience is driving investors to increasingly consolidate their financial lives. 61% of affluent clients ages 25 to 44, so they prefer to consolidate their wealth and banking relationships. Households with $1 million to $5 million in assets using only 1 financial services firm jumped 11 percentage points year-over-year to 22%, and we expect this to grow as more investors seek the convenience of one-stop shopping in all aspects of their life. This consolidation is happening at a time when investing has never played a more important role in the broader financial ecosystem.

As recently as a decade ago, investing skewed towards higher income, older, college-educated households. Today's stock ownership is at the highest levels we've seen in nearly 20 years. People are investing earlier in their life, and we're seeing engagement across a broader income and education spectrum. Investing is playing an increasingly central role in people's financial lives, and we believe this trend has a long way to go. In a world where clients want to do more with one firm and investing is more important than ever, we are uniquely positioned at the center of the investing ecosystem with the ability to support the breadth of clients' needs in the channel of their choice and in the form they prefer.

With our wealth offer, clients can access financial planning, full-service advice, tax, trust and estate services tax-aware strategies and more. With our bank, retail investors can manage their day-to-day financial lives with checking, savings and bill pay while also turning to us for lending needs. The RIAs we serve value our bank because they don't have to introduce another relationship to their clients. We're the best trading platform in the industry, supported by industry-leading service as well as research, education and coaching for traders of all sophistication levels.

We offer our clients choice with third-party and proprietary products. We continue to build out a compelling alternatives offer. We've launched Crypto and are adding capabilities throughout the year. Clients are turning to us because we simplify their financial life and help them achieve great outcomes across their investing, trading, wealth, banking and lending needs. Legacy Ameritrade clients continue to engage in our wealth and lending capabilities and 27% of all thinkorswim users are now legacy Schwab clients.

These capabilities are delivered in the ways our clients want to interact as they manage their financial lives. At different times in their lives and for different activities, clients engage with us in person, on the phone, web, mobile or via AI. Our clients value that flexibility. And in every interaction across every channel, we are bringing them an experience that combines the best of people and the power of AI by using our scale to deliver exceptional value.

Finally, we're building towards a technology platform that will support the industry well into the future. Whether that looks like it does today, where if the industry moves more towards a digital markets infrastructure and blockchain technology. While there are clearly pros and cons to tokenized securities, when it is unclear how much this market will take off, we're actively building infrastructure to support client activity on the technology of clients' choice. Without product and capability breadth, combination of people in AI and scale, we have a unique platform advantage that positions us to be the financial services provider of choice now and in the future, a position that is difficult for any competitor to match. All of this translates to delivering for stockholders.

We are tackling our growth opportunities head on. With 2 equally important growth levers, serving more clients, deepening relationships. We are continuing to attract new clients to Schwab with 2.7 million new brokerage accounts opened in first half of the year and $260 billion in core net new assets, representing year-over-year growth of nearly 20%. We're continuing to make investments that will support this growth in the future with more branches in local communities, more financial consultants, strategic marketing and advertising, including adapting our marketing to the increased influence of LLMs, the build-out of an RIA support ecosystem and investments in bringing the breadth of Schwab to our workplace clients.

At the same time, we are deepening relationships with clients, meeting more of their needs while diversifying our revenue streams. I'll discuss the opportunities we have ahead in wealth and banking.

There is a bold market for advice. We benefit from that in 2 ways. First, our RIA business continues to grow at a record pace as more investors seek advice and guidance. Second, more of our retail clients are seeking holistic financial advice delivered seamlessly on their terms through a combination of people and increasingly AI-enabled technology. We see consistently strong growth in net flows to both our Schwab Advisor Network and flagship proprietary wealth offer, Schwab Wealth Advisory. We're continuing to invest heavily in our Schwab Wealth Advisory offer, including in our tax, trust and estate capabilities to make sure we can meet the needs of retail clients that want more help and guidance in their life, and it is working. The Client Promoter Score for Schwab Wealth Advisory is the highest of any offer we have.

While we have grown significantly, we've barely scratched the surface on our opportunity in advice. The U.S. retail market is $37 trillion and growing, and we have just 2% market share. At the same time, just 5% of Schwab retail households are in a fee-based advice solution. 31% of Schwab clients said they are willing to pay for advice. Our opportunity to close this gap is a win-win for clients and Schwab. We are helping clients conduct more of their financial lives in one place and clients in our Schwab Wealth Advisory offer generate 3x the ROCA of our retail clients. The combination of the investments we're making in our wealth business, plus the sheer size of our self-directed investor base creates an unmatched conversion funnel into advice that will delight clients, continue to fuel our growth and diversify our economics over the long term.

A bank is an important differentiator for us. Our ability to offer checking payments and lending makes it easy for clients to consolidate their financial lives with us. For our AS clients, this represents an opportunity to help the RIAs in our platform, meet more of their clients' financial needs in one place. We've been focused on meeting both the asset and liability needs of our clients. Our lending balances have increased 33% year-over-year, driven in large part by adoption of our digital Pledged Asset Line offer. Our Digital Power offered delights clients with consistently strong Client Promoter scores. We're continuing to make investments to enhance our lending offers, including the addition of structured asset lending which allows clients to leverage their private investments and private shares.

The growth opportunity in bank lending is meaningful. Today at Schwab, 0.5% of clients use one of our lending products, versus 4% on average across the industry. With an average spread to securities north of 100 basis points on PALs as an example, narrowing the lending penetration gap as more investors consolidate their financial lives at Schwab is a win for clients and a win for our economics.

Let's turn now to scale and efficiency. Our ability to execute at scale continues to drive efficiencies that allow us to reinvest in growth. Our cost per account continues to decrease, and our expense on client assets is the lowest in the industry. These efficiencies unlock dollars. We're investing in enhancing our AI experience, our global capability center and our growth initiatives. In other words, our scale powers our reinvestment capacity and durable earnings power.

We've talked about AI as part of our omnichannel experience, and it is becoming more embedded in all we do, accelerating our strategy and amplifying our competitive advantages by personalizing client experiences, enhancing productivity and driving scalable growth. Importantly, we believe our greatest advantage comes from combining people with AI-powered capabilities to create deeper relationships that scale with our clients' needs. AI will help us attract new clients, deliver new capabilities to them, personalize more journeys and create more opportunities to deepen relationships over time.

We are making tangible progress here with the rollout of portfolio insights in May and the employee pilot for the first iteration of Schwab Assistant that launched earlier this month. With our combination of technology and people, our client easy scores are at or near all-time highs. AI is also driving efficiencies. As an example, over the past year, developer team productivity has improved by 15% to 20%.

And with that, I'll turn it over to Mike to share our financial picture.

Thank you, Rick, and good morning, everyone. During my time today, I'll discuss how we converted our sustained business momentum into another quarter of record financial results. In addition, I'll cover how our approach to managing the balance sheet and financial resources enables us to support robust engagement as we seek to meet the evolving needs of our clients across different environments. I will also share an updated perspective on the full year 2026 financial scenario. And finally, as we continue to do more for our clients across our platform, including incorporating emerging technologies such as AI, Schwab's model becomes increasingly diversified and scalable, helping to further enhance our financial durability through the cycle.

In doing so, we remain positioned to continue providing individual investors and RIAs with an industry-leading value proposition. 2Q was yet another strong quarter for Schwab, with the combination of our continued business momentum, client engagement and diversified model enable us to deliver strong outcomes well beyond the second quarter scenario we shared with you at Investor Day in May. This outperformance was a result of a number of factors, including a further acceleration in client trading activity through the end of the quarter. Total revenue grew 21% year-over-year to $7.1 billion, including a 19% increase in net interest revenue versus the prior year period due to increased utilization of our lending solutions by clients, the reduction of higher cost borrowings at the banks and demand for long/short strategies.

Momentum within the technology sector helped lift equity markets to their best quarterly performance since early 2020, which, in combination with robust asset gathering and client interest in Schwab's wealth and asset management offerings drove 16% year-over-year growth in asset management and administration fees to $1.8 billion. Schwab's industry-leading retail trading platform supported continued client engagement with daily average trades of $11.9 million, driving a 28% increase in trading revenue to $1.2 billion. Bank deposit account fees grew 35% year-over-year due to continued improvement in the net yield and other revenue was up 32% versus 2Q '25, with stronger trading volumes as well as typical second quarter seasonality.

Moving to expenses. Adjusted expenses for the second quarter grew 11% year-over-year reflecting strong client engagement across our trading, wealth and banking solutions and the first full quarter of Forge, while underlying expenses remain in line with our initial expectations. We also continue to make investments in key strategic initiatives to support organic growth, new products, client experience, scale and efficiency as well as artificial intelligence. Record quarterly revenue combined with balanced expense management delivered adjusted pretax profit margin of 54.3% as second quarter adjusted earnings per share reached a record $1.62, a year-over-year increase of 42%.

Moving to the balance sheet. Demand for our secured lending solutions remained strong. Total margin balances ended the quarter at $165.1 billion, including continued growth in long/short related activity. Led by new pledged asset line origination, total bank loan balances grew to $67 billion, up 33% from 2Q '25 and 16% versus the prior year-end, while investment securities remain relatively flat as we continue to support client lending needs. Increased lending activity helps further deepen relationships with clients and drives relative improvements to both Schwab's revenue growth and mix as we earn an incremental spread to the security we'd otherwise purchase.

Client cash follow typical seasonal trends, including tax payments in April. And while strong equity markets lifted sentiment and supported elevated trading activity, transactional sweep cash increased by $24.2 billion in 2Q, largely driven by demand for long/short strategies as well as organic asset gathering. Beyond the growth related to long/short, client cash trends remained strong with year-to-date underlying cash performing better than our initial expectations coming into the year. At the same time, we continue to optimize our funding mix to efficiently meet the client demand for our lending solutions. Looking ahead, we'll keep prioritizing flexibility in managing the balance sheet to remain well positioned for different macroeconomic environment.

Capital levels remained strong with our adjusted Tier 1 leverage ratio finishing the quarter within the 6.75% to 7% range. Our adjusted ratio of 6.8% reflects our support of business growth and client engagement as well as the net redemption of preferred equity and the repurchase of $1 billion worth of common shares. Looking ahead, we will continue to apply our consistent capital management framework, including prioritizing our resources to support client activity and the growth of our franchise.

The second quarter further demonstrated the strength of Schwab's model, positioning the firm to continue supporting clients while delivering strong financial outcomes over time.

Now pivoting to the full year 2026 scenario. Let's take a moment to review how certain key assumptions have evolved over the first 6 months of the year. At the Investor Day back in May, we spoke to a scenario that reflected flat Fed funds for the year, stronger equity markets and increased client trading activity. We also incorporated Forge's revenue and expenses following the acquisition's close in 1Q.

And while the impact of that acquisition is not material to the 2026 scenario, it does influence the revenue and expense year-over-year growth rate. In terms of where we are today, market expectations for interest rates continued to evolve with the forward curve pricing in 125 basis point rate hike before the end of the year. Given the strong year-to-date equity market returns, we are now assuming approximately 13% full year market appreciation, and our asset gathering momentum reinforces our confidence in the 5% organic growth rate we outlined for 2026. Following another quarter of strong trading volumes, we have taken full year daily average trades up to 10.6 million. This trading assumption does include a pullback from recent monthly levels, reflecting an expected moderation in activity, in part due to the seasonal slowdown during the summer. Therefore, we would anticipate revenue per trade to increase modestly from 2Q '26 levels as rate and volume tend to be inversely correlated.

Finally, today's updated scenario includes Forge, but excludes the impact from any opportunistic share repurchases during the second half of 2026. Using these updates, we would expect total revenue growth of 17.5% to 18.5% in 2026, with full year net interest margin expanding to a range of 3% to 3.10% and average 4Q 2026 net interest margin expected to finish in the 3.25% to 3.30% range as the timing of the potential Fed rate hike late in the year limits the impact in 2026.

Full year 2026 interest-earning assets are expected to expand modestly year-over-year. And given our sustained business momentum, we now anticipate annual expense growth to range from 9.5% to 10.5%. And I would note that underlying expenses still remain in line with the 5.5% to 6.5% range we shared at the January winter business update. The higher expense view is driven by a couple of factors. First, volume-related expenses as we support client engagement, where this increase is more than offset by stronger revenue; and second, inclusion of Forge, which contributes approximately 100 basis points to the year-over-year growth rate.

Bringing it all together, today's scenario implies stronger positive operating leverage and expanded adjusted pretax margin level versus our prior scenarios. Similar to past business updates, when we share our financial scenario, we have included a set of high-level static revenue sensitivity. Today's sensitivities are as of June 30 and are intended to complement the updated scenario we just walked through, helping you refine your estimates and shape your own perspective around the remainder of 2026.

So to wrap up, I wanted to revisit the financial formula slide from our Investor Day. Schwab's strong momentum and success over the past 5 decades has been driven by our focus on clients.

And as Rick noted upfront, we remain extremely well positioned for the future with an expanding set of wealth and investing solutions to help clients meet their financial goals. And in continuing to do more for our clients, we can drive long-term organic growth while further diversifying our revenue stream, which when combined with Schwab's leading scale as well as our disciplined approach to expense and balance sheet management helps to reinforce our confidence in delivering mid-teens earnings growth through the cycle.

And with that, let's move on to Q&A. Jeff?

Operator, can you please kick off the Q&A portion of the program?

[Operator Instructions]

Our first question will come from Dan Fannon with Jefferies.

Rick, NNA accelerated throughout the quarter, capped by a record June. I was hoping you could discuss the sustainability of these trends as well as provide some context on the contribution from new-to-firm clients versus increasing share of wallet of existing customers.

Thanks for the question, Dan. I still believe 5% or higher is the right long-term expectation, and we remain bullish on NNA. I also expect we'll deepen relationships, and we really do see clients consolidating their financial life with investing being more at the center, and that puts us in a winning position. And you see it in the growth of everything we're doing, Wealth, our proprietary wealth offer flows are up 86% year-to-date. PAL originations are up 60%. Our number of bank accounts we have, I think, are up 12%. Look at all of these statistics, and it just shows that clients are doing more and more with us. And I think that helps bring more NNA to the firm as well. So it's a nice cycle. As I think about our 3 businesses, starting with Advisor Services, I think we continue to distance ourselves from the competition in the marketplace, and we see NNA and TOA both accelerating.

But I think the capabilities we have are becoming even more and more challenging to match. And as independence continues to win and RIAs thrive, we're the natural leader in the adviser space, and I expect that to drive more than 5% NNA growth just as it has for the last several quarters. I think we're 6% plus in that business the last 4 quarters or so. In IS, I think that we continue to do a nice job of driving NNA. We are investing in FCs and in AI. And one of the things we observe is that even with the advent of AI, our NNA growth rates where we have a relationship are outpaced those where we don't have a relationship. So we continue to invest in making sure our clients have coverage for having your needs met. And when we do that, again, our expectation is NNA growth should be 5% or higher.

Finally, our workplace business, our stock plan business has been thriving and been a nice contributor to NNA. We have a big opportunity to increase NNA in our retirement business over time. That's an area where we could be doing more, where we have an opportunity to introduce ourselves to many working Americans for the first time. And I believe we have an opportunity to grow our NNA there.

So all in all, I'm bullish on our NNA. We remain positive about hitting 5% or higher and feel good about each of our 3 client-facing businesses in that regard.

Our next question comes from Patrick Moley with Piper Sandler.

So I wanted to hit on the record trading activity in the quarter, 12 million daily average trades is pretty impressive. I know you rolled out crypto trading. There were also some pretty high-profile IPOs that attracted lots of retail attention. So curious what you would characterize as normalized engagement here versus what's market environment driven and just overall, how we should think about sustainability of the trading activity at these levels?

Thanks for the question. We believe that the trading engagement you've seen is sustainable and it's supported by broad client participation. We've really seen a growth in young investors, I think part of that was started with the removal of commissions, which brought more people into the market that had less money. We've also seen growth and comfort with options trading as people are becoming more familiar with that as a way to add income or hedge portfolios. I think there's been a structural shift in the amount of options trading that we'll see.

The pattern -- the change in the pattern day trading rule is another factor that's likely to be in some of our numbers, but also likely to fuel our numbers in the future as the barriers for less wealthy clients continue to be removed and then being actively participating in markets. I think AI is absolutely benefactor in our trading levels and will continue to drive trading as people use AI to both do research on how to position themselves and how to invest as well as use AI in more of an algorithmic fashion to drive some of their trading. So I think AI is a factor.

Finally, I do think the market environment is conducive and it's conducive for a few reasons. Number one, returns have been good, but we actually find client behavior to be more driven by the volatility of markets and then the interesting activities in the market. So the fact that there's been the AI, the Mag 7, SpaceX more recently, all those things drive client interest and not just in those areas, but more broadly in investing. So I think you've seen a structural shift and people wanting to be engaged and wanting to invest, young investors, AI, all of that is leading towards a more sustained period of high levels of trading from our perspective.

Our next question comes from Devin Ryan with Citizens Bank.

Another question just on the June strength. And I want to hit on SpaceX specifically, just get a sense of how much that mattered for the June momentum and some of the behaviors you saw around. And I guess the reason I'm asking is because if we think that's maybe the beginning of a broadening of kind of an IPO window opening the type of multiplier you might see on that -- some of the areas that may be still are far away from getting back to where it could be maybe like sec lending or just other areas that have some upside?

Let me start with SpaceX and then Mike can cover sec lending and some of the other benefits there was tremendous interest in SpaceX from our client base and participating in the IPO. And we obviously made as many shares available to them as we could get. It drove high levels of volume into our service centers, high levels of engagement with financial consultants with RIAs and the like. It did not meaningfully impact our NNA in any way. So the numbers you see in June, I know some other firms reported huge bounces in NNA from SpaceX related activity. That was just not the case for us, and it was more a factor of just broad-based strength in our client base.

In terms of the sec lending activity, we're not expecting much there from SpaceX and -- so that's been somewhat of a subdued set of activities in that space this year, so not expecting much to come from that.

Our next question comes from Bill Katz with TD Cowen.

Mike, maybe one for you. As I sort of pencil out your financial guidance, think I get like [ 665 ] for the full year. If I just assume about a 23% tax rate and a flat share count from the second quarter. So I'm just sort of curious if we could dive into the share count outlook and maybe the broader question on capital return. So that's my question.

If you assume that the earning assets grow a little bit this year and your NIM expands the way you think it expands, your incremental margin seems to be running about 75%. How do we think about that use of free cash flow from here?

Maybe you could unpack that between supporting loan growth, maybe more reduction on the preferred side and then common share buyback and anything you might be thinking about on the M&A side?

Bill, thank you for the question. So we have seen tremendous growth this year, as you noted. Loan growth has been up. That's including margin lending as well as our bank product the pledged asset line up 59% year-over-year. So that has been terrific, and we are, of course, happy to support that. We're meeting a client need. Clients are deepening their relationship with us. And obviously, it comes with an incremental spread over securities.

So you are seeing the year-over-year NIM expansion, primary driver was that lending activity. And of course, we'll have to see where interest rates go from here in the scenario, we assume that one hike, but it's very late in the year, that's December. It doesn't impact the financials for 2026 if that hike occurred you would see further expansion in 2027. So good expansion of that net interest margin, good engagement by our clients.

When it comes to capital, same framework that we continue to think about where the resources of the firm first and foremost, are going to support client needs are going to continue to drive the expansion of the franchise. And so we feel very good about that use of resources. And so that is going to be our first priority. Beyond that, we continue to look to that capital framework and look to opportunistically return where it does make sense. We see value in returning capital and buybacks, but we see even greater value of deploying those resources into the franchise like we've done this year. And you can see as clients engage across our platform, that has been enormously profitable.

When we started the year in our financial scenario that operating leverage in that first scenario was 400 basis points. The updated scenario has operating leverage of 800 basis points. So quite good. And I think the last point of your question was around M&A. And again, we're growing organically very nicely. Again, we'll always look at our capabilities. We look at scale, so we never rule anything out. But again, we always think about that organic growth and continuing to deploy resources to carry out the firm strategy.

Our next question comes from Alex Blostein with Goldman Sachs.

I was hoping we could drill down a little more into the updated guidance as well and specifically zoning in on Q4 NIM guidance, which I think you said 3.25% to 3.30%. I think that's unchanged from the prior guide. You guys provided despite the fact, obviously, the environment has been a bit healthier even excluding the potential rate hike. So whether it's margin balances, that lending, perhaps, et cetera. So just curious what are some of the potential offsets that you see in the back half relative to what it feels like should be an improvement in the guide relative to the prior number?

Thanks for the question. Keep in mind that we'll have to see how the rate path plays out. But right now, we were assuming one hike that hike was for the December meeting. So you're not seeing that incremental pickup in 2026. If that hike were to occur, then it's going to be impacting the financials in 2027. So no, we feel good about the net interest margin expansion that we've seen so far. And if rates resume a hiking pattern, you'll see even more expansion.

Again, that lending activity has been strong. That comes with incremental spread relative to securities. We continue to see cash build organically as well. Again, we've seen growth in the first half of the year despite the seasonality of 1Q and 2Q. So we think we are well positioned to see that continued margin expansion through the rest of the year and beyond. Again, there'll be puts and takes. But overall, we feel really good about the trajectory.

Our next question comes from Steven Chubak with Wolfe Research.

Mike, you gave some helpful color with regards to what I wanted to unpack, which is looking at that higher NIM exit rate for the year, I was hoping you can contextualize just the -- how much of the contribution to growth is really from asset repricing tailwinds and the core loan deposit growth you were just speaking to versus some of the other sources like RIA long/short in sec lending, that might be a bit tougher to predict. And then just your appetite to grow the RIA long/short book further from here?

Steven, thank you for the question. When I look at that year-over-year growth in net interest margin, the vast majority certainly was driven by that, I'll call it, that lending, both at margin lending, non long/short as well as the bank lending, which was primarily driven by the pledged asset line. So Much of that is coming from that lending activity. And of course, as I mentioned, we've seen deposits perform well despite the first couple of quarters of seasonality.

Now in securities, we haven't grown that portfolio meaningfully. It's been relatively stable because, again, given the demand for lending, we've been happy to meet that client need. Again, I've talked about how it meets the client need, it deepens the relationship, and it comes with better economics. So you are seeing some repricing of the securities book, but it's at a much lower pace given the demand for lending activities.

And in terms of the long/short and RIA activities, we do see continued demand for that in the near term. We are well positioned to continue to support that we'll have the resources set aside to support that activity. But again, that's -- while it's grown very quickly, it's still a relatively small percentage, a very small percentage of our economics. It's roughly 1% of our revenue. But we stand ready to support it, but the expansion of the net interest margin is being driven by that lending activity and supported by our deposit base.

Our next question comes from Ken Worthington with JPMorgan.

Maybe digging in further into the long/short's tax benefit strategies, how big do you think these can ultimately be? Are you seeing demand accelerate here? Or is it starting to satiate at all? And is this ultimately a good business for Schwab? I guess, like is it good relative to the PAL and traditional margin lending business from a risk and economic perspective?

Thanks for the question, Ken. Let me start with the growth of it. We continue to see client interest in long/short. I do think we've seen a particular surge as -- if you look at the market dynamics our bigger competitors were maybe not making this as available, which probably led to a little bit of a surge. But I think we're past that now in more of a stable growth environment.

I think it's a strategy that makes a lot of sense for clients, particularly those that have sold the business or have a large and concentrated position that they want to diversify out of being able to generate and harvest losses against that while still largely tracking an index, it's quite a powerful strategy. So over the coming 5 or 10 years, I expect this strategy will get bigger than it is today. And we want to find a way to support our RIA clients.

In terms of whether it's good for the business, I'd answer it in a couple of different ways. Number one, as we look at the economics and look at the ROE, we find it to be accretive. So it's good from a financial standpoint. Number two, we think it's beneficial to the end client of the RIA because it's helping them with the best financial life. Number three, we think it's good for the RIA as a way to differentiate themselves for the client and bring a great wealth strategy to their clients. And then finally, it's great for our business because when we win the long/short business, not only do we win that business, we tend to win the business not only at the whole household, but we build the trust and confidence with the RIA.

And so one of the reasons you've seen a nice acceleration in our RIA business is because we've been there able to support them on this strategy as they wanted to use it with their clients. So I think this has been a win for the client, a win for the RIA and a win for us in our economics and an ability to serve clients.

Our next question comes from Brian Bedell with Deutsche Bank.

Maybe to switch gears a little bit to prediction markets. Can you just talk a little bit about the timing of your upcoming launch with Cboe, the binary index options. And then also, they've announced that they've applied to the SEC for company financial KPI binary options. So if that were to be approved by the SEC and Cboe does launch them, what's your interest in also launching them within your franchise? And how are you seeing maybe initial client interest in that, both from the retail and adviser side?

Thanks, Brian. Let me start with the first part. We are actively working with the Cboe on the rollout of binary options. But we haven't yet put out a time line. So we'll be sure to keep you in the market updated. It is something of interest to us, and we're working on it, but we haven't committed to a time line.

In terms of broadening that out, maybe I could just highlight the principles that I think about as it relates to prediction markets. I think there's 3 elements of prediction markets, two of which I think are interesting and relevant to our clients and 1/3 of which I really do not. The 3 elements to me are, one, there's important information embedded in production markets about what's going to happen in employment, what's going to happen to inflation, what's the probability of a recession. Those kinds of things are interesting information to our clients as they are increasingly active in markets. And that's information, I think, over time would like to make available to our clients.

Second, there are financial-related events and KPIs may well be one part of those that our clients care about that I think are relevant to our clients for either accentuating or hedging a position. If you have a big, say, position on Tesla and a KPI, how many cars are they putting out in that quarter, you can see how that would be relevant to that investor's financial life. And therefore, I think it is a good fit and of interest to our clients and something that over time, we will take a hard look at and have a role in.

The third part of production markets and where 90% to 95% of the volume exists today, is just really sports gambling. And it's betting on the World Cup, the Super Bowl, Taylor Swift's engagement, all of these things that capture the public's attention. That's where the volume is. We have no interest in it. And I think it's completely disingenuous for people to be out in the market calling this an asset class in a new way for young people to invest. It's gambling in another stripe. It's a way for people to lose money. And I have no problem with them. People want to gamble, terrific, have fun, entertain yourself, gamble, be more engaged in the game. But to me, it doesn't have a role in a client's financial life and therefore, it doesn't make sense for Schwab to offer.

And so as I think about the 3 parts of prediction markets, that's our view. Two of them, we will support over time. One of them, we will not. Thank you.

Our next question comes from Michael Cyprys with Morgan Stanley.

Just wanted to ask about tokenization. I was hoping you could speak to how you're going about building the infrastructure to support client activity there, which is something you had referenced. And then more broadly, I was hoping you could elaborate on your wallet strategy and potential use cases and utility for clients over time.

I think as it relates to tokenization, my view and the way we talked about it as a team is that we want to be able to deliver securities to clients in the way that they want those securities. And the analogy I've used with our team is it's a little bit like gas and electric cars. We're not as a company going to make a huge bet in one direction. We're going to have the ability to support both and let the client choose the way they want to engage.

I think there are some benefits to tokenization and some real drawbacks and it's unclear how much it's going to take off. If you look at the 2 main benefits, I think, 24/7 trading. I don't know how valuable that truly is. We have 24/5 trading today, 1% to 2% of trading actually happens outside of market hours and that's for a good reason. Having people in the market at one time creates more efficiency, more effectiveness to trading. It's been a good model for a long time. But again, we still support 24/5. If the market really wanted 24/7, we could do that on today's infrastructure. The other issues is settlement and doing it immediately. And I think, again, there's pros and cons to immediate settlement.

So again -- but again, if the market wanted immediate settlement, we could find a way on today's rails and then we went to T+1, we built the ability in our technology to go to T+0. So for us, we're ready and able to do that, if that's what the market wants. So we're going to be excited to serve clients in whatever form they want over want to consume securities. I think there's real pros and cons in either direction. In terms of getting into the details of the technology we're providing our wallet strategy, we're not ready to share that other than to say we're actively working on it. We're testing different ways of going about it. We are going to be ready should clients want to hold securities in another form. We will be there. We will meet our clients' needs as we always have.

Our next question comes from Ben Budish with Barclays.

Mike, I was wondering if you could give us an update on some of the revenue diversification initiatives and how we should be thinking about timing. Obviously, the big one is sort of the ETF monetization strategy. You guys have been talking about but also things like Forge, the self-directed alts platform, crypto. When should we be thinking about seeing these things starting to materialize in the P&L?

Ben, thanks for the question. As we talk about revenue growth and diversification, we covered a lot today, some of those immediate drivers. And that includes the momentum in lending. That has been accelerating and has been even beyond what we had anticipated this year. That's welcomed, of course.

And Rick covered wealth and managed investing. And so those present enormous opportunities for us and are enabling us to not just grow revenue but diversify revenue as well. And back at Investor Day, we talked about the concept of diversification within net interest revenue, where more of the economics are being driven by lending and then outside of net interest revenue, including in areas like managed investing, of course, trading as well. We continue to invest in our industry-leading trading platform. We continue to see that engagement high. We think engagement from that client set, again, with our platform with the education with traders supporting traders, that has been a very strong activity for us as well. Beyond that, then I think you get into some of the areas that you mentioned. And those will continue to contribute over time.

And whether that's ETF monetization, Forge, crypto, not as meaningful as what we're seeing in those other areas that I mentioned. But those are areas over time that are going to contribute to revenue. ETF is moving in line with where the industry either already is or is going or just reflecting the value of our platform and the distribution. And of course, Rick touched on Forge earlier in terms of what that does for us from a strategic capability as well as crypto, too. But those will continue to add over time to complement the very strong growth and diversification we already have underway. Thanks for the question.

Our next question comes from Chris Allen with KBW.

I wanted to ask -- and apologies, maybe you talked this right, but the rebound in SEC lending revenues this quarter, $178 million, strongest quarter we've seen since 3Q last year with CoreWeave. Were there any special situation this quarter? Maybe you could talk to the growth drivers here in terms of the underlying book of business. And then just remind us what's included in your NIM guidance for sec lending for the full year.

Thanks for the question, Chris. That sec lending revenue, just to bifurcate that for you. So that hard-to-borrow activity that is the typical driver of sec lending that has not been playing the role in that sec lending revenue increase. That activity has been somewhat subdued this year. For our outlook, we assume that it will remain somewhat subdued. What you're seeing go through that sec lending activity as part of that long/short set of activities. So that is contributing to that sec lending revenue.

And as I just mentioned, the broader sec lending that hard to borrow, we are anticipating that to remain subdued. Of course, if you see variations in IPO markets and more hard-to-borrow activity that could be upside for us. But not contributing meaningfully to net interest margin in the back half of the year. So again, a lot of the NIM drivers I covered already that organic lending activity has been the primary driver.

Okay. I think we have time for one final question.

Our final question will come from Mike Brown with UBS.

Great. I appreciate all the color on the NIM side. I guess I just wanted to ask maybe one more there. On the PAL growth. It continues to be really impressive. Can you maybe just expand on how that's generally being used by clients? And what financing sources are they kind of switching from opt in to using more PAL loans? And then on the AFS yield, that ticked up nicely this quarter, been kind of flat to down for the last 6 quarters. So is this just some of the repricing starting to really come through. And maybe any color you can add there, Mike, about the back half and as we exit the year, how that repricing can continue to play out?

Mike, thanks for the question. I'll cover the first part, and Mike will cover the second part. I think what's driving pledged asset line growth is a few things. Number one, the experience is incredibly easy. You can get access to money in a day, and it's done very, very simply. Number two, we have clients that have large gains with big embedded capital gains and so they don't want to sell security, you sell securities necessarily. They have growing wealth that may have concentrated positions.

And they have a life they want to live. They're seeing their wealth grow and they might want to buy a house, put their kid through call it whatever it may be, whatever they're spending money on, they have plenty of wealth to afford it, but they don't want to sell the position given the gains that they have. And so they want to leverage that position and a pledge asset line is a great way to do it incredibly easy and they can have access to the money quickly.

Mike, in terms of the securities, yes, we've seen big momentum in terms of that yield pickup. A couple of things I would say. You probably see $6 billion, $7 billion, $8 billion of cash flows coming off of that portfolio. Again, I touched on earlier how with lending that has been -- we've been happy to meet that client need given the pickup in economics. But within the investment portfolio, we are seeing that yield shift. We continue to allocate in a way that we've discussed before, U.S. treasuries being the primary set of purchases.

We also did some asset-backed securities as well, very high credit quality allocations just as a means of diversification. So given where rates are and where they're projected to be, we would expect to continue to see a lift in that yield as more of the securities have rolled over and reinvested. And again, if we're reinvesting less because we continue to meet lending needs such as PAL, we're more than happy to do that, meet client needs and the economics are even more favorable. So thank you for the question.

Well, with that, we'll wrap up. Thank you for your time this morning. I'll leave you where I started. Schwab is clearly leading the industry today and is uniquely positioned to win tomorrow. By seeing through client's eyes and putting clients at the forefront of every decision, we have earned our place at the trusted center of the investing ecosystem, and we are uniquely positioned to win in the long term with our strong momentum, no trade-offs value proposition, clear client-focused strategy and diversified financial model. Thank you.

Welcome to Institutional Investor Day 2026. To begin, please welcome Jeff Edwards.

Thank you so much. Thank you so much. The warm welcome was very much unexpected from the crowd this early in the morning. But we appreciate everyone joining us on the webcast and especially those here in the room that have made the trip to Westlake. It's very exciting to have everyone here for the 2026 Edition of Schwab's Institutional Investor Day. Obviously, I'm a little biased, but I think we have one of and probably actually, the best story and financial services. So it's an exciting day to be able to share that with you.

You saw the strong momentum that we've had in the marketplace, and that was further evidenced this morning with our April SMART report that I see a couple of folks here in the front have been quickly pecking away and putting those into the model. So it's exciting to see that continue into the year. And probably just as important, looking out there through the window, the weather looks great. The team has been working hard with the weather guys there to make sure that we don't have any more of those tornado warnings like we had in 2024. So, so far, all systems go.

And luckily, you're not stuck with me very much longer. We have a great lineup of speakers here today. They're going to talk about all the exciting things that are happening here at Schwab and how much opportunity we see to keep shaping the future of the industry and helping clients in RIAs.

Let's talk about the agenda here for a moment. We're going to get Rick up here in just a moment to help kick off the day and provide the strategic vision and outlook for the future. Jon and Jonathan will come up and talk about the Advisory Services and Retail businesses. James Kostulias will then jump in and talk about Trader. Adele Taylor will talk about Workplace for a little bit, and then Stacy will bring the energy and insights around client acquisition and marketing right before lunch.

One quick reminder about lunch. Hopefully, a couple of you had a chance to stop by some of the AI demo booths. We set those 6 up today to provide an opportunity to speak with some of the folks in the business and bring to life some of the examples of the exciting things that we're bringing both to employees and clients on the AI front.

After lunch, we're going to shift our focus to products and solutions with Neesha and Andrew clicking in across wealth, banking and the whole host of items that we're working with our clients with to drive growth and deepen those relationships. Afterwards, Dennis is going to come up and talk about all things, technology, operations and data. And finally, Mike is going to bring us home to help talk about how we're connecting all those client-driven exciting opportunities into the financial story that is driving results for Schwab and our stockholders.

In terms of Q&A, which I know is everybody's favorite part and why we're all here, the approach should be very similar to prior events. We'll have in-person mic runners, Kate and Jared, on both sides. So if you want to ask a question in the room, please raise your hand and wait for a mic to come. It is a question approach per the usual. If there are any follow-ups, we'll try to get back to you if we can. For those joining on the webcast, please submit via the console. The instructions should be there. Lauren will help collect those, and we will do our best to insert those alongside the questions here in the room that there will be a priority here in Westlake.

As always, I think you guys know how to reach Lauren and myself and the IR team. We're happy to handle any follow-up questions. If not, our information is there on the slide. And we all know what this means my time here is done. The [ omnipresent ] wall of words that remind us that outcomes may differ from expectations. So please stay in touch with our disclosures.

And with that, let's get the day started.

[Presentation]

Thank you, and thanks so much for being here. We are so grateful for all of you in the room who made the trip here to Westlake and everyone online for spending the next 6 hours with us. We think we have a great story to tell, and we're excited to tell it. I'm going to spend my time today talking about both how we're leading today and what we're doing to define tomorrow. Since we are going to be together for 6 hours, I wanted to start by taking a moment to share with you what I think some of the key takeaways from the day are.

Number one, we are a growth company that is growing across all fronts. Number two, we have a mission, a purpose and a value proposition that stands apart and is winning in the marketplace today. Number three, we have a clear strategy for the future to evolve to meet our clients' needs and to win in the marketplace. And fourth, we believe we are well positioned to drive earnings growth, not just this year, not just next year, but through the cycle with a financial recipe that has worked for years, and we believe will continue to. So let me dive -- I should mention a fifth takeaway, by the way, which wasn't on the slide, which is every quarter, Mike and I have the opportunity to spend time with you and we love that opportunity. Today, you'll get a more of a unique opportunity, which is to see the strength of the team. And I hope you walk away as impressed and with as much confidence in the team as I have on a day-to-day basis.

Let me start with leading today. And I want to take you back 50 years in time to when Chuck Schwab started our company. It was a time in which only the wealthy could invest in markets. Only the wealthy could benefit from the power of investing in compounding. And it's been our mission, our purpose for the last 50 years to make investing more accessible to bring the cost down, to make it more understandable, to get people invested earlier in their life so that they can realize the power of being an owner, the power of compounding. That is what we stand for. And that mission and that purpose sets us apart, particularly in a world where so many others are sending a different message about transacting, about gambling. We have always stood for what is right for the client, what's going to put more money in their pockets. And that's a big part of the reason why we've been successful.

And we stand at $12.6 trillion of assets today, 47 million client accounts. We grew that at 1.3 million accounts in the first quarter. If we can keep that kind of growth up for the next 5, 10 years, will be 70 million accounts, 100 million accounts. And that's core to our mission because that means there's a lot more Americans in our country and more people all over the world who will have access to the power of being an owner, access to the power of compounding. That's what we are here for. That's our mission. We will be and need to be a much bigger company for the benefit of all of the people in our country for what we do and how we do it.

And while we're a big company with $12.6 trillion of assets, we are operating with the purpose, the ambition and the speed of a startup. I'd highlight the highlights of the last 2 years since we were together in this room. We've enhanced our services and experiences. We've brought the best of people and technology to our clients. We've added financial consultants. We've added wealth advisers. And at the same time, we've launched AI to support our clients and to support our client-facing professionals and how they efficiently answer our client questions.

We've improved many of our experiences, including taking our pledged asset line experience from what used to be 40 days down to 1 day and often is done in only minutes. It is the industry-leading experience for a pledged asset line. We've leaned into building out our products and solutions to meet the segmented needs of our clients. We've launched alternatives and other products and services for our higher net worth clients. We've added to our wealth advisory capabilities, and you'll hear a lot more about that from Neesha later. We continue to add to our leadership in trading, which is a really important segment of clients for us and a really important business. We've added 24/5 trading, but we've also added lots of product capabilities, lots of service and advice capabilities around our trading platform. We continue to invest in our Advisor business.

Lots of things that we didn't put on the page that aren't exciting to talk about in this room, but make a huge difference for our clients. And that's the experiences they have every day on schwab.com that makes their lives easier. We are operating with a record client easy score for our advisers, and that's because of the investments we've made the last few years in making it easy. We've also added capabilities that they love, such as our long/short -- support of the long/short strategies and INTF. We're adding for our advisers a structured asset lending program, which will open our lending up to more forms of collateral, something that our advisers have been asking for, for a long time, and that differentiates us because we can bring the power of our bank to the adviser market, something many of our competitors cannot do in the same way that we can.

And we're meeting the needs of our different retail segments, as you'll hear from Jonathan in just a little bit, whether it's our teen investor account or our crypto launch, which happened this week to clients for the very first time, we are meeting the needs of our clients through our products and solutions, expanding and evolving what we're doing for clients and delighting them along the way.

To move at the pace we've been moving at as a big company, we are both building our capabilities, buying them and partnering where it makes sense. We bought Forge to start a journey like we've been on the last 50 years in public investing to democratize access to private investing, and we couldn't be more excited about that. We made an investment in Wealth.com, which is an AI-backed capability that allows clients to plan their taxes to engage in a trust and estate plan, and take it all the way through documentation, all fueled by AI in an experience that is far easier and more streamlined than it used to be. And the early experience with it so far is very promising. Clients love it. And so we are making progress strategy to meet our clients' need and feel great about how we've moved the business.

That is helping our growth, and we are growing on all fronts. We had a record first quarter, $158 billion of NNA in the first quarter, an all-time high when you exclude the onetime mutual fund clearing outflow that was planned for. We have talked in many -- for many quarters about driving solutions growth, about deepening our relationships with clients, and we continue to see accelerated growth quarter after quarter in our wealth business and in our lending business. And then finally, that's translating to attractive economics, as Mike will cover in a lot more detail later on in the day.

Our ability to succeed and to drive that growth and to be a growth company is founded on what we stand for. And it all starts with our purpose, which is to enhance our clients' financial life to champion their goals, to help them be owners to get -- to start saving to get invested and to live their best financial life. And that's backed by our trusted brand, our best-in-class value, the blending of people and technology across an omnichannel experience that sets us apart from our peers, and product breadth that allows us to be a one-stop shop and make it easy for clients.

For 50 years, our company has stood for trust. It stood for doing the right thing for clients. It stood for getting more money into our clients' pockets and helping them grow their wealth, and that's not going to change. We offer the best-in-class value in the industry. With an 11 basis point expense on client assets, we are far less expensive to run our business than any one of our competitors. That allows us to operate with a 50% margin and put more money in our clients' pockets because we're offering them incredible value, and that's really hard for anyone in our industry to match.

Likewise, our omnichannel experience sets us apart from everyone. We are just -- we're not just an app. We're an experience. We have award-winning, as you can see from Forbes, the best customer service in the industry. Not only that, if you look at our client phone satisfaction scores, they are at an all-time high. Our digital platforms just won the U.S. News and World Report, Best Investing Platform for the fourth year in a row. So clients love engaging on our digital platforms. And at the same time, we know they love having a relationship.

And our people are making a huge difference. And we can see that in a bunch of different ways. We know clients love engaging with people because we can see the growth of our RIAs, where there's personalized relationships. We can see the accelerated growth that we earn from clients when we have a dedicated financial consultant relationship. 2.5x the NNA that we earn when we have that dedicated relationship. And we earn 10 points higher Client Promoter Scores when they have -- when we have a dedicated relationship.

So technology for sure, is important today, and it's going to be even more important in the future. But we believe it's the power of people and technology that sets us apart that continues to win today, and we believe it will continue to in the future. And you'll see this little AI note on the side here. AI will become a new interaction channel for us. Just like people come to mobile, web or phone lines or walk into one of our branches to conduct activity to find out information. AI will be the next way for our clients to do that. It's not going to change our strategy in any way. It's going to be a new interaction channel that is going to allow clients to interact with us in a new way. It will change our strategy around growth, but the interaction channel is another platform for our clients to engage.

We have product breadth that can't be matched and that is a huge advantage. Clients can come to us for all of these reasons. They don't just have to come to us because we're the best trading platform. They can come to us because we're the best trading platform, and we have incredible advice for self-directed investors. They can come to us because for our RIAs because we have great product choice, ETFs, mutual funds, alternatives, digital assets for our retail clients, a bank that they can -- so that we can help them with both sides of their balance sheet. Our product breadth gives us a unique advantage. And it's not just the product list, it's the way we deliver it to clients.

I had a client reach out to me this week. It's been a client for a few months, and they had joined us from a large competitor. And they sent me a note to tell me how much they had enjoyed the experience because they felt for the first time in their Financial services experience. We were putting them at the front of every recommendation we were making, every suggestion that we had, every point of expertise that we offered as opposed to trying to do what was best for the firm. And they wanted me to know how much they appreciated that objectivity. So it's not just our product breadth, it's the way we deliver it. It's all about putting the client at the front.

Now there's been an AI narrative in the market that I think has been a significant overhang for our stock and detached our stock from our fundamentals. First, there was a narrative around how a tax planning software or AI tax planning from a relatively small competitor of ours was going to somehow dis-intermediate our business. More recently, it's been about how our cash strategy is not going to work in the world of AI. And I wanted to take a few minutes since I have all of you here today to hit that one on the head because I think it's incredibly misfounded.

I want to start with explaining why clients come to Schwab. They come to us to invest and trade. Because of that, we take their cash and we default it into safe, highly liquid cash, waiting for them to put their investments to work to make the decisions that they need to make, to move the money around that they need to move but we default it to liquid and safe cash. And then we make it incredibly easy to find other options. It's a click of a button, a couple of clicks of a button, and you can find purchased money funds with among the lowest fees in the industry and the highest yields. You can buy individual bonds for $1 a bond, which I believe is the best deal on individual bonds in the world. You can find a deep and competitive CD marketplace.

And not only do we make it easy, we actively promote them through marketing, through when you log on, oftentimes, the very first thing you see is get more for your cash at Schwab, get more on your cash at Schwab. As a result of the fact that we make it easy and we actively promote it, our clients move a lot of their cash to other yield securities. We have $700 million -- $1 billion of client cash and purchased money funds. We have $800 billion of cash in individual bonds. So clients are clearly finding their way to other options because we make it easy and we have compelling options.

We are not a bank that traps their cash in a checking account. And I can see why if you're one of those banks, maybe you need to think about a cash optimizer because it's really hard to move your money around from checking to higher-yielding options. That is fundamentally not the case at Schwab. We couldn't make it easier. We couldn't promote cash options more. We have $3 trillion of cash that moves around every month. Every month, $3 trillion moving to buy and sell securities to pay bills, to wire money in or out of the firm. to pay advisory fees, to post collateral against short positions, all kinds of uses for cash every month that adds up to $3 trillion a month. To put the $400 billion of cash that is in sweep in perspective today, that is half a week of client money movement. We simply do not believe that there is lots of cash just sitting around oblivious to the concept that when you come to Schwab, you can invest in all of these capabilities.

Second point I want to make is that we have no plans to have a cash optimizer. And I want to talk about why. Number one, cash optimizers have been around for a long period of time. I think MaxMyInterest has been around since 2013 or something like that. We compete against all kinds of cash strategies today. I travel all over around the country every year. I go and talk to hundreds of RIAs. I go to every one of our service centers and spend time with our client-facing professionals. In the last couple of years, I've been to 100 of our branches. I hold focus groups directly with our retail clients. In every one of these conversations, I ask a really simple question.

How else could we be helping you in your financial life? What could we do to make the experience at Schwab better? In the thousands of conversations I've had, not one, not one time have I ever heard, I really need a cash optimizer at Schwab. So the idea that we're going to create one when we have all these other priorities and ways that we can help clients and when our cash strategy and our overall value proposition is clearly working is completely misfounded.

Our value proposition is winning and it's winning at historic levels, and I want to touch on that for a moment. We are #1 in total client assets. Our NNA growth is accelerating. Our TOA ratio is 1.7. And I want to put that in historical terms for you. Since Schwab and Ameritrade have come together, our TOA ratio has never been higher. I then went and asked the team, I said, well, let's go -- can we go back 10 years and look at just Schwab originated accounts? What's our TOA? And our TOA for Schwab originated accounts in the last 10 years has never been higher than it is today. Our value proposition is winning in the marketplace.

Our clients are deepening their relationships with us, which is voting with their feet that they want to do more business with us every day, whether it's consuming more advice through our wealth business or borrowing through our bank. Our client Promoter Scores, which we use as a measure of client satisfaction, have never been higher. Our client Easy Scores, which we care about deeply because we think eases wins in our industry, have also never been higher than they are today.

The final point I would make is I believe our level of innovation and the pace at which we're moving have never been faster. We've eliminated half of our committees. We've stood up a product group within legal to shepherd things through faster. We've moved our digital teams inside our businesses so that the businesses and technology can collaborate more closely and get things to market faster. We're using AI to develop and to develop quickly. We are moving at a rapid pace so that we can evolve and meet the needs of our clients.

Before we pivot to the future, I just want to highlight the landscape in which we operate today. We are fortunate that we participate in the 2 fastest-growing segments of the financial services landscape. And in addition to that, meaningfully outgrow those 2 fast-growing areas of the financial services landscape. And you can see our market share today, 14% roughly, which is a strong market share and yet at the same time, scratching the surface. Think about the power of what we do. We put the client at the front of everything we do and everything we stand for.

People in our country would be far better off if they saved, invested and did so early. And no company has more to offer as people in our country want to take that journey than Charles Schwab. So it's incumbent upon us to take this market share represented in the lower left corner of that box and expand it dramatically. We should be a much bigger business helping far more clients than we are today.

So let me now touch on our road map for doing so. It starts with setting the stage for what we think of as the 4 big themes that will evolve in the coming years in our industry. First is the next generation of investors are highly engaged and they're operating in different ways than the prior generation, and we need to be there for them. Number two, we believe there is a bull market for convenience, not just in our industry, but in every industry. And we need to make sure we're incredibly easy to do business with. There are asset classes and products that are emerging that we need to have for clients. And finally, we do think artificial intelligence will have a meaningful impact on our industry and is an incredible opportunity for us to grow our business and to serve our clients more efficiently than we do today.

There we go. So let me talk about the future, and it all starts with living out our mission. As I shared earlier, 50 years ago, we started with the purpose of introducing people to investing, democratizing access to investing, getting more people invested, helping them save and grow their wealth and benefit from ownership and compounding. That remains our purpose today, and we aspire to be the primary retail wealth management provider for investors and traders of any size in all the ways they invest and trade.

In a world of convenience, being able to deliver a compelling one-stop shopping experience is critical to our future, and no firm is better positioned for that than we are. Second, we have a leadership position in the RIA space today as a custodian and are providing a breadth of services and capabilities to RIAs. We have an opportunity to expand on that to create an RIA ecosystem, which allows the RIAs to focus more on growing their business, spending time with clients and at the same time, is a path to monetization for that business.

Third, while we're #1 in retail, we're #1 in the Advisor business, we are not in that position in workplace. We need to be far bigger in workplace than we are today. For many Americans, it's the first place they save and invest and get introduced to Financial services. We need to be there in a bigger way, and we're going to make the investments to do that. Our strategy is going to be -- continue to be founded on seeing through clients' eyes, doing what's right for clients, and we'll do that via 4 focus areas.

Number one, we need to grow the firm. And to me, that means 2 equally important things. Number one, we need to grow NNA and do so at an accelerated rate. Number two, we need to deepen clients because in a world where they want ease, handling more of their financial life benefits them and it benefits us. Second, we need to continue to drive scale and efficiency. to leverage our advantage on expense on client assets, to leverage the technology that we can create because of our size and to reinvest from our efficiency back into our growth so that we can serve more clients and live out our purpose and mission.

Third, and something we don't talk about enough and sometimes can go overlooked is the brilliant basics. The everyday things are so critical, safety and security, the ease of interactions. We don't put out press releases but the enhancement -- on things like this, but the enhancements we make to our mobile app every day make a huge difference for our clients. Our client Promoter Scores among our Ameritrade clients have risen 14 percentage points because we've made behind the scenes a lot of enhancements to the mobile experience that they really enjoy and use. Likewise, for advisers, we made a lot of enhancements to the experience, and our Easy scores are at an all-time high. So when we talk about those things, it doesn't draw a lot of clicks, but it's incredibly important to our business and remains a key focus area.

And our people. One of the things I love about Schwab is we are a mission-based company. And if you walk around this campus or speak to our 33,000 people, they are here because they care deeply about helping our clients live their best financial life. Our people help set us apart every single day. We believe in the power of people and technology, and it's winning, as you can see in all the numbers I shared earlier.

So let me step through a couple of these in just a touch more detail. So again, on growth, 2 equally important levers, growing new assets and deepening relationships. And deepening relationships is of utmost importance when you have a business with $12.6 trillion and 47 million clients. Some of the things we're focused on as it relates to growth, we've got to meet the segmented needs of our clients, and you'll hear that throughout the day from our various presenters, whether it's our ultra-high net worth clients in retail, our traders, and you'll hear from James and for our RIAs advisers of every size and type, we've got to be there to meet their specific needs.

Second, we've got to continue to bring the best of people and technology because even in a world of AI, we believe people and technology will win. We've got to win on AI. And we will grow our business in AI in a couple of ways. Number one, given that mission and that purpose and the aspiration we have to be a far bigger company and serve many more people, increasingly, many will come through a large language model to learn about financial services. And we need to make sure we show up when they do. And you'll hear, I imagine, from Stacy on that today. We also can use AI to leverage how we engage clients. We have benefited from personalized relationships, and we've seen NNA grow faster as a result. But we've never served the 1 million or under client with a personalized relationship or have it in mass.

I believe with some of the AI capabilities that we'll have and that Jonathan will demo today via a video and that you will see at the back of the room, we'll be able to provide insights to our less -- to our clients with less than 1 million that will provide similar levels of personalization over time that we've been able to deliver via an FC. And I'm excited for the growth that should come from that.

As I talked about earlier, we've got to expand our workplace business, broaden our RIA business to improve our monetization. There's lots we're doing to broaden our products and services to meet the segmented needs of our clients. And we've got to put at the front ease and convenience, the little things, the call they have, the mobile experience they have, it's all got to be easy.

And finally, I think it's important for us to recognize that we provide tremendous value to our clients. And there is an ecosystem around Schwab of people that gather economics. We need to make sure we capture our fair share. And I think there's many ways we can do that in the coming years. Second part of growth is deepening relationships, and our focus here will be lending. Every time I go to impact, I hear from advisers, I'd love for you to do more lending to my clients, so I don't need to introduce a bank. One of the things they asked for was to be able to lend against different forms of collateral. Well, we just rolled that out to a beginning group of RIAs, and we'll roll it out to all RIAs over time.

We are finding ways to meet their needs here at Schwab. We need to grow our Advisor business, and you'll hear more about that from Neesha but I couldn't be more excited about the opportunity to serve our Schwab clients have been trust us that believe in us to serve them with our wealth advice, and we have a growing opportunity to do so.

We've got incredible opportunities to meet the product and advice needs of our clients. Our clients come to us all the time and say, I've got a concentrated position. I've got a big gain. I want to hedge my portfolio. All kinds of things clients are looking for where we can provide customization, personalization, meet their need and monetize our business.

And finally, trading is incredibly important to our business. We have, as you can see, trading engagement continues to pick up, and it's a really important business for us. On scale and efficiency, we need to drive scale and efficiency that we can invest back in the client experience. We're doing that via a number of ways, and you're going to hear from Dennis on that later, driving big technology transformation. We are moving -- creating a global capability center in India and using AI to power our productivity.

As I mentioned earlier, the basics are critical to our success, and we're going to continue to invest in the ease of our experience, in the resiliency that we offer and in our omnichannel experience. And then finally, we will continue to make people a key part of what we deliver. We are a mission-based company. We've got 33,000 people all in this together, fighting every day to give our best to the clients to bring the best of Schwab to each client so they can live their best financial life. And we're winning on the people front as well. We just completed our engagement score, and our engagement is at an all-time high here at Schwab.

So with that, let me wrap up so that I can get to questions. Number one, we are a growth company that is delivering growth on all fronts. Number two, our client offering is winning in the marketplace. And number three, we are built for what is next, and we're moving with a purpose and ambition and a pace that we don't think can be matched. And finally, as you'll hear from Mike later on in the day, we believe we are very well positioned for earnings growth, not just this year and next year, but through the cycle with our financial formula.

And with that, I would love to hear from you and your questions. We got a mic runner that will.

Alexander Blostein from Goldman Sachs. I wanted to start with your point on cash optimizer. Obviously, it's an important topic. I hear you have no plans, and I also hear you that you're not hearing from clients that they want it. But if the competitive landscape changes and this becomes more broadly available to clients through your other competitors, what would your response be then? And how would you think about potentially changing some of the components of the business model to respond to that?

Yes. Thanks, Alex. I think it's important to recognize that we already compete against cash optimizers in different ways. One of our biggest competitors sweeps into higher-yielding cash, others sweep into money funds. We already face this competitive dynamic. And as I shared with you earlier, we're winning in a big way. So we're not worried about the threat from an AI cash optimizer. And so we think our business strategy is built for what's coming next.

Steven Chubak from Wolfe Research. So you spoke about the need to drive better growth in the Workplace channel. You do have a very formidable competitor in the space, and it's translating into much better NNA growth outcomes. I was hoping you could speak to how you would differentiate your value prop in the marketplace and what that could mean for long-term NNA growth and what that incremental contribution could become?

Yes. Thanks, Steven, and thanks for being here. I think that we can be a winner in the Workplace segment for a few reasons. Number one, wellness in financial planning, financial capabilities is becoming increasingly important. No one can do that like we can. Number two, very few competitors in the workplace channel can bring both stock plan and retirement plan together in one place. And for the employer, that creates ease, and so we need to lean into that. Number three, we win on service. We win on service today even against the #1 competitor. I think we've won the Plan Sponsor Service Award like 9 years in a row. We are winning on service. There are some areas we need to get stronger at to really be a formidable competitor.

The biggest one being the modernization of our retirement plan technology capabilities, which will add features for both plan sponsors and the end participant that will make us competitive with anyone. And when we have that, our ability to offer wellness, our ability to have stock plan and retirement plan bundled together, our ability to offer the award-winning service that we have that's differentiated from our big competitors is going to allow us to win in the marketplace.

In terms of specific NNA targets, I think it's too soon to tell. But I do believe that creating a big workplace business will be a great top-of-the-funnel capability for us and really important to accelerating our NNA growth beyond the levels that we're at today. And we've seen it already recently and our Stock Plan business has been a big part of our NNA growth the past few years. And we look forward to the day when it's see an even much bigger part. And like some or maybe one of our competitors, we know when we open the door that year, we're going to get a tremendous amount of inflows from the rollovers associated with those accounts. So we're focused on that. We're going to invest, and we think we've got a great way to win in the future.

Brennan Hawken, BMO. Would love to hear more about lending. You spoke to how the feedback from advisers is great that you're there for them. But do you think you need -- do you have all the capabilities you need? Do you need to continue to roll out and enhance? Where is the awareness? Where is the penetration? Where do you want to get it to? How do we -- how should we think about it in the next few years?

Yes. Thanks for the question, Brennan, and thanks for being here. The first thing I'd say is lending is strategically important in the sense that it allows us to win more in the marketplace, particularly in both channels but let me speak to advisers for a minute. The fact that our biggest competitor in the Advisor channel doesn't have a bank, creates a big advantage for us. So the more and more we lend, the better. Second, you put yourself in the adviser's shoes. They don't want to introduce a big bank to the relationship who may want to get into the wealth side of that client's pocket and the RIA doesn't want that. And so they want us to deliver it to them and not have to introduce a bank. And so again, it's strategically important for that reason. I think through the pledged asset line that we rolled out to clients and now the structured asset line, which opens up lending to more forms of collateral, private shares, alternatives, restricted stock, things along those lines, -- that's a big win for our advisers and something they've asked for, for years.

I think between those 2, between our mortgage capabilities, we have now met the core need. We've got to drive more awareness, more understanding of how easy it is, how compelling our rates are. I think that alone will drive a lot of growth. And then I do think there are some other areas where we can add to our banking capabilities. But I think with what we have today, we have a very clear road map for the future to be able to grow in a meaningful way.

Ben Budish from Barclays. Rick, you talked quite a bit about AI this morning and on the last earnings call. Curious how you think about it translating to the financial formula. Are you -- are we getting to the point where you think AI can help accelerate top-of-funnel acquisition, help drive greater operating leverage, drive down further the cost to serve? How are you thinking about that over the next several years in terms of where you can implement to either accelerate, drive more operating leverage, that kind of thing?

Yes. Thanks for the question, Ben. I think it will grow both top line, not probably next year and maybe not even the next -- the year after that. But I think in the coming 5 years, we'll see more growth from AI because we'll be able to work with the LLMs to drive more clients to Schwab. And again, we'll cover that in more detail later. We'll be able to, with our existing clients, drive more personalized insights that allow them to benefit from more of the capabilities that we have at Schwab that will allow us to deepen relationships and likely with some of those smaller clients, get them to consolidate assets from other places because we're offering those personalized insights that they wouldn't have. I think it's going to grow top line. And without a doubt, we are seeing meaningful AI efficiencies.

Now that's not translating. You can see our headcount, our headcount is growing. And you might say, well, all this AI you've launched and all the usage and Dennis will share, I think a stat that shows just how much we're using AI now versus the past. And our headcount is not dropping. You may wonder why. But what's happening is we are seeing headcount go down in certain areas but we're hiring so much to drive our growth with financial consultants. We're hiring a lot to deepen relationships with the growth of our wealth business. We're hiring wealth advisers like crazy because we're getting so much flows through the door that that's masking all the savings that we're seeing from AI. So I think AI will drive both top line and bottom line. I think it's going to be a real accelerant to our strategy.

David Smith from Truist Securities. Rick, as AI makes it easier to scale and service clients, how does that inform your thinking as to the clients that you can serve at Schwab versus referring to RIAs? And just more broadly, how does that change your thinking about any symbiosis between Investor Services and Advisor Services?

Well, I think there's huge symbiosis between them. I think that -- the big one to me comes back to the purpose and the mission that Chuck started the firm with. We built this company to make investors better off in their financial life. And if a client works with an adviser, a trusted adviser that's a fiduciary, we feel confident that they're going to be better off. So it's very mission-based and same with retail investors that they're working with us. We do aspire for our retail investors. The investors that have been with us for a long time. They've got $6.5-ish trillion with us today. Many of them have been with us for years. They've built up a trusted relationship with a financial consultant. They get to the point in their life where they have a meaningful amount of wealth and perhaps where they don't want to spend as much time thinking about their financial life and their financial life has become more complex.

In those cases, we want to be able to serve them with our proprietary wealth capabilities, in addition to all the managed investing strategies we have and our Schwab Advisor Network but we believe the go-to for existing Schwab retail clients should be our Schwab Wealth Advisory program. It grew in the first quarter 90% year-over-year. And by the way, the year-over-year comp was on a quarter that was a record. Neesha will go into a lot more detail, and she's done a phenomenal job leading the area and driving the growth. The investments are working, and we think that strategy will really pay off in the long run.

We're going to go ahead and take a question from the web console. We have Bill Katz from TD Cowen. He'd like you to talk a little bit about any opportunities outside of the U.S.

Yes. International, I think, in the long run, will be a compelling business. And I'll go back to where I started. Our goal is to get millions and millions of more people invested in the world. People are better off when they invest. Their financial lives are enhanced. They grow their wealth. They understand the power of ownership and compounding. There are many places in the world that would benefit from that at Schwab. And in the future, as we make the investments to make our international capabilities stronger, I can't wait for the day where that becomes a meaningful contributor to our growth. In the near term, it is a nice growth opportunity for us, and we're seeing with our trading capabilities and the investors around the world that want to invest in the U.S., good growth.

We've added more relationships to our international clients. That's helping. We've added also more advice capabilities, and we're seeing growth there. So we're seeing both good growth in the short run and at the same time, over the long run, potentially more transformative opportunities.

And I think we have time for one more question.

Devin Ryan, Citizens. Question just about distribution and opportunities. You talked about there being more areas to maybe monetize what you build, $12.6 trillion in client assets over 40 million accounts. So huge distribution value. The ETF change or the potential fee there seems like one opportunity. But can you maybe expand upon some of the other areas that might be opportunities in the future and how material those could be given what you have built?

Yes. I think distribution and product is clearly one. I think the work we do with RIAs, there's many places where we're doing work that we -- that there's value we could add and potentially be compensated for. I think in our trading area is an area where there potentially could be opportunities to monetize. So if you look at every aspect of our business, we think there are possible ways to monetize. And not -- by the way, we're not getting -- we're not going to go into a world where we're nickel and diming clients all over the place and adding fees and things like that. But there are places where there are people operating on our platform that are earning incredible margins, and we're bringing the client to them or we're doing the hard work, and we're not capturing our fair share.

So this is not about squeezing our clients but I think there's an opportunity for us to be front-footed with some of the folks that provide a lot of value on our platform to our clients, but where we could perhaps be capturing more of the value.

And with that, listen, again, I want to just say how much I appreciate you all being here. We -- it means a lot to us that you flew into Texas. You're going to spend the next 6 hours with us. I think you'll be really impressed with the team I am every day. You don't get to see them as much, and I hope you walk away impressed with the breadth of talent here at Schwab, including our next fine gentleman and leader, Jon Beatty, who leads Advisor Services. Come on up, Jon.

Thank you, Rick. Well, good morning, everybody. Thank you for traveling to Westlake. Jeff told me this morning that for anyone who wants to stick around this afternoon, we've got a cattle wrestling program ready and available for all of you.

Well, it is tremendous to see everybody, and I am thrilled to have an opportunity to update you on Advisor Services this morning. Hard to believe, as Rick said, Jon Beatty, I head the Advisor business. 29 years I've been working here at Charles Schwab, all of those years working with independent advisers. And I have to tell you what gets me excited about this business today is the same thing that drew me here 29 years ago, and that is the opportunity to work with entrepreneurs, entrepreneurs who are building something of their own, who are delivering advice in the way that they see is right and competing on their own every day.

We've been a champion for RIAs for nearly 40 years now. Actually, next year, April 1, will be our 40th anniversary of serving RIAs. That's not just a job that we do. That is a passion that we have in serving our clients every day, being there for them as they want to serve their clients and help their clients reach their financial dreams. I hope that you see all of that reflected in my comments here this morning.

Well, here's what I'd like you to take away from my talk this morning. First, where we are today and the tremendous momentum that we have in the marketplace. Secondly, that our platform is well positioned and has never been in a stronger place. It is more robust than ever, as you heard from Rick, and we are ready to compete. And third, we're leading. Where are we going? Because custody is just the beginning. I'm going to say that about 5 or 10 times while I'm up here today. I hope you take that away from my talk here with you this morning.

Let me give you a sense of the commitment that we have to advisers. This commitment is where we start with clients every day. We've been saying this now for a decade. Those of you who have come to these programs probably have heard leader from Advisor Services stand up here and say, helping advisers grow, compete and succeed. Our advisers love the consistency and the continuity of our focus on helping them win in the marketplace. Just a personal story real quick. I have 2 daughters, 20s, 25 and 27. My wife told me recently that she overheard one of my daughter's friends asking her what her father does. And my daughter answered, he works for Charles Schwab in the Advisor businesses, and he helps advisers grow, compete and succeed. So it's permeated the family.

But we see it through this lens, which is extending the fiduciary model to more American investors. Rick said it, that ladders up to our corporate mission of helping investors reach their financial dreams. This is not just a mission. It's the lens with which we see every business decision, every investment and every innovation for the future.

Well, let me start with giving you a sense of the scale that we're working with in Advisor Services. $5.2 trillion of assets, serving 16,000 advisers nationwide, 10,000 of those firms managing less than $300 million on our platform, true quintessential small businesses but over 1,000 now with more than $1 billion of assets on our platform, up significantly from just 5 or 10 years ago and everything else in between. Those advisers serving 4 million households at Charles Schwab, and we have been the #1 custodian from the beginning of the RIA industry for custodial assets for advisers.

I see big numbers here on the page, but this represents the trust that advisers are putting in Schwab every day. That's the trust that everything is built on, on our platform. Well, the RIA channel, we know is the fastest-growing channel in U.S. wealth management here in the country. You can see here a 13% CAGR over the last 6 years from 2018 to 2024. RIAs are taking share and gaining on the wire houses. This is a structural shift that we've been seeing over the last decade, not a cyclical shift.

Nearly 70% of advisers now tell us that they prefer the independent model. Assets are in motion in this industry and Schwab is the leader of the fastest-growing channel in financial services, and we're well positioned to invest and grow as this is happening. When our clients win, we win. I've been saying that for decades now here at Schwab.

Well, the story of momentum is real, and it is sustained even today. Since the TDA conversion, we've seen our NNA ramp significantly. We saw roughly a 25% growth rate from '23 to '24. last year, a 44% growth rate in our NNA, delivering $285 billion of assets. And the momentum that continues in Q1, $86 billion of NNA. That was a record for a Q1 period-over-period. And advisers are delivering new households to Schwab. Last year, over 600,000 new households, $190 billion of that $285 billion came from new households. In this past quarter, 86,000 new households to Schwab. And we are winning in all channels. Organic growth is ramping and accelerating significantly. That's our advisers winning new clients one at a time in the marketplace.

Share of wallet sales doubled last year compared to the prior year. Let me explain what a share of wallet sale is. That's when an adviser chooses to move clients that they already manage from one of our competitors to Schwab. That is the highest sense of client satisfaction right there. Also, in our conversion sales, we saw an all-time high of new advisers joining our platform last year. Our transfer of asset ratio is over 2 and gaining steam. That means we're winning 2x the amount of assets from our competitors than we lose to them. This is not luck. This is a platform that advisers are choosing over and over and over again. I love saying that. This is so fun.

Well, you may ask me, well, Jon, why are you winning in the magnitude that you're winning? It's because we're delivering brilliant experiences to our advisers. It starts with our people in the center of everything we do. Over the last 2 years, we've invested over 150,000 hours of training with our service professionals, turning them into workflow experts and digital ambassadors. We've also built a world-class digital experience for our advisers. As you can see here, we are gaining on digital adoption. 73% of accounts now at Schwab are opened digitally, either in our proprietary digital onboarding system or DocuSign. Now 79% of accounts -- or sorry, move money transactions are done digitally with straight-through processing. We are taking paper out of the system and creating efficiencies at scale never seen before.

Our advisers, they've never been happier with their experience at Schwab. You can see here, we've got a 55% client Promoter Score, 93% satisfaction amongst our advisers, near an all-time high. But my favorite score is our 94% ease of doing business score. That tells me that advisers are enjoying our platform here at Schwab.

And here's the kicker. Thanks to all this digital adoption, we are delivering scale at a pace that we've never seen before. We're reducing the number of hours professionals spend on a per account basis. We're increasing the number of accounts per professional on our platform. But if I could bring it home for you, last year, as I said, 44% NNA growth, $285 billion of assets, we didn't have to hire a single service professional to assume that business and create the kind of satisfaction scores that we're delivering for the firm right now. This is the cycle, expert people, world-class digital experiences, scale and efficiency that is helping us compete and take share from our competitors.

Now with our mindset of continuous improvement in adviser services, I think artificial intelligence is going to take this to a whole another level. AI is not a future story for Advisor Services. It's a now story. And we're applying it in 3. And we're applying it in 3 ways. In our own back office, we're using it with our 3,000-plus service professionals, helping them be more accurate, faster and more consistent with calls and workflow with our client.

Tools like Knowledge Center, our real-time call transcriptions are helping our advisers answer calls and questions faster, more accurately. And here's the best part. First call resolution is going up, which makes happier clients, happier advisers. And then secondly, outwardly to advisers, converting everyday interactions into actionable intelligence for advisers. We're building an adviser assistant that will start with status updates for advisers and NIGO resolution problem solving, one of the stickiest parts of doing business between us and our advisers. This will help our clients deliver better experiences to their client, move client assets faster and create growth within their business. This will be delivered through the Schwab Advisor Center ecosystem that advisers travel to every day.

And then thirdly, and maybe the place I'm most excited about, which is through our open AI ecosystem. Today, our API-driven ecosystem sits at the center of the industry. We are delivering API interactions with our advisers at a pace that we've never seen before. This is driving scale and efficiency while also creating the kinds of experiences that help advisers compete. We're committed to this, committed to building an AI integration platform that helps our advisers and the fintech players innovate and create futuristic business models in their back offices. This is not experimentation. This is applied AI where it's meaningful to our clients. And obviously, with the fiduciary standard at the center and data governance as a nonnegotiable in our relationship with advisers.

Well, as you could see, every day, we're striving to be the obvious choice for advisers. And we're saying that now out loud. Obviously, we serve our clients with humility, but we're leading the industry with strength and with boldness on their behalf. But nothing says it better than hearing it from a client. So let's play the video.

[Presentation]

Jim is my new best friend at Cerity. I don't think I could have -- I heard him say the trusted custodian, the company that always gets it right. I have to say it is so Schwabvious for us at Schwab. That's right. We launched the Schwabvious advertising campaign last September, and it is already delivering for us, 100 million views, and we're the leader in the category. We're leading in brand awareness. We're leading in custodial service awareness. But what I'm most excited about is we're leading in prospect adviser recall of Schwab and Schwabvious as a provider to them. And we're going to lean more into this in 2026. We're going to deliver it through social, audio, video. We're going to do some selective sports opportunities. We want to meet advisers where they are.

And the message I have to tell you is landing. Custody is just the beginning. That's not a tagline. That's a strategic shift in our business. It's a strategic commitment to our clients. So what is it? Advisers that are winning in the marketplace today due to the competitive environment are going to need more from Schwab than just a safe place to put their assets. They're going to need a partner that can help them to serve ever-increasingly complex clients to compete, as Rick said, with the major wires and the global banks, and they're going to build a sustainable business with a partner who sees beyond custody as an opportunity and relationship with them. That's who we are. That's what we're building. And I think that's why independent advisers are choosing Schwab at an outpaced [indiscernible].

Let me talk to you a little bit about how I think this works. So I started with brilliant experiences. At the foundation of relationship with our clients, we've got to deliver on best-in-class technology and expert service professionals. But when we do that, advisers trust us to go beyond. They want our thought leadership. They want our wealth services. As Rick talked about, banking, investment, trading capabilities. That's the value that we can deliver when we go beyond custody and relationship with our clients. I believe AI will thread through all of that and allow us to deliver it at scale, efficiency as well as in the moment with our clients.

Let me focus a little bit on the right-hand side of this slide because this is the RIA ecosystem, as Rick described it. Wealth services, I'm going to get into that a little bit more on the next slide. Advisor ProDirect is a program that we launched last year and is gaining steam within our client base. This is a program for small advisers who want to lean into us for growth coaching and back-office efficiency so they can build the optimal business and grow at a faster pace than the rest of the industry. We charge a membership fee to be a part of that. Advisers are excited about it, and they see Schwab as an advocate for them, helping them compete in the marketplace.

Another great example is Family Wealth Alliance. That's a firm that we bought about 4 years ago. It's a think tank of advisory firms. Again, a membership fee model where advisers come together and learn and work on getting better at serving the ultra-affluent client. The revenue in that business is growing significantly because we're adding deep value and relationship with these advisers, helping them compete where they want to take their businesses.

I'd also mention our ultra-high net worth solution. Again, more services to help them compete against the global banks and the wirehouses. This is how we are going to make a difference in the lives of our clients. These aren't just add-ons. These are ways that we become indispensable in our relationship. We also get win-win monetization here as well as revenue diversification in the Advisor business.

Well, let me go a little bit deeper now on Wealth Services because we think this is the big opportunity. Rick mentioned it, banking, investments, trading. You can see here in the numbers, pledged asset lines, up 49%, balances up 49%. Alternative AUM, up 34%, a $90 billion business inside Advisor Services. Our institutional no transaction fee platform, up 82%. Options revenue, up 19%. Are we getting the trend here? Equity and ETF trading, up 37%, advisers are using more of our platform, and that's driving sustainable monetization for Schwab.

Banking keeps assets with advisers at Schwab. It's both, as Rick said, defensive and offensive for them in their businesses, and they're leaning in hard. Paul Woolway and team have offered to hire us even more senior bankers so that we can be in the moment with advisers, teaching them how to use a pledged asset line, the differential from a margin loan and a pledged asset line. It is creating great value and relationships.

Investments, Rick mentioned tax the long/short tax program. There is no custodian that is more open for business, helping advisers where they want to go with their investors. It brings institutional capabilities to these relationships without sacrificing personalization. And then our trading capabilities, the opportunity to help advisers find the level of execution that they need to serve their more complex clients. Wealth Services is how we're going to help advisers grow upmarket to serve bigger and more complex clients, deepen relationships with those clients and with us and compete with the largest firms in the industry.

Well, we're delivering strong results, $5.2 trillion of assets. But in a lot of ways, we are just getting started. There's $37 trillion of managed assets that sit away from us and our relationship with advisers. That's a hard number to kind of get your head around, but this is what I do know that the independent model, the open architecture model is the winning model in the marketplace. And that's exactly where we're investing, and it's the place that we are well positioned in the marketplace. We just need to keep doing what we're doing, listening to our clients and what they need to compete and grow, and we have an extraordinary runway ahead as we look at this opportunity here in front of us.

So let me leave you with this. If I could get the slide to change. There we go. Advisor Services is leading today with momentum, scale and a platform that has never been well better positioned for the future because custody is just the beginning, and that's the way that we're going to help advisers compete so they can take share and deliver an outsized portion of that to Charles Schwab. The platform is ready, we're ready. In a lot of ways, I think we're just getting started on this opportunity.

So with that, let's get started on some questions.

Mike Cyprys of Morgan Stanley. A question -- so you mentioned custody is just the beginning, and you spoke about the RIA ecosystem that you're building out. I was just hoping to double-click on the wealth services aspect of that. I was just hoping to double-click on the wealth services aspect of that. I was hoping you might be able to help size for us how you think about the opportunity set. Maybe you can elaborate on your penetration today versus where you'd like that to be, where you think that opportunity is? And talk about some of the steps you're going to take over the next 12 to 18 months versus steps over the next 3 years that could be the most meaningful in driving broader uptake of Wealth Services.

Yes. I think what we're looking at is a trend in the RIA space where advisory firms know that they have opportunities to lean on scale players like the asset managers in the industry as well as Charles Schwab. And so as we've coined it, banking is a significant opportunity for us, and that is an opportunity to help them be offensive in the market and go out and win new clients through the liability side of a relationship versus just coming at it from the asset management side. It also, as Rick said, helps them play defense because when institutions are trying to come into their relationship with low balance or I'd say, low rate loans, we can meet them in the moment and help them retain that client and avoid the disruption of a competitor coming in from an angle that they hadn't been prepared for. We think we're a differentiator there because other custodians don't have the robust capability that we have. So that's why an adviser would pick Schwab over one of the other players in that scenario.

Investments, I think in some ways, you could talk about it at the symbol level. I mean we've got wonderful breadth of product that is proprietary here at Schwab. Our INTF platform is a way that we're able to establish or extend, I should say, no fee trading institutional level mutual funds and ETFs to our clients. So that's another example of how we are going to extend into the future. I think there's a big opportunity as advisers are looking at turnkey asset management players in the marketplace. We have a tri-party relationship there. And as we talk to fintech providers, there's an opportunity to create better experience in the tri-party relationship model there. So that's another area that we're looking.

Trading is something that is, in some ways, coming back into vogue. What's really been an interesting phenomenon, I would say, over the last 3 to 5 years is we've seen national firms evolve and manage assets and an RIA firm at scale that we've never seen before. They now have block trades of the size that almost a pure asset manager would have. And so they can't just plumb those into an online trading tool and expect quality execution. So that's been a place that we've stepped in with our block trading desk, expert traders and the tools in our back office to help drive execution of large ETFs or concentrated stock positions. We are now earning a $5 handling fee for the each trade, and that is an exciting win-win opportunity that we see in the marketplace.

I think that there's a big opportunity here, and I think it's mutually beneficial for us as well as advisers leaning into us. As I talk to advisers, maybe my last thought here is -- and there's a big -- we can maybe talk about custody fees in a minute, but that is a topic of discussion in the RIA space. Advisers would prefer not to pay a custody fee. They don't mind paying for fees or for services that directly impact their ability to serve clients. They don't want to pay to move an account or to open up an account. But if we can bring value strategically to help them manage client assets and grow their business, they're willing to open up the checkbook for that kind of service. So that's where we're leaning in for revenue diversification and win-win monetization.

Charles Bendit from Rothschild & Redburn. So you mentioned that the RIA channel has been the fastest growing within the U.S. adviser-mediated market over the last decade or so. When you think about -- and I guess tech has been an important enabler of that growth. When you think about AI, both the way that you're implementing it now and how you might implement it over the next 3, 5 years, do you think that argues for continued very strong growth of the RIA channel? Do you think AI is going to be an important accelerant of that trend?

I do believe the trend continues for 2 primary reasons. One, I believe consumers are waking up to the benefit of working with a fiduciary adviser, especially those of high net worth or ultra-high net worth. I hear from advisers all the time that their ultra-high net worth clients are really beginning to understand and differentiate that kind of relationship versus what they've experienced at other providers. In addition to that, 2 things happening at the same time. You can see in our industry that the sophistication and the capabilities and the size of these firms is growing in a significant way. So I think they are way more competitive today than they were.

I would acknowledge that the differentiation gap has narrowed in the last decade. I remember in my early days, you could say fee-based, you could say open architecture, you could say fiduciary and the fish would jump in the boat because the proprietary actions of the wirehouses was a stark difference for the consumer. But as differentiation has narrowed, I think advisers have responded well in upping their game and expanding the services that they provide, moving on from investment management to planning and now estate, family governance. You would be amazed to see the long list of things that advisers do. Many now talking about health and wealth at the same time.

I think consumer investors are bringing those 2 together because they marry up to each other in their retirement years being wealthy and healthy at the same time. So I think that's an interesting trend and will, again, allow for differentiation and -- which means shorter sales cycles for winning clients.

Maybe a last thought here is that I see firms getting more sophisticated at client acquisition. We know our industry has grown primarily through referrals, investors having a great experience with their fiduciary adviser and that investor referring a friend or a neighbor to that adviser. It's been the engine of growth for the RIA space. But we now see RIA firms, especially the national firms, you hear them on the radio. Sometimes you see them on TV. They're building scalable enterprise marketing, client acquisition programs for 2 reasons, they have to create a value proposition to their adviser base that differentiates from their other opportunities, employers that, that adviser might think about going to work for. So the enterprise mindset is now driving enterprise marketing and client acquisition strategies.

Mike Brown from UBS. So I won't let you get off stage without a question about cash sweep and custody fees. So Schwab's custody is kind of free to RIAs today, and it's kind of monetized through the broad platform capabilities and sweep cash. So new entrants seem to be offering more of a subscription model with market rate sweeps, kind of framing sweeps as a bit of a conflict. As RIAs and clients become more yield aware or perhaps become more yield aware over time, how do you continue to defend the model? And might you offer a paid custody and higher-yield sweep to retain certain RIAs?

Yes. I'll echo a bit what Rick said here. So I have an opportunity to travel around the country. I do roundtables with advisers. We have an advisory board of 20 advisers that we meet with twice a year. We have a client experience advisory Board that meets with us twice a year. I talk to advisers almost every day in my day-to-day activities. And I will say this, what I hear from them is they want us focused on the friction opportunity in the business related to operations and creating brilliant experiences for those clients. We talk about custody fees, and they continue to tell us that's not something that they're interested in, and they like the business model that we have today.

And so as we listen to our clients, see the business through our clients' eyes, that's what we hear and see. So our laundry list of priorities are about driving more scale, more productivity in the ecosystem. I'll share it to you this way, which is we have about 8 million touch points a year with advisers. Let's say a touch point lasts 4 minutes. Do the math. That's 32 million minutes a year of touch points between us and our advisers. Advisers want us to take that number down so they can repurpose every 1 million minutes to other ways of serving clients to be talking to their clients about their estate, their financials, their health and wealth and less time between us and the back office. That's the list of things that advisers are asking us for today.

All right. And I think we have time for one final question.

Let's make it a good one.

Gosh, pressure is on.

So Ken Worthington from JPMorgan. So Rick indicated on the first quarter call that as part of the win-win monetization, it's exploring ETF access and service fees and ETF managers don't want to pay these additional fees. What is Schwab's potential to leverage its relationship with advisers to partner with some asset managers to better monetize access and service fees. Does that make sense?

Yes, it does. Thank you. And that's a great question for Andrew when he gets up here later in relationship with the ETF providers. But I would tell you the perspective that I hear from the RIAs is that they believe that players who are able to monetize the relationship between them and Schwab as a centralized service should help pay some of the freight to deliver that service. So for a long time in our industry, we had shareholder servicing fees around mutual funds, which helps carry the freight for delivering services to investors and advisers. And they believe that ETF players should come along in the same way and participating in the economics of the platform.

So we hear good support from our adviser base that, that is the right thing to be pursuing to make sure that everybody is carrying the day to serve investors and advisers on our platform. But Andrew can follow up on the point of view from the ETF providers.

Well, I want to thank you all for your time and attention today. I really appreciate the opportunity. And I have the pleasure of taking you all to a break now. I think we're going to be back here at 10:10. So let's get -- let's get a little bit of a break and get back here at 10:10. Thank you.

[Break]

All right. Welcome back, everyone. Really excited to be here to talk about the retail business. Chuck Schwab founded this firm over 50 years ago with really one purpose, which was to help individual investors and traders get great financial outcomes, whether they were young or old, big or small, traders or investors, the mission, the purpose was the same, which is helping them achieve the outcomes that they so richly deserve. And I'm proud to say we've made a lot of progress in the retail business. You'll see we're at 27 million retail accounts, over $5 trillion in assets but we really are just at the beginning. I really feel that. I feel that for a couple of reasons.

Number one, we're operating in a business with single-digit market share. We're a dominant player with single-digit market share in a business that is growing near or above double digits. That's an incredible place to be from a growth standpoint. I also believe in my core every day because every day, whether I'm in a cab at the airport, in my hockey league, in social circles, I talk to people who would benefit tremendously from Charles Schwab. And so it's that -- those macro factors, those micro conversations that give me as the Head of Retail, tremendous, tremendous confidence in the potential for significant growth over the next decade, much building off the tremendous growth we've built over the last 50 years.

So with that, what I'd like to do is touch on a couple of things today, very specifically talk about the strength of the business overall, talk about the very specific growth we delivered in '25 and which continues into '26, talk about how well positioned we are, not just simply because of our winning strategy but also because of the opportunity that I talked about earlier and then talk about how we're going to go after that opportunity with very specific initiatives, proven strategies and directions that will drive that growth.

Starting with some results. We delivered really strong -- in the Retail business, really strong results, '25 over '24 across all client fundamentals. You can see a couple here, but core net new assets are up over 44% new-to-firm households up over 14%. Client Promoter Score, a significant jump from 57 -- 58 to 67, very, very significant progress, which I can talk about. And those results have continued into 2026 with Q1 delivering $53 billion of NNA, over 300,000 new to-firm households and another jump in client Promoter Score to 2 points to get us to 69. That CPS score is no doubt a reflection of the relationships we built with clients but also the incredible service we deliver, the technology resilience that we've maintained that you'll hear more about from Dennis later and also just all the new capabilities that we brought to market over the last several years and quarters.

The results are in particular with 2 segments with advice seekers and active traders. On the active trader side, daily average trades, '25 over '24 for retail were up 32%. That momentum continued into Q1, another 25%. And as you saw from our SMART report, that momentum just keeps going. And then managed investing flows is second year in a row where MI flows were up over 35%. And I -- Rick talks about a bull market for advice. There is absolutely a bull market for advice. There's also very specifically for a bull market for the advice that we are bringing to market and we are serving to our clients. I fully expect those numbers to continue through '26 and beyond. And you can see already the momentum we had in Q1 with $22 billion of net new MI flows, so really strong growth.

In addition to those results, we made many, many enhancements to the value proposition over the last several quarters. Rick covered a bunch of them. There's a long list beyond this page but I'll just hit on a couple. We hired hundreds of more financial consultants, critical to our strategy, opened dozens of more branches, absolutely critical to our strategy. We expanded our alternative investments platform, and there's more to come there, launched lots of new trading products. You'll hear more about this from James. We enhanced our private wealth services offer, which is our offer built for the ultra-high net worth, the $10 million plus.

And near and dear to my heart and our purpose, just a couple of weeks ago, we launched a teen account. This is the first purpose-built account for 13- to 17-year-olds to get started investing where unlike in a custodial account where they're a passenger, in this case, they really are in the driver seat with the appropriate guardrails but they really are in the driver seat. Launching this account is really the definition of living our purpose. We want more and more investors in this country. We want them to get started earlier and earlier. And most importantly, we want them to have the service, the education and support to be lifelong successful investors. That has been -- I think Chuck probably would have said that 50 years ago, we'd all say it every day but it's now more important than ever when you -- we see others out there blurring the lines between investing and gambling.

I'll move off this but as a father of 2 boys, having them, unfortunately, they're already beyond that. They're already adults making their own decisions. But I would have loved to have a teen account for them, and they had a custodial account, but the teen account is a much more engaged product.

With the results and the enhancements, not surprisingly, there's lots of recognition of this business, and I think it's well deserved. I highlighted a couple here. Stockbrokers.com named us #1 overall for the second year in a row but not just #1 overall, #1 in advanced trading, mobile trading, high net worth customer service, ease of use. These are 5 critical categories for us to be winning in every day. So really, really proud of that metric or that accolade. And also, I think as Rick mentioned, U.S. News and World Report, second year -- fourth year in a row being #1 overall. But again, not just #1 overall but #1 in stock trading, #1 in options trading, day trading and 4x. So really, really a strong indication of not just the breadth of what we offer but the depth of what we offer. I think Investopedia just this week announced that we were #1 also for mobile and client education. Again, 2 other areas that are really core to the value proposition.

So with that success, where do we go from here? We're going to invest in proven strategies that work. Number one, more and more relationships, which I'll talk about in marketing; number two, launching new products and capabilities to deepen the client relationship across the client spectrum. Number three, we're going to continue to elevate our digital experiences, in particular, in the mobile space, but across the board. And then number four, which I know there's a lot of interest in, we are going to lean into AI even more as a tremendous unlock of value. I think we're already seeing that unlock in '26 in a very real way, and yet we're also just at the beginning of what we will see.

So let me touch on each. The relationship story, I think you know well from prior years that we've back tested this data every way, every day, every way. And I can tell you, without question, assigning a financial consultant to a client at Charles Schwab, when you compare it to clients who are like clients with like assets and like investing styles who don't have a financial consultant, you see a 10-point improvement in CPS. You see over 2 -- almost 2.5x the NNA, over 4.5x the enrollment in MI. So really, really strong results from those FCs. And it is the FC that matters. But we also know, all things equal, local is better than national. In fact, when we have a local branch versus a national relationship, we see about a 35% improvement in market share in that branch.

So not surprisingly, you're going to see us continue to invest in financial consultants and wealth consultants, and you're going to see us opening more and more branches, expanding and renovating other ones. It is core to our strategy and definitely working.

Another big part of our strategy that's working is marketing. Marketing has always been since day 1, certainly from the day Chuck started the company, marketing has been a critical lever of growth for the business and a critical lever of growth for retail in particular. I am proud to say in a market where our competitors are spending more, some a lot more, I would argue pretty inefficiently, many of them, we've been able to keep our spending relatively flat, in fact, materially down coming off the TD Ameritrade integration. And despite that, deliver more and more client outcomes defined as more and more new-to-firm households, but also younger. Younger is critically important to the next generation for them and for us. Our average age of our new-to-firm client is now under 40, just under 39. And in fact, the average age of our total retail client is now below 50 at 49. That's been coming down year-over-year materially. And that may not sound as impressive as it is, but I can tell you, when you have 27 million client accounts, each one of them is associated with an individual. Unfortunately, every one of us grow ages exactly a year, every year. It is quite hard to bring your average age down with that deep of an embedded base. You've got to do 2 things. You've got to bring in lots of new clients and they need to be a lot younger, and we're doing both of those.

And I think you'll hear more about this from Stacy, but I think the success comes from a couple of things. Number one, we know who we're going after. We've got very clear design targets. Number two, we are relentless about data and measurement in all of our marketing. And number three, I think we've just got an insight-driven creative marketing team who knows how to go after it. So marketing will and continue to be a big lever.

New products, also critical to our success in deepening relationships. I talked about the teen account. Let's go on the other end of the spectrum for the self-directed -- largely self-directed investor who wants direct access to spot crypto. As Rick mentioned, as of this week, we're beginning to invite people into our spot crypto offering. It is -- unlike others you may see out there, this is a fully integrated offering with the retail brokerage account. It will feel to the clients, and it is a Schwab experience. It is another account built into the Schwab ecosystem with easy money movement, easy trading. It's Bitcoin, it's Ethereum. It's priced at a great value. And over time, we're going to move -- we're going to have asset transfers come in as well.

So I'm really excited about crypto. Already 20% of ETPs in the industry are held at Schwab crypto ETPs. So we know there's interest there. And I also travel to branches constantly and talk to clients. We have lots of clients who hold spot crypto elsewhere, often largely appreciated crypto that they want to bring over to Charles Schwab, and they're just waiting for to get the invite.

And then private markets is another big one for us. You'll hear more from Andrew on this later. But with the Forge acquisition, we're not just #1 in public equity markets, but we're #1 in private. I think that -- I think that private market opportunity is significant for the entire client base over time, but in particular, the high net worth and ultra-high net worth who wants direct access to that $9 trillion of venture-backed private equity.

Beyond products, we'll continue to invest in capabilities for key client segments, high net worth and ultra-high net worth. We call that private client and private wealth services, think $1 million-plus private client, $10 million-plus private wealth services, building bespoke capabilities for each of those segments, the center of which is making sure we have relationships for all these folks. But for ultra-high net worth, we're also doing some interesting things. We just launched family benefits, which allows us to treat the entire family with one relationship and one set of benefits, which goes a long way. We launched a loyalty program, which is really about delivering curated and specialized experiences to the ultra-high net worth. And we also are launching a purpose-built performance reporting platform that is built for the complexities that ultra-high net worth clients have. High net worth, we're winning with them. It's critically important. We saw just last year a 31% increase in year-over-year asset growth amongst that category.

On the trader side, in the interest of time, I'm going to defer to James, who will come up in a second to talk about Trader, but lots of new capabilities in Trader. I would just say in Trader, this is not just about daily average trades. Traders also bring in 2x the NNA on a relative asset-weighted basis than their equivalent retail clients. So absolutely need to win with traders, are winning with traders, and it's not just about that, it's about assets. And then Wealth Advisory, Neesha will talk about more but wealth in general and particularly Schwab Wealth Advisory is a very, very important focus area for us. We're doing more and more localization, more and more discretionary, more and more tax, trust, and the estate.

And again, this is the virtuous cycle. When a client enrolls in Schwab Wealth Advisory or MI more generally, we see their client outcomes improve materially. So it's great for them. It is also great for us and not simply because of the monetization and the predictability of that monetization, but we see higher retention, higher consolidation and as you can see, materially higher CPS, which means more clients starting at Schwab via recommendation from someone they trust, which is a great way to start.

Digital. The digital platform still remain the primary interaction models for our Schwab clients. We have great people all over the country, have great people in our contact centers, but the vast majority of interactions are still dot-com, mobile and thinkorswim, meaningful investments coming there on -- a lot in the mobile side, not surprisingly, maybe to you, mobile is now 2/3 of all of our client interactions. Just a couple of years ago, it was 50%. 2 years from now, it might be 90%. But a lot of investments in the mobile space, including -- we keep winning for having one of the best or the best mobile apps but we're not slowing down. We're launching a fully refreshed and even more modernized version of that app across mobile and web, we're making investments in trading and positions and research. And then happy to say we also just launched a full fractional and notional trading across our platforms, which is a great unlock for many clients who want to do automatic investing or small investing, especially for smaller clients.

And then on thinkorswim, again, I'll defer to James in a minute, but a lot of investments in portfolio management and risk management. And we're 2 years off the integration and thinkorswim now represents 49% of all of our retail trades at Schwab. That's -- if there was any debate about adoption of thinkorswim as a platform within the Schwab client base, I think that's -- would put that debate away.

Last section I want to talk -- or one of the last section I want to talk about is AI. We are leaning heavily into AI as a significant unlock of value. As you'd expect at Charles Schwab though, we are doing it in a very practical way, and we are doing it consistent with our strategy. AI is not changing our strategy. AI is enabling our strategy, both on the client side and on the client-facing professional side. On the client side, we just launched the first Gen AI client-facing application that I think from any major firm, any major bank that we've seen out there called Portfolio Insights. What Portfolio Insights does is it provides a summary of a client's portfolio. I have 28 accounts at Charles Schwab, tremendously useful to get a narrative. It brings together portfolio performance, market news and Schwab and content from the Schwab Center for Financial Research into a holistic narrative for the client.

That's out today. That is just the beginning. What is coming next is on the right, which is a ChatGPT-like experience where clients will be able to interact with a Schwab Assistant in a multimodal way to get deeper portfolio insights, to get answers to service questions, to get guided coaching in session to query personalized questions like how -- what are my capital gains across my top 5 brokerage accounts over the last 12 months or 6 months? Very practical use of AI in a conversational way.

Rather than me saying much more about it, I'm going to show a demo. Two things I want -- a video, 2 things on the video, it may seem a bit fast. If you're like me, I don't listen to podcast or videos at 1.0. I often do at 2.0. I won't do that to you. But I think it's at 1.2. So if it feels fast, that's why. And then second, what I'm showing isn't in 2 years, this is in months. This is literally in months and [indiscernible].

[Presentation]

So I hope you get a sense, this is coming very, very quickly over the next couple of months, you'll start to see this already. It will be multimodal. It will get better and better but a really good example, I think, building something that is additive in a very meaningful way to the Schwab experience. I say additive because for some clients, they may use the Schwab Assistant to do a couple of things. But for other clients, over time, it may become a full replacement for navigation and point and click. It may become a third channel. Critically important. What I just showed was not new capabilities. It's a new interaction model. The capabilities that we bring to market ultimately will be driven by our strategy and will be channel agnostic.

The second thing I wanted to talk -- I think I left it quicker. The second thing I wanted to touch on quickly was our client -- what are we doing with client-facing professionals. A lot of great work you saw in the back of the room that's in production today. The first thing we launched was our Knowledge Assistant. This is a Gen AI LLM tool that allows clients to -- or allows our client-facing professionals to query all of our knowledge center data all over the company quickly to get answers to client questions. It's been tremendously valuable. We have a research assistant in production. This is for our sales professionals. All of them are using it to query all of our Center for Financial Research content and other content to find, aggregate and deliver to our clients relevant market commentary.

And then the service assistant in the back of the room as well, every single Schwab call is now going to our service assistant. It is a Gen AI tool that does all transcription, in-session coaching, all next best action, call follow-up. It is a dramatic, dramatic enabler for our financial services professionals to be much more effective with what they do and deliver better client service.

On the far right, we're building right now, what we're calling a relationship assistant. This will be a market likely in weeks, not even months. It mirrors our service assistant. And again, it helps our relationship folks with meeting prep, in meeting work and post-meeting follow-up. So again, let me play a quick video showing you what that will do.

[Presentation]

What gives me so much confidence with AI as this company was built on building the best -- building great relationships through the best of people and technology and I see artificial intelligence as being an incredible enabler of us leaning in to what we are really good at, which is trusted relationships on people and technology. And hopefully, you get a sense from that from these.

I just want to end really quickly with where I started, which is to say, we're 55-plus years in, but this retail business has achieved incredible size and scale. We're now sitting at $5.3 trillion over 7 million daily average trades, 27 million accounts, significant lending book of over $130 billion, managed assets of over $836 billion, incredible number from where we were years ago.

And we have those numbers because we bring together this people and technology, not just great service, but best-in-class digital platforms, not just great value, but best of Schwab and third party, not just investing, but investing trading, banking advice, all under one roof, supported by a whole cadre of coaching and education and branches.

That model is working, and that's the core model. Beyond the core model, we have curated experiences for lots of different segments. I identified a couple here, self-directed investors, traders, younger investors, advice seekers, high net worth, ultra high net worth. We have specialized capabilities for each of those. And in each of those categories, we are winning. We are #1 in retail trading. We are #1 in options trading. We're winning with younger folks with over 60% of our new to firm households being under 40.

We are winning with advice seekers with rapid growth, year-over-year growth that I see continuing for the foreseeable future. And we're winning with high net worth and ultra high net worth. So I feel -- hopefully, you sense my passion. I feel a tremendous amount of confidence in where this business is. But frankly, I have as much confidence about where this business is going to go.

For the reasons I said earlier, I can't think of a better position to be than being at a dominant player with relative -- with still low share because of a fragmented market in a business that's growing dramatically and in a business where clients need us.

When people come to Charles Schwab, it's good for the -- it's good for the client, it's good for the company, and frankly, I think it's good for the country. So with that, I'm going to bring up my colleague, James Kostulias, who's a critical part of the retail team and leads specifically all the trading business.

Well, energy up, you got to get energy up a little bit. I'm really happy to be here. I had a great conversation last night. I love the questions. I'm going to try to get to, I think, what were some of the key points that were brought up last night. And so really where we start, I think, is you know the numbers as well as I do. I'm sure maybe in some cases, even a little bit better. So we have some numbers on here, but really what I want to talk about are 3 main things.

The growth we've seen in the trading business as our undisputed leadership position in the business, why we believe and confidently believe that, that growth is sustainable and what we're seeing to really indicate that to talk a little bit about the holistic value proposition, which is honestly the secret sauce in the trader space, in different market conditions, different components of the value proposition are more important.

And obviously, we're in some unique times with some of the things that we're seeing with the conflict in the Middle East and the geopolitical situation. And so the education part of the business has become really important now as clients are trying to navigate those different market conditions.

And then three, why we're so excited about the future going forward. The future is really bright. We have our foot squarely on the gas and nowhere near the brake, and we are really excited about that. Again, not to get into the numbers too much. Just to tick and tie the one, you just saw from Jonathan, that 9.9, you saw over 10 in this morning's smart report because I know you all read that first thing in the morning or maybe after your trip to the gym, that 9.9 is a total firm number, which is now obviously over 10 that includes the RIA business that Jon had talked about before, continue to see really strong growth in derivatives.

The other thing I think that's really important thematic to think about here is we've got the active trader business, and my team and I live our lives thinking about both active trader clients and their holistic needs across Schwab, whether that's in the trading space or beyond the trading space, right, and how we partner across the organization for that.

But trading is also what we think about all the time. And a lot of this trading that we see, especially in the growth numbers are coming from clients we don't segment as active trader. And that's been a trend that's really got kicked off during the pandemic, but sort of the seeds were planted, the seeds have been watered with Liberation Day and honestly, under this entire administration, there's always interesting trading opportunities and clients are engaged whether they're traders or they're not traders, right?

And so we talked about half the trades placed on the thinkorswim platform. That means half the trades are placed on non thinkorswim platform. We actually look at the client base that uses thinkorswim. About 45% of those users are not segmented active traders. But what does that mean? They're interested in trading. They may be interested in the charts.

They may be interested in watching the Schwab network there. They may create watch list. They may like the news and research. Our live education events are segmenting half traders, half nontraders now. All those non-traders are interested in maybe placing their first option trade, maybe placing their first equity trade, honestly, maybe placing their first complex option trade.

And so huge opportunity with both the active trader space and the nonactive trader space. Jonathan talked a little bit about the success we're having with younger clients. That permeates into the trader business as well, where you see the 42% of clients from Gen Z., leveraging the thinkorswim platform. Education, so critical to our value proposition, is a little bit of a barbell. We get a lot of the older clients who are interested in education. Maybe they've just retired, they've got a little bit more time they want to learn about trading, and we got a lot of engagement with young folks within all the different value proposition pieces we have in education.

We have courses. We have online content. We have live events. We do 35-plus hours a week of digital virtual content. And the trend within derivatives trading that you've seen for a long time, absolutely is continuing. And that 38% number is a big number that we're really proud of. I think the other key point on why we believe this engagement is sustainable is historically, trading was very, very tightly correlated to the VIX, the overall VIX and the beta was probably near 1 beta, right? VIX goes up trading volumes go up.

We're seeing unbelievable results, as you saw in the smart report the other day at a time when the VIX is fairly muted. Why do we think that is? We think clients are -- we know clients are able to find opportunities to seek volatility either in products, some of the new products that are coming out, single stock to date options, as an example, you've got levered funds, obviously. But you've got volatility in sectors, right? The migration that we saw in client trading from mostly tech, most of the time to a concentration in metals trading at the end of January, rolling into energy trading that we're seeing here with some of the geopolitical news in the environment.

And the reality is traders and investors are finding opportunities in this market, not directly correlated to overall volatility. And that's honestly been happening really since the pandemic and we see that as a trend that's absolutely going to continue here. The proliferation of new products is going to help support that as well as we look. I talked about single stock Zero DPE. We've got some other things coming down the pipe with binary options and outcome-based options from NASDAQ and the CBOE. You've got single stock futures and other things coming as well, which is going to help clients identify trading behaviors.

Jonathan talked a bit about sort of the broader success that we get from the industry, but I have to put a couple up here to third-party validation, right? That's important. The other one, I think that's important. We talked a little bit about last time, I recognize a lot of faces, we were here coming off of the TD Ameritrade integration. We had some clients who weren't thrilled about getting moved over to Schwab. Those clients are absolutely loving it here, and they're taking advantage of broader Schwab products in droves, right?

And so they're traders from Ameritrade taking advantage of the things Neesha is going to talk about in the invoice space and in the banking space. And all that has led to a 14-point year-over-year increase in our Net Promoter Score, and those trends continue to rise. And so our traders are really happy here. The other real big opportunity around traders invest and investors trade, right?

And I talked about the investors trading piece. The traders investing piece, again, is such a big opportunity for us as we look at them taking advantage of Jon Beatty's RIA services where needed and Neesha's wealth management services where needed. And all those things are important to traders.

The idea that we had a lot of self-directed clients is true but those self-treated doesn't mean do it alone, do-it-yourself. They often want some form of help in some form of engagement, whether that be with traditional wealth management on the one side or that be with the trading experience. So we talk a lot about our experience curated for traders supporting traders. And nobody can really match that. As we look at the value proposition, this is really the secret sauce to the trading offering at Schwab.

We have clients who are here for the platforms. We have clients who are here for the service relationships. We have clients that are here because they tell us, no one helps me manage risk in my account better than you, whether it's the experts I talk to, whether it's a specific analyzed tab within thinkorswim, nobody helps me manage complex trading relationships the way you all do.

And we have clients that are here for the network, right? We've got that are coming out and attending multiple live events in cities. They bring their laptop. They sit down for 6 hours and they engage in education.

That's a huge time commitment and they come back and those CPS scores are actually even higher than the Net Promoter Scores that I talked about before. And so it's not one of these things. It's an absolute definition of the sum is greater than the whole of the parts. It is absolutely a holistic value proposition that appeals to traders wherever they are along the spectrum, right? Start out from placing your first equity trades, your first option trade, your first complex option trade, cross-asset class hedging and portfolio margin accounts, they all take advantage of different components of the value proposition.

We couldn't be more excited about what's ahead. We push to 24/7, it's coming. It's real. In some cases, it's here. We'll be -- we are live 24/7 now with crypto trading that we just recently launched, and we've got the CME listing their first products here at the end of the month, more products to come.

Our options, market makers are equity exchanges, everybody is moving towards 24/7, which is only going to create additional opportunities. We continue to enhance the margin experience. Some of you have asked questions about the pattern daytrader rule changes, if you want to grab me at some point offline and have a quick conversation on that, I would be happy to do that.

But that's also, we think, going to benefit those individual investors, especially the younger sort of smaller account who had some restrictions on them before. And we recently just rekicked off an IPO experience at Schwab that we are really excited about. There's been a lot of talk here today. We are using AI within the thinkorswim platform around how we curate and present some content for clients.

We have more to come from an agentic experience to really help onboard you to the platform and then plug in essentially to some of the things we talked about with the services system. So more to come there, but we are absolutely leaning into AI in the trading space to help clients with their trade ideas.

I hit on a few of the education things. I want to talk about the people part for just a couple of seconds. Nobody, nobody offers as much people support for traders as we do. We've got all the technical support you want. Any medium you want to come through chat, Bones, live events, in-person in branches.

We're the only firm to offer trader specific branches to help our active trader specific needs. We've got multiple people in multiple locations that are leaning in and focusing on that, all through clients' eyes, right? You want to interact with us, you choose the terms you want to interact with us, and we'll provide the world-class value proposition.

I talked a little bit about some of the education stuff. Coaching is a huge thing. We've seen a huge uptake in coaching. The Schwab network is a little bit of a hidden gem that helps our clients understand, get some trade ideas, hear things about risk and get to see the platform in action that we host on the network.

If I can conclude for you all, I would just say this, more and more investors are engaging in the markets. Our traders are always going to be engaging regardless of market conditions, they trade in bull markets, they trade in bear markets, they trade in sideways market.

We're getting more and more engagement from the nontraders, which is fantastic. We're continuing to expand our market-leading offer to meet their demands wherever they are. And we're really excited about a lot of the things coming forward with maximum commitment towards investing in a better experience.

Thank you so much. With that, I want to invite my boss and friend, Jonathan back up, and we're going to do a little bit of Q&A. Welcome back.

Ben Budish from Barclays. Question maybe for either of you. I'm curious if there's any more stats you can share around retail trading, particularly with adoption of derivatives. I'm curious how many accounts are enabled for derivatives and I imagine you see some upside to that, but how many of the actual customers are doing it?

And anything you could share in terms of the mix shift, there's been a lot of growth in things like index options, and there's obviously some P&L implications we're thinking through, but I would think that engagement with derivatives more broadly is also a positive. So curious on those 2 items, and anything else you can share.

Yes. So we can come back to the exact number. We have millions of options approved accounts. Their activity levels will vary month-to-month, some are active and some are not active in other months, but those numbers continue to rise as well. We're also investing in processes to make it easier for clients to apply for options, migrate through the various different approval levels. By easier, I don't mean sort of laxing from a compliance perspective. I just mean making it clear, making it cleaner making the process simpler.

On the mix point, I think I talked to some of you about this last night, it's an important one. When we're in markets where we're seeing really explosive growth in trading, oftentimes that growth is more equity heavy than option heavy. If you think of our traders as being very consistent, they may trade 5% more, they may trade 3% more in different markets.

But if you think about those growth numbers coming from your nontraders, those are typically more equity focused. Their notional values of trades are typically a bit lower. There are options trading when they do derivative trading, they do a fair amount of it will be smaller number of contracts per share.

So I think overall, there's a little bit of a natural hedge here, which is, I think, something that sometimes gets missed as well. When we see their trading numbers go up, obviously good for us, good for our clients, good from a revenue perspective. But you'll see the revenue per trade go down a little bit. If you were to see a little bit of a pullback, the pullback typically comes in the nontraders and so the trading volumes, if they were to come down a little bit, you will see the revenue per trading the contract for Trade Creek back up.

So as you're thinking about your model sort of specifically, as we see a lot of growth and you start modeling more growth in the revenue per trade piece will come down a little bit. And if you start to pull back a little bit on trades, I would see that going up.

I would just say that a lot of the great derivative growth we're seeing, I think is us talking to clients about what their trading strategies are and how we can help them with risk management and things like that. So that's pretty unique to Schwab, I think, adding that value.

Chris Allen on KBW. I was wondering if you were working on or at least thinking about AI-driven solutions for portfolio management and/or trading. In terms of utilizing AI for active portfolio management implementing trading strategies.

Yes. So I'll start and jump in. But what I demonstrated then there was, again, I would call the Schwab system, that Schwab assistant, over time, you can imagine it being a different interaction model that supports all the capabilities you could do a Schwab, otherwise would point and click and navigate to.

So I do expect that over time, we will add more and more capabilities to that assistant. I don't think AI will change our strategy. We have a strategy, and we will use AI to enable that strategy and what we enable will be cross channel agnostic to the channel. So certainly, being able to say the assistant, okay, based on this, I want to place a trade, place that trade for me. Here's the market or here's the you want to limit has placed it at this limit order.

Absolutely, I can imagine things like that. That's consistent with what we do today.

And I would say we have a growing API business where you have clients who are doing a lot of the more sophisticated trading today. We absolutely want to incorporate agents into that to help them. Some are using their agents already today and working with us through the we want to, as Jonathan said, talked about the expansion of the concept there and bring that into thinkorswim.

I think the first place we're going to do it later this year is going to be around the onboarding and sort of learning the platform, right?

We think we want to make it easier for clients to engage with an agent to understand how to set up and customize and do sort of the basics. You can think of the natural evolution from that as they consume hundreds of pages of content that we have in PDFs.

People don't want to read 100 pages just that's probably an insight for you all, but they don't want to do that anymore. They want to engage and they want to have conversational dialogue about it. The next step is we have tools like Think script that will help you automate your trading. How do we make that simpler and much more conversational as opposed to a bit more like programming language today, all that's coming.

Devin Ryan with Citizens. More of a short-term question. Trading volumes are hitting records right now. We're in a good backdrop, you mentioned kind of this administration and opportunities. Can you help us think about how much of the activity right now is secular and structural, meaning more products, more clients they're better educated.

And so people are just more engaged structurally versus how much is just this cyclical element, and so we wouldn't be surprised to see a big pullback. And I think that -- just trying to understand if we're seeing signs of maybe or similar to what we saw in 2021 when we peaked and then roll over. How are you thinking about that right now?

Yes. That's a fantastic question. I think I'd say 3 things to that. The first would be absolutely some of the traders and the investors that got sort of baptized by fire during the pandemic have matured, and we like to think our service model and our education model has ultimately helped with that. and they're now fully engaged in the market.

And they're comfortable trading in various different market conditions. If you looked at our numbers specifically from March, but really for all of Q1, where we had some market pullback here and certainly more uncertainty with the geopolitical situation, our trading volumes continue to rise.

Some of our competitors certainly didn't. And I think I would say that is a structural change that we have seen. I think the other big change that I've seen historically before, I talked about the correlation to the VIX overall. But a lot of our traders used to be very either symbol or very sector-specific.

The migration across areas of different sectors and different symbols to trading opportunities. is really, really interesting to me and something we've been seeing for a while now.

If you had told me in January of this year that for our younger clients, our 30 and under clients for a specific week in January, GLD and SLV were to be the most traded ETFs, I would have said you're insane. Young people don't trade gold. They don't trade silver, right?

They're all in technology or everything else. That lasted for a brief period of time, we saw extreme volatility in the metals then they moved over. Now they are trading energy stocks. And so I think the ability to sort of migrate from sector to sector and symbol to symbol also feel structural to me versus secular.

Now I do think, to your point on the administration and sort of the broader world, there's absolutely some that we're getting from that. But if I were looking at the continued increases we're seeing, I would put much more in the structural change camp as opposed to secular trends.

I would -- I think our -- just to add, our client base is pretty distinct in that regard. There's always going to be cyclicality associated with markets VIX, geopolitical environments, think we have a much more durable client base who have a more disciplined and professional trading strategies or investment strategies that I think creates a lot of that durability.

So maybe 1 way to put that, 25% of our option volume is complex option volume. So the implication there is, hey, in any kind of market, I can trade. I'm not taking fires on deep out of the money calls and just cross my fingers and hoping the market goes up. That's very unique in the industry.

I think we can squeeze in one more.

Alex Blostein with Goldman. I wanted to double-click into a couple of things you mentioned, particularly related to market structure developments. One is 24/7, which feels like it's grown rapidly, and you obviously made a point that you already offer some of these capabilities.

But to what extent do you think this could enhance your ability to access retail investors outside the U.S. because that sounds like where the incremental could really come from? And then separately, but sort of new things, prediction markets, maybe it's helpful to get your latest view on how you see yourself engaging with that part of the world.

Let me take both.

Yes.

Maybe prediction markets will be over the next break 1 because we're going to run out of time. Happy to chat about that one. But I think 2 things I'd say. The international business is a great business for us. Rick touched on a couple of things.

In any given month, probably 8% to 12% of our new accounts are coming from the international business. So we're seeing nice growth there. They participate and an outsized proportion in the 24/5 trading that we see. So they're punching way above their weight because they're interested in U.S. market trading on their terms.

I think that's only going to increase as we see it move beyond 24/5 and into 24/7, and we continue to see liquidity rise, right? Liquidity begets liquidity. I think there are a lot of international clients who want exposure to U.S. markets for sure. And I think the 24/7 push is absolutely going to be something that's going to help with that. We will continue to see growth there.

Lastly, I would just say on that, we see big nights in 24/5 trading around geopolitical activity, Navidea Earnings Day is typically a day, we'll see a lot. On a normal Tuesday and a normal Wednesday night, you don't really see all that much volume there. But a lot of the core volume you see in the day-to-day days is driven by the international clients, and the trends there is actually positive.

I know we're out of time. So prediction markets maybe offline, but maybe just generally back to our purpose. We are here to help individual investors and traders achieve great financial outcomes.

And for that reason, I think Rick and many of us talk a lot about the getting the line between gambling and investing. And that's we do believe there's a line there. Now with respect to prediction markets, there could be an opportunity over time, and we're certainly looking at them. But it's got to make sense for us. It's got to make sense for our clients.

And that's the lens we look at, and we've looked at for 50 years, and we've continue to innovate over those 5 years and broadening new products to market at the right time under Schwab's terms when it makes sense. And I think crypto is a great example of that. So I know we are -- I think we're out of time.

So thank you, and I think I get to introduce a Adele Taylor, who leads our workplace business. We call it the workplace business, but it's really side-by-side with the retail business and a critical part of it. So thank you.

Hello, everyone. Great to be here with you all. I'm Adele Taylor, and I lead our Workplace Services business. I'm very excited to share with you today how Workplace is powering Schwab's performance. and the incredible opportunity we see for it to have a much larger role in our growth story going forward. So let's jump into it.

I'm going to share 3 things. First, Workplace is driving asset growth for Schwab today, both on a stand-alone basis and in the way that it supports our retail business, as you just heard from Jonathan and also our Advisor Services business.

Second, the market is coming towards us, things that are changing externally about what companies and corporations want from their workplace services match very well with the value proposition that we can provide at Schwab. And third, we aspire to be much larger in this space, and we're leaning into that with a set of investments and an action plan to get there.

What I'd love to start with is pulling the curtain back a bit on what is workplace services. It's a set of businesses that are very complementary and work together as a platform. I'd like you to think about it in 2 categories. The first category is places where we go directly to a company and sell a service and then we engage directly with their participants on an investment-related need. This includes our retirement plan services. We administer 401(k)s, nonqualified deferred compensation plans, employee stock ownership plan, a whole litany of other plan types. So it also includes our stock plan services business. This is equity compensation awards and employee stock purchase programs. We manage the equity awards program. We record keep it and then we accept the shares when they invest directly into our brokerage accounts.

We also have 2 brokerage offerings, designated brokerage services. which is a trade supervision and monitoring tool that companies use for compliance purposes, again, using our brokerage capability from retail and personal choice Investment Services which is a brokerage offering inside 401(k)s, sits on our platform, also sits on more than 20 other record-keeping platforms. So taken together, a lot of businesses, but we go directly to the sponsors and then we're able to engage with their participants as a result.

We also have 2 businesses that support RIAs and extend our retirement offering to the very small end of the market. We power key partners of RIAs called third-party administrators. Now this is an established and recognized business. Our record-keeping providers, our recordkeeping platform is known as a service-centric, participant-centric trusted name in the industry.

In Stock Plan Services, we're a top 4 providers. And in fact, we serve out of the magnificent 8, 4 among the largest public companies in the world. And then our brokerage products are also leading Personal Choice as the #1 in this category. And as a result, this is driving on a stand-alone basis, performance for the firm. It's about $1.3 trillion in client assets. We touched 6 million participant accounts. And last year, we drove about $70 billion in NNA. Now again, that's stand-alone.

What I'd like to share next is how does workplace power the rest of the firm. And this is probably the most important thing that I hope you take away from today. Let's start with our retail business. By nature of us engaging and building these relationships directly with those 6 million participant accounts, we're able to introduce them to everything that Schwab has to offer. They come to schwab.com, they call our service centers. They have access to phone teams who are licensed, trained individuals. They have access to our financial consultants, our wealth consultants, the full set of everything that you just heard about from Jonathan.

This is also very self-reinforcing because we take everything that we're able to provide in retail and use that as an anchor of our value proposition as to why we're really well positioned to help sponsors or these corporations achieve what they want with their plans.

Now with Advisor Services, we have a very different but also quite powerful relationship. We extend the solution set for these individual advisers to be able to compete on their own and serve their clients' needs. The retirement spectrum that I talked about and the Stock Plan Services, they work with small businesses who have those needs. They also are looking for, as you heard about from Jon, ways to grow their businesses and their practices, and many of them are building up retirement consulting arms. That means they go design these plans with the companies, and they need a vendor. They need a partner who can provide those services, and we're one of them. Again, we have a mutually reinforcing dynamic here. Today, about 60% of our new business referrals come from an adviser who has a wealth management relationship.

Now this flywheel is today very powerful. And I have a couple of statistics here that demonstrate that. Every year, we introduced about 400,000 new households to Schwab. These are individuals who we have never worked with before, and we only have the ability to talk to them because we got that planned relationship. They're already working with us because they sit at that employer. And this number is so large, not because plans are coming and going, but because those companies are growing. They are hiring. And of course, there's a natural employee life cycle as part of that.

Also today, more than 1/4 of our participants have another relationship with Schwab. That's a result of us obviously having the sponsor relationship, but equally importantly, the strength of our value proposition in our other 2 businesses. And finally, when assets leave the plan, 50% of the time, those individuals choose to keep them with Schwab. So you can see this is a very powerful flywheel. Stand-alone, we're performing well, and we're also doing a great job supporting these other 2 businesses.

Part of the reason for this is the strength of our value proposition today. We are known for service. We are known for client centricity, and we are known for being a trusted brand who's on the side of the individual investor. And I think these numbers really speak for themselves. When I say service, in the workplace context, it means how are we working with HR executives, finance executives who are administering these programs. And our teams show up with ownership, with integrity, with expertise and with credibility. And when I speak to our plan sponsors, this is consistently the top thing that they tell me about what they value and what they value in our relationship. Our client Promoter Score, again, with those corporate individuals is 80. That's industry-leading.

We also have the same participant service value proposition in the workplace channel that we do in our retail channel. We pick up the phone when someone calls more than 90% of the time in 60 seconds. You get to talk to a licensed trained individual who knows how to talk to you about everything, your plan capabilities, everything -- excuse me, your retirement needs, things that are outside of your plan. And their ability -- they're able to do that is something we're going to continue to stay focused on.

And then we're recognized in the industry. Planned sponsor is one of the many industry consortiums. And for 9 years running, we have been the #1 -- excuse me, we have the most #1 best-in-class awards across the recordkeeping set. Those categories include participant experience, sponsor experience, record-keeping platform and investments and fees. So we're starting from a very strong position.

However, what I'm most excited about is the opportunity that we have ahead to do even more for Schwab and for the participants in those plans. Let me start with what's happening in the broader market and why there's a lot of opportunity for us to compete.

First of all, the retirement space and the equity space, these are sizable and growing and deep markets. I'll start with equity. It's about $3 trillion today in granted and unvested awards, and that is expected to continue to grow and expand. Most of the large public corporations already offer this, but they're increasing who they're offering it to with their employee base. More than 85% of plan sponsors say they anticipate this continuing to grow, especially with stock market valuations where they are, it's the way that employees participate in the success of their companies.

So a very similar story on the retirement side. It's about a $13 trillion market and something that employers really do view and employees expect as a core part of their benefits package. People are also looking at multiple different plan types. We're seeing an increase in the number of sponsors who are offering more than one type of retirement offering. So that's one big thing happening in the market.

The other change is that sponsors today are asking for help with their employees on financial wellness. That means help them understand their benefits, help give education, help give context, help give point-in-time advice and give them the ability to execute, to invest right alongside their benefits. And this is a shift. About 90% of plan sponsors today say this is very important to them when they're thinking about who the partner is they're choosing to work with. That's up from more than 5 years ago, it was around the 60% mark. So again, we're seeing a real shift in the market.

And then finally, what are employers asking for from their partners and from their providers. They really want simpler and more integrated experiences. They work with a wide set of different vendors across HR benefits. And as they think about how they're being asked to do more with their resources, they're increasingly looking for places that they can simplify.

So given that's what's happening in the external market, you can see why Schwab is so well positioned to compete and to win in this space. Our value proposition is to be an integrated provider. We will help you with the full set of your retirement solutions, however many plans and whatever type you need. We have a set of equity compensation solutions right alongside wellness. That's the guidance, that's the service. That's the ability to help those participants understand and take advantage of their benefits and the ability to invest alongside. All of that is underpinned by who we are at Schwab and how people recognize us and associate us with what we stand for in the broader market.

I want to share something that really brought this to life for me. I visit our corporate sponsors regularly. And I made a visit out to ones on the West Coast, a technology provider, and they have a retirement plan with us and a stock plan. They chose us because of that integrated benefits offering as well as the wellness. And I had a few interactions.

One thing that I saw happen was a meeting between our service teams, the relationship manager and the corporate service teams with their HR partners. They were planning for this company's largest vests ever. They were performance-based awards, and they were planning how could they actually communicate that to participants, how could they make sure that our phone teams were aware and available, and how could they make sure that operationally, it went flawlessly. It's a real dynamic of collaboration and a partnership.

Then I went down the hall, and I saw one of our corporate financial consultants. So someone who is trained just the way every consultant is in the branch network actually physically sits on site. It's an office just like any office on a corporate campus, but it says Schwab, and this individual is there every day. She sets up appointments, 3 to 4 a day. She has her door open when people want to come ask questions. And she shared with me while I was there, the last meeting she had an individual, a mid-career engineer had come and said they were trying to figure out how to manage their overall tax situation. And she took that, had a dialogue with them and set up a follow-up to do a full planning, which, as you all know, is really the entry point into a lifetime and much broader financial relationship.

And then finally, I met with our the CHRO there, who I speak with fairly regularly. And she shared with me that they want us to be an extension of their team. They're viewing this as a long-term partnership, and that's something I'm going to continue to work on with her. So a ton of opportunity ahead.

Now I'd like to share with you how are we going to go capture it. Here's the plan. First, we're going to go out into the market and win more of those sponsor relationships. I see several avenues of growth for us to go after, and I'll give you a couple of examples of that. One is the way that these retirement plans are sold in the broader market is through advisers or consultants. And you'll recall that I shared that almost 60% of our referrals today are coming from ones where we have a broader relationship with Schwab. We're going to them and saying, we'd like to team up. Are you growing and this is a focus area for you? And are you looking for a preferred partner that you'd like to grow with you? And we can tailor our service model, our sales model, our coverage model with them to help them grow and earn those relationships.

Another example of something that we're doing to win stock plan business is we're going earlier in the company life cycle. We're going to go -- we've recently launched a new offering that you've heard about on some of our other earnings calls called PIES, Private Issuer Equity Services. And this is cap table management for companies that are approaching IPO, but not there yet. And by establishing those relationships earlier and promising to convert them seamlessly into their public market capability alongside retirement, alongside advice and education, alongside investment support for their employees, that's a very compelling value proposition.

We're going to make it even stronger by adding Forge into the mix. As you know, we've recently closed that transaction. And we can use their relationships as well as their offering to meet with those private company CFOs and talk to them of a suite, stock plan management, retirement, liquidity solutions for their employees, wealth management. Very few providers can do that in the market today.

The second part of the plan is increasing the engagement with retail. Now as you've seen, we're already in a very strong starting point, and I believe we can do so much more to bring everything that we have in retail into the workplace. It starts, of course, with digital channels. That's often the first place that people interact with us, and we are wholly integrating this experience into our Schwab digital properties.

On one example you just saw in the last session, the Schwab Assistant. And you may have noticed one of the skills on that was talking about stock plan and RSU capabilities. That's going to help our participants get more engaged and drive them to live channel where we can start a broader relationship. We're also doing a lot to optimize that in-person and live engagement. We know that when someone calls into Schwab and asks for a consultation when they say, I'd like to have a meeting with your advice team, they don't have a relationship yet. But after they talk to one of those individuals, 50% of the time, they take an action. So we've got to find ways to be in front of people at the right time and get them the guidance when they want it.

So those are the 2 plans for growth, win more plans and let's get more retail engagement from these relationships. We have a few key enablers where we're investing to be able to do that. The first is on our core technology platform. The bar is always rising. These plans are getting more complex, and we'd like to be able to do more with those administrative features and functionality and meet those sponsors' needs. We've increased our technology capacity in this space. We're going to continue to stay focused on that.

We're also working on further strengthening our relationship model. As you saw, we already have a CPS score of 80. We're in a very strong spot. But what we'd like to do is lean into those relationships and bring them more value, be more proactive with other ways that we can introduce Schwab, including our financial wellness support.

And finally, talent. This is a service-led business. And as you have heard me say, this is one of our main differentiators. I'm very focused on making sure that we can attract the talent and continue to foster that. Even if an individual is not in a client-facing position, they're supported by a team who's helping doing the solutioning that is.

So with that, I hope this gives you a sense for how well positioned we are in the workplace business and how much potential we have to be a larger part of Schwab's growth story.

And with that, I'll open for your questions.

Steve Wharton, JPMorgan. Obviously, a large competitor has been very successful in workplace and generating net new asset growth. They did 2 acquisitions over the years to help build it. I'm just wondering, as you think about your growth plan, like how hard is it to dislodge existing workplace providers? Does your strategy require acquisitions? Just give us a little bit of color on the dynamics on how fast you can make this happen in light of a very intense competitive dynamic that already exists.

Thank you for the question. So let me start with the planned purchase dynamics or the sales cycle, so to speak. So it's -- though we can sell these on an integrated basis, sometimes they do come to market differently. In the retirement plan space, these plans tend to come up for bid or review at least every 5 years. They have a fiduciary obligation. So there's a natural catalyst for it to come to market.

We do come up against a wide range of competitors. This is a more fragmented space. And we, in that situation, are really leaning on our differentiators, service, financial wellness, who we are as an institution.

On the stock plan side, it's a little bit different. The reason that these plans come to market, we are finding is when there's been a service issue with another provider, these are operationally complex things to go after. So it's not uncommon. They do come up for bid.

The best place to establish a relationship, however, is pre-IPO because any time you go through a conversion, it's an experience for the HR team. It takes work, it takes care for the employee experience, and you're placing a lot of trust in the provider to expose your employees in that way. So the opportunity for us in Stock Plan is going after the places where we know there's been service issues and then going earlier in the life cycle with PIES as I was talking about.

To answer your question on acquisitions and how do we think about that, as with any strategic opportunity, we are always looking at build, buy or partner, and we're going to continue to evaluate that. What's the best capability? Time to market, expense, all the things you would imagine. We are very pleased with our ability to bring PIES to market more quickly because of a partnership that we did with Capita, who is a recordkeeping software provider. We are the front end. We are the sales team. We are the service team. We are obviously the financial wellness provider, but we got there more quickly by using someone else's existing record-keeping software.

Brennan Hawken, BMO. I'd be interested to hear maybe some more specifics around what your goals are around driving the growth, right? Maybe what percentage of net new is your business today across Schwab? Where do you want to get it to? Or if the idea is maybe market share, where you are today in the various businesses and where you want to go?

Sure. Thank you. So let me start with just where we are in the market today. On our largest businesses, Stock Plan and Retirement Plan Services, Stock Plan, we're a top 4 provider, and it's a much more concentrated set of competitors. So when things are coming up for bid, we've got a real opportunity to be in front of that.

On the retirement plan side, we are one of the smaller providers. If you look at the defined contribution league tables, we're a top 10 provider. The space, however, is much more fragmented. It's not that every time something comes up for bid, you go to one of those same core competitors. So our advantage in that space based on our value proposition is really finding ways where we can get distribution advantage. We want to be included in the RFP processes where we're a good fit for those providers. And that's why I mentioned we're so focused on the retirement consultant dynamics and building growth partnerships with those individuals.

Then in terms of the results that I'd love to see from this business, it's too early for any specific NNA numbers. But what I will say is we are very focused on 2 indicators as we think about growth. One is the plans that we're bringing in, which directly results in NNA on a stand-alone basis. And the second is how are we introducing those clients as relationships to retail. How many households are establishing a relationship that they didn't have before. And those households, how are they bringing assets and consolidating their broader relationship with Schwab. So those are two things that I'll be looking at pretty closely going forward.

And we'll take one final question.

Rick Roy from Jefferies. Maybe just expanding on that last part of your answer. If you could dig a little bit deeper into your strategy for capturing the assets held away once these Stock Plan participants do choose to vest with Schwab Brokerage and going after perhaps the broader portfolios that might not be on the Schwab network, if you could expand on that.

Yes. Thank you for the question. So the way that we are establishing those relationships is using the multiple channels that we have developed through the retail organization and being in front of those individuals at moments that really matter for them. So if you think about the digital experiences, the way that we're communicating with them through e-mail, the live channel conversations where they call in and ask a question about their plan or about how they're thinking about their broader financial life and then when they're coming to the in-person channel. So those are the 4 ways that we get in touch with them.

We are using -- who you're going to hear from next, our Chief Marketing Officer. We're using all of the marketing techniques that we have in other places to make sure we know when there's something happening and that person may be open to broadening their relationship. Just one small example of this. We know that when an individual onboards into a plan, that's the highest moment that they're open to thinking about their financial life consistently. There are many others through the process. But there's a little bit of money in motion, right? They're thinking about their financial relationship. They're enrolling. They're making decisions that they previously haven't.

Something else that we're working on across the board is embedding advice very early in that discussion. When you lead with helping someone think about how to solve their problem, that's what leads to an established relationship over time.

Great. Well, thank you very much for the questions. It's great to spend the time with you all. And I'm going to bring up my colleague, Stacy Hammond, our Chief Marketing Officer.

Hi, everyone, and I'll add my thanks to being here in Texas with us. It's a privilege to get to have this conversation. And I would like to thank Rick and Jonathan and James and John and Adele for giving a master class and why I say to my team all the time, there has never been a more exciting time to be a marketer at Schwab because our value proposition in the market is winning. And there's only upside from there. We should be a bigger company. And it's literally our job definition to get to bring that value proposition to market so we can bring it to more audiences, and we can bring more dollars to Schwab.

It's also a privilege to get to see a lot of the marketing that we create have already appeared before I even took to this stage, and that is because I am in the business of supporting the enterprises. I support their growth by bringing that value proposition to market. But we're going to focus on today is how we do that, the strategy behind that. So it's one thing to say we're an engine of growth.

It's another thing to prove it. I generally prefer to prove it with data rather than claims and conjecture, although I've been known to do the latter as well. But clearly, marketing is foundational to our enterprise growth, and we are consistently able to drive growth for the enterprises even with a declining marketing spend as we would have expected post synergy. So as you heard from Jonathan, we acquired more than 1 million new retail clients last year and the profile of those new clients is fantastic because we are able to acquire more affluent clients, more traders and more younger investors. It would be one thing to be winning among any of those audiences, but our ability to win across all 3 of those audiences really proves the point that our value proposition is broad in nature and resonates with a wide range of investors, opening the aperture for future growth opportunity as well.

So clearly, marketing drives meaningful growth, but the way that we do that is through a very disciplined and consistent strategy. We do it through channels where you expect to find investors. We talk about that through paid, which is when we literally pay someone else to tell the story that we want to tell that could take the form of advertising would be the most common paid activation.

We have what we call owned channels. These are like our home. These are the things where we decide the content that goes into those channels, whether that is our LinkedIn profile or whether it is schwab.com or Advisor Services.

And then we think about earned media, which is what other people say about us because they've had the opportunity to experience the value proposition that you heard our other leaders talk about earlier. And we are constantly innovating across those channels, which I'll talk about a little bit more in a second.

So I've already talked about how our value proposition is incredibly broad and resonates with a broad set of investors. However, in order to be efficient, we have to be incredibly disciplined about the audiences that we pursue. We call these our design targets. Our retail design target, we talk about in terms of a psychographic rather than a demographic. A psychographic is how somebody thinks like their mindset. And some of these characteristics, I think, will probably sound familiar to you because I imagine all of you are very driven. But these are people who share their DNA with Schwab. They are people who are optimistic. They are people who are engaged. They are incredibly accountable and they approach their financial life with one hand on the wheel. We serve our independently minded financial advisers who want the flexibility, as John demonstrated, to deliver the best possible outcomes for their clients. And also, as Adele just referenced, the plan sponsors who champion on behalf of their employees and shape those organizations into a great place to work by getting their employees on the path to financial wellness.

The strategy that we use is comprised of 3 components. The first is measurement. The second is innovation, and the third is creativity. And for the next few minutes here, we're going to double-click on each one of those. So we are going to start with measurement. And fortunately, my colleagues put a lot of the creative assets that we produce already on the screen. And you might expect that a marketing presentation would start with a lot of creative.

We actually start in marketing from a place of measurement. We are relentlessly analytical about how we approach every single dollar that we spend, and part of that is enabled by our marketing mix optimization model, which is an econometric model that looks across more than 60 different touch points. It looks at things that we control like how much we spend. And it looks at things we don't control, like the market environment, what's happening with the S&P 500, and it looks at what our competitors are doing. And it assigned partial attribution across all of those touch points so that we can optimize how we spend in channels like TV, in print and in audio.

This is an incredibly valuable tool as we optimize our media spend every single year, which has led us to be able to achieve a 15% increase in our return on ad spend, which in this marketplace where we see less people watching advertising is a testament to the fact that our advertising is incredibly efficient.

We also use a multi-touch attribution model to combine the placement where you place the ad with an understanding of the messages that we're putting into that ad. So the multi-touch attribution model combines creative and placement and allows us to optimize in each individual channel. A good example of this is something that we call native advertising. This is like if you're on Investopedia or you're on a site and in the right rail, you'll see content that looks more like embedded content than it does like an ad. And what we have found is that when we pay to place our education in those placements, we get tremendous engagement because people are already in a place where they're learning, they see our paid education. James referred to some of this earlier today. They come to schwab.com, they learn, and we find that leads to much higher intent lower down in the funnel.

As I said, we optimize our media spend every year, and you guys consume media and you're probably watching way less cable if anybody in the room even has cable, then you are watching TV on Hulu or whatever your subscription of choice is. And so we shift our spend to match consumer behaviors and put our advertising in the places where we see the greatest efficiencies.

Watching Hulu is probably not the biggest surprise, but one of the ones that we actually see a lot of consumption among especially this driven audience is in podcast. So we've seen a 4x increase in our investment in podcast. Not surprisingly, people who are curious and naturally leaning in are listening to a lot of podcasts.

10 years ago, 70% of video content was consumed live. And today, it is 70% is consumed streaming. So it's completely inverted over the past 10 years. Not surprisingly, probably consistent with your behaviors, we see magazine consumption down by about 50%, and I'm convinced they're all in dentist office. And we see prime time viewing down by about 60%. And the reason why this has such an impact on us is it used to be able to -- you would buy a TV ad on friends and half the country would see your ad. It was fantastic. It was a fantastic way to reach people. But with the proliferation of content, you have to be much more targeted about where you go because those broad-based channels simply don't have the same efficiency.

Shifting to the innovation pillar. I'm excited to share some of the things that we've been doing in marketing, starting with an activation on Twitch. I want to be very clear that we -- actually, let me start by -- with a common knowledge check here. How many people know what Twitch is? Okay. More than I expected. I won't ask how many of you are active users on Twitch because that feels revealing in a way that you might not want other people to know.

So Twitch is a platform where you can watch other people game. That sounds endlessly entertaining if you're my 18-year-old and 16-year-old. And we did an activation on Twitch with Michael Iachini, who is here at Schwab. We gave him the designation of Chief Board Game Officer, and he actually created an entire game of Catan where he taught people about the principles of investing. Not surprisingly, games like Catan, games like Minecraft, those are all about resource allocation. They are about planning. They are about diversification, and they are wonderful places to learn about the world of investing.

And so while the people who participate in the live streams on Twitch who have random names like Trader Tagrog and things like that, well, they may see random, their engagement on this platform is incredibly high. This is not about us going to a gaming platform in order to gamify investing. This is about us going to a gaming platform to go to where people are engaged and engage them in the Schwab brand and teach them in a moment when they're already leaning in.

A new activation that I'm excited about on YouTube, we're going to be doing Market Miles, where we've worked with a financial influencer to go for a run in Central Park. And she is going to hit up people in Central Park who are also running, and she's going to talk to them about finances as they run. I've seen the first sneak peek of the content, and it's actually fantastic. We'll have a diverse group of people, some of whom know nothing about investing and she can help educate them all the way to people who are really experts, including our very own Kevin Gordon. So some really fun and innovative ways to go to where people are.

People are changing their behaviors. Every example that I just gave you, if you noticed, was on the phone, people are engaging on their tablets, and we see this in our client behavior as well. So how we think about reaching our clients has to change as well. So we're continually innovating in our digital experiences to ensure that we're getting the incredible product innovations that you heard from my team members earlier. We're getting those innovations in front of clients where they are.

So we had more than 2 billion digital interactions last year on mobile and web. Twice as many of them were on mobile as they were on web and 40 more times were digital than live. So the way that we can reach our clients and scale is by delivering digital experiences where they get exposure to the things that we have to offer.

What you're looking at here is our newly launched App Store. So our app until fairly recently was a transactional app where you could do things like place trades, raise with money. And now it is a place where you can also learn about everything that we have to offer just like you could on our web experience.

Jonathan referenced earlier the teen account, which my 16-year-old is highly engaged in, and I'm not looking forward to doing that tax event when we get there. But TeamSnap. How many people know what TeamSnap is? I know who have kids simply by who raised their hand in the room. TeamSnap has over 30 million people who use their app to manage their kids sporting event. It is how you know where your soccer tournament is, what time you need to arrive. It is all parents who are highly engaged. This is all about going to high engagement areas where people are already leaning in and then showing up there with a Schwab message. We will be there with the teen account.

Interestingly, when we ask teens and parents, about 70% of teens are really interested in investing. My 16-year-old is in that 70%. And about 73% of parents say it's incredibly important for teens to be -- to think about investing. And that may be the literal only example of a place where teens and parents are literally aligned. 70% of teens are interested and 70% of parents want them to be.

We are showing up in social media as well. We're building brand awareness and delivering our education by working with influencers, and this is across TikTok and Meta and Instagram. Whatever the reel is that shows up in your feed regularly, it's probably something that we have worked with an influencer on because the idea, again, is to show up in a way that feels relevant and modern to the investors that we are trying to reach.

A great adviser example here is we did our first advertising campaign on Reddit for advisers because advisers use Reddit to source from other independently minded folks, how they might think about turning independent, which custodians they're thinking about. And we ran a campaign on Reddit that was in the form of New Yorker cartoons. It was one of our best-performing campaigns we've ever seen to get brand-new advisers to engage with us because we went to the place where they were naturally engaging, and we serve them creative that was contextually relevant.

A fun activation that we did around the holidays. We were the first financial services company to create Amazon boxes that showed up around the holidays in people's home, over 1 million homes. And the idea wasn't to sell Schwab, it wasn't to sell crypto. The idea was to create a moment of delight and create a deeper connection to Schwab. We actually saw this show up in social media, where existing clients, if they got the boxes, we're excited about the fact that the holidays, they felt a deeper connection to Schwab, and we saw it show up among prospects as well who were delighted by the idea that Schwab was creating a positive experience in their life.

I think you heard from James, we have a robust podcast library. We referenced earlier, our audiences are very engaged in podcasts. We have a 78% completion rate, which is about 20% higher than the industry average. And the range of topics really speaks to the different audiences that we are engaging with. In fact, Choiceology has over 7 million downloads. If you haven't listened to it, it's a great listen on your plane ride home, highly recommend.

We're continually testing new formats, including on YouTube. In fact, last year, investors watched about 300,000 hours of YouTube content from Charles Schwab. We are the #1 financial services provider on YouTube. 300,000 hours is basically the equivalent of a single human watching our YouTube channel for 30-plus years. It's a lot of content consumption. And the reason why we do this is it's an incredibly scalable channel to get -- to educate people and to build trust when they're in the moment when they really need us the most. And of course, we work with different modalities in the YouTube channel. There are some very detailed, very trader-heavy-oriented, deeply technical trading strategies all the way to, I want to buy my first stock. And as you can imagine, the presentation of those two look fundamentally different. It's also a fabulous opportunity to get our Schwab Center for Financial Research experts out there sharing their point of view.

We talked earlier a little bit about AI. And clearly, LLMs are changing the way that investors interact with all companies, not just Schwab. I would start by saying that we still see 84% of searches happening in Google. 84%. So while we talk a lot about LLMs, the vast majority of searches are still happening in Google. And about half of the search results in Google are AI-assisted or Gemini assisted.

We see about 8% of searches happening within the LLMs. So a couple of examples that you're seeing here on the screen. So the first is who is a trusted brokerage firm, and it's a little blurry on the screen. So I'm going to point out to you what's up there. So you will see us cited first in the AI overview. The way you get cited first is by having authoritative content. Authoritative content means you have robust content that other parties have also referenced, thus creating authority in the space.

You will see us in the snippets on the side, leading with some of the awards that Jonathan referenced earlier. And recently, Google within their financial services vertical finally launched paid advertising within their AI results. So soon, you will see Schwab advertising show up in their AI-assisted searches as well.

What was playing on the left -- I'm actually going to go ahead and go back, so you can see it as I talk. What is playing on the left here is what are the best trading platforms in ChatGPT. The good news is the very activities that make us incredibly successful for search engine optimization have given us a massive head start as it relates to answer engine optimization. So you'll see Schwab show up, way to go James, as the #1 trading platform. And that is not only about clearly being the authoritative source. The best thing we can do to show up as #1 in these recommendations is to deliver an exceptional client experience every single day.

Creativity, third on the list of things that we talk about in marketing. Creativity is informed by what I talked about earlier, which is a deep understanding of our design target. I'll talk a little bit about 2 of our ad campaigns. I love that John already introduced Schwabvious. Schwabvious is a campaign that launched last year that signals to the marketplace that we are the obvious choice for -- to be the custodian for advisers. We're excited to extend it this year to go beyond the custody, as John likes to say, and ensure that our advisers are aware of everything that we have to offer in our wealth services offer.

Our retail advertising is consistently the most recalled ad in the category. That is in large part due to our foil Carl. Carl is a broker that we invented in 2015 to stand for what we do not stand for. He is a very handy foil to allow consumers to see what it is that we offer, and he stands in stark contrast to that. He is memorable because he's a little bit of a doofus. We can be provocative when we stand against him. And the best part is the clients and the ads always look like the hero. The client speaks on our behalf. Carl can never provide what Schwab can. And when you can get a client to speak on your behalf rather than you telling an audience, it is always more engaging.

And finally, several of us talked about this last night, but we have a fantastic partnership with the PGA, and we have worked very carefully to ensure that every activation across all of our golf sponsorships delivers in a way that is uniquely Schwab and uniquely creative. Starting with the prize for the Charles Schwab Challenge, if you're not aware, is a car in addition to the financial payout. And when we first did this and Kevin Na won, the car was a Dodge Challenger, not surprisingly, for the Charles Schwab Challenge. And Kevin turned around and handed the keys to his caddy, which might have been the most social moment we've ever had at Schwab. But the idea that he was willing to give the car away to his caddy created a talk track well after the Charles Schwab Challenge.

This year, the prize is a 1982 Jeep Scrambler. We always choose the year to signify something in our history. 1982 is when we first introduced 24/7 order entry. And if you would like to commemorate 1982 on your own laptops, you'll find at lunch stickers of the Jeep scrambler that you are welcome to take home with you.

We are also bringing golf into other avenues. I talked earlier about how we have to show up where investors are. We are showing up on major content platforms, whose name I'm not allowed to say yet, but we are doing in-scene integration. So imagine you were watching a fictional TV about golf. We will be the presenting sponsor of the golf tournament, again, showing up where people are engaged.

And then finally, if you haven't had a chance to watch our challengers videos and you're into the golf, I highly recommend that you can find them at schwabgolf.com, but it allows us to celebrate the spirit that we celebrate at Schwab of people who are really invested in the game, people who are deeply engaged in something they are passionate about and people who are willing to take on a challenge to make something better.

And finally, Rick referenced this earlier, our brand is deeply trusted. Our brand also has to stay modern and relevant and consistent. And we are in the process of updating our visual identity to deliver a much more unified and human client experience that will future-proof the brand as we go through some of the digital transformations that we just talked about. This is an evolution, not a revolution, I should say. If you're looking on the screen, this does look very different than what we are today, but not in a categorically different way. But what we want to do is create a cohesive brand experience so that in every single touch point you have with Schwab, we are reinforcing that sense that builds deep client relationships and will allow us to grow.

So I will end where I began, which is it is a privilege to be a marketer at this time at Schwab because the value proposition that we bring to market is winning. And we bring that value proposition to market so that the enterprises can grow at the rates that they've shared with you. And there's only upside ahead of us, and it is our responsibility to ensure that we step with a big leap into that opportunity.

So I will now take questions.

Mike Cyprys of Morgan Stanley. So you talked about how consumer behavior is evolving where it's tougher to reach the vast audiences as compared to years past when people watch cable TV so much. Can you talk about how the cost of client acquisition is evolving in response to that across the industry and at Schwab? And as you look out over the next 5, 10 years, how do you see that cost of client acquisition evolving? Maybe you could also touch upon how you see the lifetime value of the customer also evolving with that?

Yes. Let me take the cost of acquisitions first. So there has never been more competition for dollar. I think you heard Jonathan referenced this as well, which inherently drives the cost of acquisition up. And it is the analytics that we use that has been able to drive down our cost of acquisition, combined with an outstanding value proposition. I actually think you could have all the analytics in the world and buy all the best media in the world, but if your value proposition was terrible, you have nothing to share and you wouldn't be winning. So the cost of acquisition is going up. We've been able to drive it down with relentless analytics and through an outstanding value proposition.

In terms of long-term value, we tend to prioritize based on our audiences. So you heard me say earlier in the retail space, affluent and trader, which clearly have very strong LTVs relative to other potential audiences. And so when we think about -- I referenced earlier that multi-touch attribution model, one of the things that it gives us is actually funding over time in addition to account open. So we're able to optimize all of our placements, not only to acquire quantity, but also to acquire quality, which also informs LTV. Hopefully, that helps.

All right. Let's just take one more.

Mike Brown from UBS. So Schwab's brand is built on trust, education and accessibility. But agentic AI tools are now kind of making the financial guidance feel more instantaneous and maybe kind of free from the provider. So how does the marketing strategy evolve when the human plus technology message becomes increasingly harder to differentiate? Like what are you kind of -- how are you kind of approaching that evolving competitive landscape?

I love that question, and anybody who knows me knows that's a little bit of my soapbox. So I think a couple of things. First of all, I think agentic AI is actually great for investors. We stand for democratizing information. We stand for easy and quick access. So in many ways, the fact that you can ask a question about your finances and get a quick answer or you can ask what your wealth contribution limits are is great for investors, and it encourages their engagement. So in many ways, to me, this is making the experience of engaging with financial services companies, honestly, easier. So it is a rising tide in some ways.

That said, on the slide that I showed about AEO, we have to ensure that we continue to show up not only as one of the most cited sources, but also as one of the most recommended companies. cited sources is mostly within our control. And what I mean by that is we can do a lot of optimization on our side to ensure that we are structuring data in a way that is easier for the LLMs to be trained on it, that they can update it frequently. We can ensure that we have a robust amount of content because LLMs are like hungry cows. They just want more input. So we need to produce content that the LLMs will want to consume. So being an authoritative source and showing up first is actually something well within our control.

The second component of that, which is about the experience is I believe that more and more investors will allow LLMs to do the cognitive processing, which means we, as a brand, will be delivering a part of the experience that is less rational and more something that you feel. We all make decisions today not only based on the left side of our brain, but also on the right side of our brain. And I think you see that in our CPS scores. I think you see it when you go down the Schwab rabbit hole on Reddit. This is people raving about our experiences. And that is how we will show up in the #1 rankings.

So it's a combination of the two. It's continuing to deliver exceptional experiences. And I would argue even raising the bar on those, which is what the team talked about today, but it is also ensuring that our content is structured in such a way that the LLM can consume it, and we continue to be an authoritative source.

So I think we're out of time for questions. There were a couple more hands up. I will be here for lunch, which is happening next. So I think we're back in here at 12:30.

A couple of things. Please do, if you haven't had a chance already, check out some of the showcase on the left over here, where we're demonstrating some of the things that you heard about in the prior presentations.

And I will, with that, send everybody to grab some lunch. Thanks, guys.

[Break]

Hello, everybody. I get the coveted after lunch spot. I hope you all had a great lunch and enjoyed a little bit of refreshment and a little bit of conversation. I'm excited to be kicking off, I think, what I'm going to call our deepening section of the day, which is where we're going to talk about our wealth advisory, our banking, lending trust, investment product section. So I'm going to talk a little bit about wealth advisory, banking and trust to start. And then my colleague, Andrew D'Anna is going to come up and talk a little bit more about the investment products area and some of the emerging products there, and then we're going to do a Q&A together.

But I'm excited to be here and see some familiar faces over the last -- what, several years, I've had the privilege of being able to share with you all the exciting things we're doing at Schwab. And I think the last time I did this session, we were pretty early in our transformation around some of our wealth management areas. And I'm excited today to be able to show you some of the progress that we're making as well as with 1 of our dear colleague, Paul Woolway retiring, we're taking the opportunity to bring the banking and trust organization a little bit closer to wealth management because of some of the synergies that we see. So I'm going to be talking a little bit about that, too.

So as I go through this presentation, I hope the things that you take away today are that clients are increasingly first looking to Schwab for these types of products and services. It's no longer the case that they think of Schwab as a transactional platform. And that's been the case for many years now is our retail client base, but you also heard John this morning talking about how our RIA clients are looking to us for more than custody. This is a trend that we see, and it's fueling a lot of demand. And that's why when you see our growth rates, you see, of course, the growth that we see across the industry and our growth rates tend to be higher because we see more and more clients attracted to the Schwab value proposition.

The other thing you're going to see is the growth is accelerating. And it's always nice when your boss steals your thunder. But Rick shared a little bit about some of the statistics this morning about just how quickly we're seeing the growth. And we're really still early in this journey. And that's my third point is that we really are just scratching the surface. I think that's what I'm most excited about is when I think about the size of the opportunity in front of us, $12.7 trillion of assets and our opportunity to serve more and more of the needs of our clients through great value, great quality, great service solution. It's really exciting to see. And we have the opportunity and we have their trust so we can innovate on their behalf.

So just to set a little bit of the landscape of what are the capabilities that we're talking about here. We have managed investing, which you all know is a big part of our deepening and how we deliver value-added service to our clients. And the 2 biggest offers there are Schwab Wealth Advisory and Schwab Advisor Network. We also have, of course, Schwab Intelligent Portfolios, our robo offer as well as proprietary SMAs. But this is a category that's growing quite rapidly, and I'll spend a little bit of time on that.

We also have Specialty Wealth Services. And I think if some of you had a chance to go visit the Wealth.com folks in the back, we have a couple of my teammates here who are -- are sharing a little bit about the capabilities that we're introducing. But this is really important because these Specialty Wealth Services are often the entry way to enrollment into managed investing or deeper relationships with Schwab. So tax trust and estate financial planning, charitable giving, income solutions, all kinds of specialists that help our clients understand more about what it is that Schwab can provide and get their needs met so that they kind of have a deeper and longer-lasting relationship with Schwab.

And then on the Banking and Trust side, of course, our lending solutions. You heard about Pledged Asset Lines and the growth that we've had there, but also mortgages, HELOCS. There's a set of capabilities there as well as, of course, our trust services and deposit products. And we're proud for, I think, the eighth year in a row to have won the J.D. Power award on our investor checking account. So lots of great momentum across this landscape.

But let me start with managed investing because that is really a story that we are very excited about. And like I said, I was here just a couple of years on sharing with you the type of investment and transformation that we're trying to drive here. This gives you a sense of just the type of growth that we've seen in managed investing over the last few years as we've been focusing on this area. And I would take your attention to the size of the dark blue bar there because what that is, is the amount of flows that are going into our full service managed investing offer.

So what we see is that not only do investors want more advice from Schwab, but they want holistic advice from Schwab. And this is a trend that we're seeing across the industry. We certainly see it here. And what that results in is over 90% of the flows that are going into managed investing are going into 1 of these 2 holistic wealth offers. That's exciting because that means that there -- these clients are trusting Schwab with their entire relationship with their whole life, essentially. And not only do we see tremendous growth in both of these offers, you see they're both of 25% year-over-year. But we also see incredible client satisfaction. And that's that -- we talked a little bit earlier from our colleagues talked about the fact that when we deliver great products, great service, great value, our clients become our biggest advocate. And that's really how we continue to grow the franchise and continue to grow this business.

The net flows number for Schwab Wealth Advisory and I'll dive into that a little bit more with what Rick was highlighting. Just a few years ago, that was a fraction of that number and it's grown pretty significantly. And what that -- it has been a result of is a transformation and investment that we've been making in Schwab Wealth Advisory. It has been really an investment that we knew would pay off, although I will admit to you all, it has paid off probably even more quickly than we anticipated. The quarterly flows that we're seeing now into Schwab Wealth Advisory are about triple what they were only 18 months ago. So it's really an acceleration that we've seen. And we continue to have more and more investors enroll in that offer. And I would say, be delighted and deliver that 88 CPS score.

How have we done it? We've invested pretty significantly. And we've invested in digital capabilities. We've introduced a discretionary offer. We've actually expanded locally. So some of you might have the history here, but this was an offer that was always hybrid or virtual. So we had our wealth advisers located in 4 locations across the country. We're now in 20 markets, actually, we'll be in 30 markets by the end of the year, which does a lot in terms of building that local relationship with clients in all the affluent markets that we want to be in.

We've also invested significantly in sales and wholesaling and distribution. This is something a few years ago we actually didn't have a business development function supporting Schwab Wealth Advisory. We now do and it's proven to be quite successful. And that business development function, by the way, has the opportunity to develop relationships with our financial consultants on the side of the RIAs working with our relationship managers but also being able to educate clients directly on all the various solutions that we bring. And that's why 1 of the interesting things we see with Schwab Wealth Advisory is not only do we see flows coming in and satisfied clients at Schwab Wealth Advisory. But Schwab Wealth Advisory tends to be the highest consumer of a lot of our other products and services.

So for example, Schwab Personalized Indexing, our direct indexing offer, 40% of the flows that go into Schwab Personalized Indexing comes through Schwab Wealth Advisory. Or Pledged Asset Lines, about -- even though Schwab Wealth Advisory households only comprise about 1% of overall Schwab households, they comprise about 10% of originations of Pledged Asset Line.

So when you have this holistic relationship with the client, you're able to not only satisfy their needs, but you're also able to introduce them to other solutions across the Schwab spectrum.

The other thing I would say is we've been hiring. And actually, last year, I think we hired over 200 wealth advisers across many markets. Again, we're hiring about at that pace this year given the growth that we're seeing. And all that hiring goes to support the relationships and the types of interactions that we're trying to deliver for our clients. I'll talk in a few minutes about how we're scaling that growth as well, which is really exciting when you think about what we can do with digital, automation, AI and all of it together.

But I will also point out 1 other specific on this page, which is the economics. This is really good for clients. When they deliver us an 88 CPS score, we know that they're happy, but this is also really good for our business. The ROCA of these clients, the average ROCA of the clients that enroll in Schwab Wealth Advisory is 3x what a typical self-directed investor delivers to Schwab. So happy client is paying us an explicit fee and also helping us drive diversified revenue growth.

So as I mentioned, Schwab Wealth Advisory is also an entree into Pledged Asset Lines and mortgages and other lending products. But the great thing is we're seeing momentum across the board when it comes to our lending products. And when it comes to Pledged Asset Line, the investments that we've made over the last few years, whether it's reducing the cycle times to under a day, I think right now, the average is 0.7 days, is actually what it is for cycle time, increasing the eligibility. So we made separately managed accounts, for example, pledgeable assets. We're in the process and have just started rolling out the structured asset line, which allows alternative investments to be pledgeable. Those enhancements have really opened up the flood gates in some ways to more and more advisers and retail investors being attracted to that offering. And especially if you think about what's happened in equity markets is a really attractive way for our clients to be able to get access to liquidity.

The other thing is when you look at the consumers of the Pledged Asset Line, it's pretty balanced actually across the retail client base as well as the RIA client base. We see engagement and opportunity in both. And I'll talk a little bit about the penetration numbers in a minute here.

Mortgage also is a great opportunity for us. You can see also double-digit growth there. And obviously, that moves around a little bit with rates, but we continue to see a lot of engagement for our clients there. There, we've actually launched the ultra-high net worth experience. So to improve and create a little higher touch experience for investors who want -- who need that and are engaging with us on the mortgage side.

And then I'll touch on the trust side as well. We haven't talked as much about trust in some of these forums. But if you think about the demographic trends and the growth of estate planning, trust plan and kind of generational wealth transfer, the trust part of our business is something that we think is a real opportunity. And again, as we've been having more and more engagements with tax trust in the state, we kind of are often in the position to introduce our trust services capabilities. And right now we have that opportunity again across the retail client base as well as on the RIA side. So it really is a very synergistic opportunity as we continue to grow our Wealth Advisory and have the opportunity to bring more of these banking and trust products into the fold as well.

So as we look forward, I won't spend a lot of time here, but I think it's important to kind of think about the kind of just the secular trend that we see that really is the tailwind behind a lot of the growth that we're seeing. The demand for advice, sometimes I talk about the willingness to pay for advice and we see that willingness to pay has grown dramatically. But we were just looking at some of the most recent data. And it really kind of -- if you step back and think about why do we think this growth is sustainable, it's because more and more investors need help. And that willingness to pay number, which only a decade ago was about 38% of affluent investors willing to pay for advice is now 68%. So in the world of AI, where you can get all this information by plugging in your data into cloud and for your positions and all of that, more and more investors are saying, I want help. I want guidance, and they're coming to Schwab for it. And by the way, over 80% of those investors tell us that they want a one-stop experience. So that goes back to our value proposition. We're bringing wealth, banking, investing, trading altogether can be so powerful.

Andrew is going to talk a little bit about product solutions, so I won't spend much time there, but that is something we continue to hear from our investors as product solutions and the sophistication, personalization. Again, something that we're very well positioned for.

And then I get excited about the wealth tech ecosystem because I think what it allows us to do is introduce new capabilities to our clients and that buy-build partner equation that we do every time, we have more and more opportunities to partner to license to invest in companies like we did with Wealth.com to be able to bring more capabilities to our clients, whether they are a retail investor or an RIA.

And as I mentioned, we're just scratching the surface. This is, I think, the most exciting slide to me because it shows you just how small our share is when we think about some of these areas. So on the left side of the slide, right now, we have about $840-or-so billion you saw in management investing assets. It's a $37 trillion market, and it's grown by the way, by 8% or so a year. So a huge opportunity. If you look at all of retail managed investing, it's like 2%. So it's a huge opportunity for us when you think about, again, that secular trend and our ability to capitalize on that. We've actually doubled the organic growth rate that we're experiencing in that area. So we have a lot of opportunity still ahead.

And then when you think about lending penetration, someone asked the question, I think, earlier today around lending penetration across our client base, we have about 0.5% of lending penetration. Competitive benchmarks kind of -- it's hard to find, but what we see is around 4% industry average when it comes to lending penetration. And when we see a client, especially an RIA engaged with the Pledged Asset Line, for example, we see that once they engage 1 client and they're like, Oh, this is really a great solution. Oh, let me engage another client, and it really builds quickly. So today, about 23% of our RIAs have engaged in a pal, but that means that could be as little as 1 client so far. And so again, when you think about that opportunity, that leaves a lot of opportunity for us to continue to engage the RIAs, as well as help them educate more and more of their clients about the opportunity with a product like PAL.

So let me talk quickly about where we're headed and why we're so excited about capitalizing on that opportunity I shared. First of all, we're going to continue to expand and invest in the offering. And there, the priorities are around bringing new capabilities into the wealth management space. I talked a lot about state planning, actually tax planning is a real opportunity for us, and there's some great capabilities that our colleagues at Wealth.com have introduced that we will be introducing into the Schwab Wealth Advisory experience. We're doing a lot -- Jonathan talked a little bit about segmentation, well specializations, ultra high network, lots of opportunities there that we're investing in.

I would say on the banking side, I mentioned the structured asset line. But the other one I mentioned is, on the registered independent adviser side, we are making it easier for our RIA clients to engage in banking relationships with Schwab. In the past, historically, there hasn't been as much connectivity between the RIA platforms and our banking platforms, and we are working aggressively on fixing that and kind of filling that gap so that we can continue to drive more penetration there.

Awareness. That is a big opportunity for us. You saw the numbers. We have a lot of clients at Schwab who are excited. We have a great CPS score. We have a great value proposition. We have to build awareness. And some of that is about getting into local markets. Some of that is about leveraging Stacy Hammond and her team and how we market and get very segmented and targeted about how we reach clients who might have a need or life event. Some of that is actually about really targeted and successful distribution and sales and wholesaling efforts, which, again, as I mentioned, we've grown pretty significantly over the last few years. So there's a lot of opportunities in growing awareness.

And then finally, I would say, scaling and supercharging. And this is where technology and some of you know, I have a background in digital, I get very excited about the opportunity of when we bring the digital capabilities, automation and AI. And a supercharger human talent, it changes the game because now our advisers can do so much more, have deeper conversations, spend more time asking the question behind the question. And less time doing leading prep and documentation and trust document that would have taken 2 hours to review now takes a couple of minutes. I mean it's amazing what we can do.

And just a testament, it's really important that our advisers have a great experience as well. Just a testament to how much this is all helping. We do a rep experience score as well as we all do the satisfactions for our clients. Our rep experience for our wealth advisers has gone up 21 points in 2 years as we've been investing in these capabilities. So it really is kind of a virtuous cycle as we invest in these capabilities to create a better experience for clients as well as a better experience for our advisers.

I will just end by kind of bringing it all together because I really think this is such a big opportunity when we think about how large we have. I call it that within the Schwab House, we have a big pond right within the Schwab House. And that's not even counting the $37 trillion market that's out there. We have a lot of opportunities to continue to bring awareness to our products and services, and we're going to continue to transform those products and services to make sure that they're meeting the needs of clients.

The other thing is we have a proven record over the last few years, we've really been able to show how, as we engage clients and we actually meet their specific needs and the way that they want them to be met, we're able to convert them into an enrolled client into a managed investing offer or engage them in a PAL or a mortgage.

And then finally, our value proposition, you've heard this across all day. I think is really unmatched. And a lot of the things that are important to an investor who's a self-directed investor are also important to an advised client but it's actually a higher bar, if you think about it. If you're willing to take advice from someone, you really better trust them. And that's where I think we have a unique spot here and a unique opportunity to capitalize on.

So with that, I'm going to hand off to my dear colleague, Andrew D'Anna, who's going to talk a little bit about investment products, and then we'll come back for Q&A. Andrew?

All right. Thank you, Neesha. Fantastic to be here with all of you. I'm Andrew D'Anna. I've been at Schwab for more than 10 years now, but I'm a new face on the management committee. So meeting you -- meeting many of you for the first time. I lead an organization focused on our investment platforms, solutions and strategy. And while Neesha just spent a lot of time talking about what we're doing to deepen client relationships with our wealth solutions and our banking solutions, I'm going to pick up where she left off and focus now on our investment products and platforms. And similarly, talk about what we're doing to grow and expand the shelf to meet the ever-evolving set of client needs that we see. While also thinking a lot about how we continue to enhance monetization of the scaled platforms that we already have.

Hope in the time that we have together you come away with a couple of takeaways. The first is that the breadth of our product platform really matters. And that we're using that breadth to drive growth and revenue diversification and as an important tool to deepen clients with our -- and their relationships.

In a world where Rick talks a lot about the bull market for convenience, in a world based in convenience, it's really important that we offer our clients the tools that they need, all in 1 place. And when we do that, we know our clients are rewarding us with more of their assets and more of their loyalty. So we're seeing a lot of momentum in clients doing exactly that as we've expanded our product suite in a number of areas.

Next, I'm going to talk about our priorities for where we're going next. And here, we're really thinking about where the puck is going. And we're making targeted disciplined investments in the places that we see our clients' needs evolving, too. And with those investments, we're going to take advantage of the growth that we see in those areas.

And finally, around monetization. We see a meaningful opportunity to monetize the scaled third-party platforms that we have already built over time and we're working in a disciplined way to do that, and I'll talk a little bit about ETF monetization that's undergoing -- that is underway right now and other areas, we're going to take that strategy next.

So let me start with our -- how we drive earnings growth through the cycle. And you have all seen this in a number of presentations. And I want you to come away with why our product suite really matters and helps fuel -- to fuel this cycle. And the first is around how our product suite helps us drive and acquire new clients. Quite often, our clients tell us that of all the reasons they come to Schwab, the breadth of our product suite is one of the most important -- and one of the things that brings them here for the first time.

But more than that, often our investment products are some of the first experiences that our clients have, whether that's using our ETF or mutual fund selector to build a portfolio or a whole suite of tools to build a bond ladder and many other resources. This is often the very first interaction our clients are having with us. But more than that, it's a really important part of how we deepen relationships with our clients over time. And this is all about being there as their life changes and evolves and their needs evolve with them, again, enabling them as they grow to consolidate more of their investment activity with us at Schwab.

I met a client at a panel a few weeks ago. She had been at Schwab for 30 years. I wish I could have brought her on the stage with me because I asked her how our experience with Schwab evolved over those 30 years, and what she said just perfectly captures this point around the importance of our product platform. What you said was, to her Schwab is a lot like the Tesla Financial Services. We have a model for every phase of her life. She said he started with us and something like her Model 3, buying individual stocks and bonds on the platform. As she grew up and maybe outgrew that Model 3, she opened a 529 accounts and began to work with more sophisticated ETF and mutual fund solutions.

Eventually, she was tired of doing it on her own and she opened a Schwab Intelligent Portfolio account. And that enabled her to start doing more and more of that by herself. She's now in the space of transitioning into retirement and thinking about how do I take this growth portfolio and turn it into one that I can de-accumulate and live off in my retirement. She's actually working with Neesha's team and is working directly with a wealth adviser. And actually, it continues to be taking a lot of the products off our shelf including Wasmer solutions for income and is even thinking about some of our alts products. I think that story is playing out across our 30 million client base every single day and is reflective of the mission that we're on to help and serve clients through that life cycle.

So why this product breadth matter? I think we're really proud to offer 1 of the largest, most comprehensive platforms in the industry. And if Schwab was a supermarket of solutions, this is really our investment product aisle. And on it, you should expect to find anything you can find out there in the investing universe chances are we have it in -- somewhere on this aisle, whether it's proprietary, advisory solutions across managed portfolios, direct indexing, digital advice or a whole suite of mature third-party product platforms in alts, ETFs, fixed income, et cetera. And increasingly emerging product areas in private markets and digital assets, which I'm going to cover in just a few minutes.

We really aspire through this menu and through a combination of build, partner and buy to really be a place that we are able to give our clients the tools to meet their needs throughout their entire investing life cycle.

And the breadth of this portfolio is really translating into a really meaningful momentum. And we're seeing that across the board. First, third-party mutual funds and ETFs. They continue to be a core building block for so many of our clients and advisers in how they build their portfolio. And we today have grown to almost $4.6 trillion and remain one of the largest and most mature platforms in both of those asset classes.

SMAs continue to be an asset class that more clients are looking to for personalization as well as tax-efficient strategies and much more. We have grown nearly 30% over the last 3 years on our SMA platform, which is a combination of our proprietary and third-party solutions and have reached almost $600 billion in asset size on that platform.

And finally, alts become an important part as clients of portfolios as clients look for outsized returns and the diversification that comes with mapping private markets again in a portfolio with public markets. And we have seen really outsized growth in that space, almost 40% over the last 3 years, reaching over $90 billion in assets. And I'm going to talk a little bit more about what we're doing to accelerate more of that growth in the years to come.

But it's not just third-party solutions that is driving this growth. We are increasingly seeing an openness among our clients, and you've heard this from Neesha and others as well to look to Schwab solutions to meet more of those needs. And we're really seeing it across the board. We look at Schwab Personalized Indexing, our direct indexing solution, helping clients with tax-efficient strategies. It grew almost 80% year-over-year.

As clients continue to look for help in fixed income, our Wasmer strategies have been a fantastic solution and have been growing rapidly, more than 20%. And more than 10 years after launch, our Schwab Personalized Indexing -- sorry, our Schwab Intelligent Portfolio solution, our digital asset solution is continuing to grow at more than 20%. These are not ultimately niche offerings. All these together represent scaled client demand for advice and personalization and really represent where we are going in the products and solutions we've built.

So we haven't been standing still, for sure. And a lot of this momentum is the result of the disciplined investing that we've been doing to improve our platforms and expand them to meet more of our needs. And we've been doing a lot.

Last year, we, of course, launched our retail alternatives platform, Schwab select, Schwab Alternative Select. That platform, we've more than doubled the number of funds and is driving strong growth this year. We're making similar investments on the AS side, both expanding the fund offering in alternatives as well as making important investments in the digital experience to make it easier for advisers to access those funds. We've also meaningfully expanded the universe of institutional share class funds available on our no-transaction-fee mutual fund platform for institutions. We've now -- that now exceeds more than 2,000 funds available to those clients. And we did a lot of investments in our AS business and the platform that they have available to them, especially in more complex products.

You heard from Rick and you heard from John, what we've done to make sure that we're open for business and available for clients in new and emerging areas like long/short strategies, and that's an area that we're committed and investing to support our advisers to grow. But you all know the industry is moving fast, and we are focused on where the puck is going. And I think we're -- that means 2 things in terms of our priorities in the investment product space.

The first priority is focusing on where client demand is evolving and emerging, and beginning to make investments in those areas so that we are ready to scale as that client demand emerges and grows. There are 3 areas of focus that I'll talk about in the next few minutes. The work we're doing around alternative investments, what we're doing in private markets and of course, with our launch of spot crypto, what we're doing in the digital asset space. We're also focused very much on our monetization strategy, as I said, and I'll talk a little bit about where we are with ETF monetization.

So let's start with alternative investments. So this is clearly an area of dramatic growth across the industry, and one that we see ourselves today as underpenetrated in and have a meaningful opportunity for upside growth. Really estimates that the retail and the wealth channels will be the fastest-growing segments in alternative assets, and that will reach $3.7 trillion by 2029.

We have an outside opportunity for growth, though because of where our penetration is today and where we see it potentially growing. Retail investors tell us that more than half of them believe that they will have more than a 5% allocation to alts by the end of the decade. We are just getting started in the launch of our retail alts platform, and that will give us an opportunity to capitalize on that growth.

On the AS side, only 35% of our advisers have an alts exposure on our platform today. At the same time, our average allocation to alts is about 1/4 of what the industry average is in the RIA space. Both of those statistics mean that we have a lot of upside as there is underlying momentum and growth in this asset class to also outpace that growth as we improve penetration.

Private market is a subset of alternatives and another area that we see meaningful opportunity. There's been a number of articles in the news about big IPOs coming up that you won't be surprised to know we're driving a lot of interest in energy in the pre-IPO space. But beyond client demand, I think I'll -- I want to focus on the mission that we've been on for the last 50 years that Rick talked about earlier today, which has really been oriented around democratizing investing for the average American and the average investor. And we've done that in so many ways to increase access, lower cost and add transparency. And as we look at the private market space and the pre-IPO space, what it looks like today and how difficult it is to invest in it, it is a ripe opportunity for us to take that playbook that we've executed so successfully in the public markets and now apply it to this new frontier. We, of course, acquired Forge Global and announced that and closed earlier this year. That's a key step in helping to accelerate against that mission. Forge brings us a lot of capabilities like a digital platform for trading private shares, like an asset management team that has been building private market funds, like the whole data research and education environment that will allow us to together build private market offering in a way that we're really proud of that represents how we build product for Schwab.

If you combine that set of capabilities with the 5 -- more than $5 trillion in assets on retail, the more than $5 trillion of assets in advisory services, that gives us a tremendous opportunity to scale that business. And ultimately, the big goal is to change private markets for the better.

In addition to private markets and alts digital assets, no surprises. A meaningful opportunity. We have had a crypto offering and offered our clients access to digital assets in a variety of ways over the years, whether it be futures, options, exchange traded products, we are -- we have more than 20% market share in some of those products today. And so it's been an area that we've been in for a number of years.

However, the last 18 months, a lot has changed in the industry. We started to get more clarity on the regulatory side with the GENIUS Act passing Congress last year, the CLARITY Act now making its way through Congress. Lots of pilots are beginning to mature in the industry. The pilot with Nasdaq on tokenized equities, more and more consortiums coming together for things like tokenized deposits. These developments are giving us the additional clarity that we need to begin to move more deliberately into this space.

And we are also in a tremendous position to do that, given the scale and experience and trust that we've built with our clients. So the investments we're making right now is going to lay the groundwork. So as client demand begins to emerge in some of these spaces, we will be in the opportune position to move deliberately and that speed. And not surprisingly, there's a lot of areas that we're looking at, like stablecoins could potentially be another way that clients move digital assets inside and outside of Schwab.

As we launch digital assets, we're going to, of course, be looking through our bank to potentially lend against those assets. In our asset management business, we're going to be thinking about how tokenization might enable us to reach new clients and show up in new markets.

And through all of these, the same approach that we've taken to all of our investment products will apply. We're going to start with what our clients are asking us for and where are the true benefits, and that's what's going to drive our prioritization as we work through this space.

Spot Crypto, of course, is our first proprietary entry into the space, and I'm really happy to be here this week because just earlier this week, we introduced our very first clients to our spot crypto offering, and we are on our path for general availability later this year. We're really proud of what we've built in spot crypto because I think it represents that Schwab way of delivering products, combining a trusted brand with a proven track record in a space where security matters so much. Coming out the business with competitive and transparent pricing, becoming one of the lowest priced competitors to enter of our major competitors and offering a solution that is tremendously transparent in the way that we price with only a commission and no spread.

And then finally, what our clients are really looking for from us is the convenience. The convenience to buy and hold their crypto assets in the same place as the rest of their investments and the integration that we're doing across our platform is going to enable our clients to do that.

I end with monetization. We talked a little bit about the variety of places we're going to think about monetization and ETFs really represent our nearest-term opportunity. As I shared earlier, we are a scaled player in ETF. We have more than $2.5 trillion in ETF assets on our platform, and we have more than a 20% market share in that space. It's also an area that we're delivering tremendous value to both our clients and the asset managers that we partner with on those platforms, ranging from the technology and platforms that we have in place, the service that we provide our clients, the research and data that we provide, the data we provide our asset managers, we're generating tremendous value for both the asset managers and our clients. And this effort is really about rightsizing the economics that we see when we look at that platform and aligning it better with the value that we believe that we are generating in that business.

As we approach this opportunity, we see a lot of rights to win not only did we execute a similar strategy when it came to mutual funds several years ago. We also continuously see the environment more and more moving in the direction of shareholder servicing in the ETF space as well with a number of our biggest competitors already forging ahead with programs similar to what we're thinking about.

We have started conversations already with our more than 400 asset managers on the platform, and we have firm commitments from some of our closest partners. I expect those conversations are going to continue through the course of this year and material impact will begin to start in 2027 and then in the outer years.

Mutual funds are the place we're starting, but it's not where we're going to end when it comes to monetization opportunities. We see similar opportunities in both the alts space as well as the SMA space as we think about the playbook that we're executing in ETFs. In both of these areas, our strategy is going to be similar. We're going to think about investments that we can make to deliver outsized value in the way clients are accessing our third-party platforms. And with that value, we're going to create economic models to ensure that we're capturing our fair share.

And just in case John didn't say it enough times, this is what I think it means to go beyond custody. This idea that we're going to be investing in value-added services and using those services to drive our growth and revenue diversification.

So as we turn now to Q&A, I'm going to invite Neesha back up to the stage and maybe just land 3 takeaways for you. One, our product breadth, we believe really matters and is a core feature in how we fuel our growth, and how we deepen relationships with our clients.

Two, we're being really deliberate in investing where the puck is going and getting ahead of where we see client demand emerging and ensuring that we are in a position to win as those trends play out.

And finally, monetization matters. And we are making deliberate efforts to ensure that we are driving durable long-term value creation on the third-party platforms that we've built and are now running at scale.

So thanks. I'm going to invite Neesha up, and then we will kickoff Q&A.

It's Brian Bedell, Deutsche Bank. Maybe a question for Andrew on the alternative side. Can you talk about some of the differences in the cadence of your growth plan for the retail alternatives on the Schwab platform versus the one in the RIA channel. I believe the ones on the Schwab platform or maybe potentially faster monetization or I shouldn't say faster, but of longer-term stronger monetization potential, but does that require getting into mass affluent usage? And if you could just talk about the cadence of growth of this RIA channel versus the retail channel and alts?

Yes. I think similar to the strategy I was laying out a few minutes ago that our modernization strategy is aligned with the value that we're creating on these platforms. And if you think about our retail platform relative to our adviser platform, retailers where we are going the furthest in building a curated shelf that we've done the full degree of due diligence on the funds and putting ourselves in a position to actually recommend those funds to end clients. It's also where we have built a team of specialists that support client conversations in this area and a whole ecosystem of education and support to ensure that our clients are being well served by that platform. That's different than the advisory context, where mostly what we're doing is we're supporting advisers in playing that role for their clients, and we're building value-added services to make it easier for those advisers to access those platforms. And what that means is the economic opportunity that we have on the retail side is more meaningful.

To the question about do we need to go all the way to mass affluent to realize that opportunity, we are just scratching the surface on that opportunity. As I mentioned, our penetration is, it gives us a lot of upside on both the retail as well as the advisory services side. And our current focus on retail, at least at $5 million and above gives us a lot of runway for growth before we begin to expand that further and do more to democratize the asset class.

Jacquelyne Cavanaugh with Putnam. While I appreciate Rick's comments at the beginning that the concerns around cash sweep are potentially [ missounded ] or unfounded. I am curious how you're thinking about is your thinking on monetization of products or offering changed? Because it feels like for a long time, Schwab built functionality to create stickiness, client customer acquisition, grow NNA and maybe there's things you've offered is that you can go back and take another look at how do you monetize them? Are you monetizing them sufficiently. And how is the thinking around new opportunities? Has it changed at all as a result of sort of this more recent fear? Or has it been sort of steady state as you go?

I would say -- and maybe I'll start and Neesha, please jump in. I would say it's changed. I'd say it's accelerated in part because of how fast the industry is changing in some of the areas that I talked about. And I think, two, it hasn't changed because still, I think we're still grounded in the same core approach of starting with what our clients are asking for and where we believe we can create unique benefit for them to meet their needs across their life cycle. And that is what's guiding us into the areas that I talked about. And it continues to be the area that we're primarily focused.

They are -- I'd say, where we are evolving is the level of complexity and sophistication of new products that we are building. Neesha, I think you said we are not -- in any way, a plain vanilla platform, and our clients are coming to us asking us for some of the most sophisticated things that they can find anywhere. And with that, that has us looking more carefully and more deliberately about building ecosystems around alts, around private markets, in a way that we can really bring what's unique to our value proposition to those new areas. And so that's probably another area where we are changing and evolving as we accelerate.

The only thing, Jackie, I might add is that, I think the other opportunity, as we introduce new capabilities, we look at kind of the cost of that capability to provide it, right, versus the value created and where it's a labor-intensive capability, right? We may think how do we potentially preserve this capability for a relationship, experience, Schwab Wealth Advisory. If you think about Wealth.com and a lot of things we're doing for introducing them into Schwab Wealth Advisory. It doesn't mean that some of those capabilities, we may not introduce to self-directed investors but we're being very thoughtful and methodical about thinking about the scalability and back to Andrew's point, the need of the client. And if you're a $1 million client, do you actually need that capability? Or is it better for you to enroll in a holistic offer and then you get access to that experience?

The presentation was near and dear to my heart. So I very much appreciate the words of wisdom. So Ken Worthington from JPMorgan. So really on ETF access and marketing fees, ETF managers don't want to pay these fees. Do you anticipate ETF fees initially being on sales? And if so, how long does it take to transition these fees to ETF assets? That's sort of number one.

And then number two, are you partnering with some asset managers to help them build ETF share and assets and are you willing to charge fees similar to what Fidelity is charging that might irritate your clients initially to demonstrate Schwab's value proposition to the ETF managers?

Both good questions. I think on the first part, we're approaching this as [ in spirit of ] partnership with partners that we have had, asset management partners that we've had working with us on this platform for many years. Without going to the specifics of the each negotiation, I think what I will say is all of them are going to be a little different. We're going to approach them based on what the asset manager needs and is looking for. But at the end of the day, expect we'll walk away from those negotiations, feeling like that we have captured a share of the economics that aligns with the value we're creating in distributing their funds.

As I said, we are at the beginning of the process of engaging those asset managers but are beginning to have a lot of early traction with commitments from some of our biggest partners. And I think no surprises given what's already happened elsewhere in the industry that many of them have been expecting this conversation from us, and so not surprised at all that we'll now be getting it.

To the question about fees and how we would introduce fees. We're thinking about all of the levers that we have in these negotiations, both the carrots and the sticks to make sure that we deliver those outcomes. And we're also doing it through the lens of the value proposition that we ultimately are also protecting around low-cost simplicity for our investors and also choice, offering choice for our investors. And we're confident that we'll be able to balance both of those things as we come out of those negotiations.

David Smith from Truist Securities. Neesha, you spoke to a big gap in lending penetration for Schwab compared to some of your bank competitors. Is there any expectation that Schwab can fully close this gap over time? Or is there just a lower ceiling given the different business models here. And how do you rank putting out new lending offerings versus just driving increased awareness or other methodologies in terms of the importance for you to keep closing this gap?

Yes, let me start with the second part of your question first in terms of capabilities. I think we feel pretty good about the capabilities that we have. And the investments that we've made over the last few years, especially, again, around eligibility, the quality of the experience, you think that's really kind of created kind of best-in-class products and the facilities that we have there. It doesn't mean that we won't explore others if our clients are asking for them, and there are some opportunities that we hear about occasionally. But I think we feel very good about the steps that we have. A lot of the focus now is about awareness and building the experience, as I mentioned, make sure it's easy for RIAs to engage with these products. But given the rate of adoption that you're seeing in the growth rate, we think that we've hit the mark on that. And so we're going to continue focusing on that.

With regards to your first question on penetration. We don't -- I think you know Schwab, we don't set product goals, we don't have targets. But I would say that there -- the market is enormous. And given the fact that only 23% of the RIAs that work with us even have a single power with a single client, there's a big opportunity. And I think between the RIA business as well as our retail business, as I mentioned, the distribution is actually quite even. We have a lot of, as you know, very wealthy clients in retail with very concentrated positions where this is an extremely attractive offering. So I think we feel very confident about the level of penetration we can get to. And hopefully, it will look a lot better the next time you see that chart.

All right. I think that was our last question, and let me get the pleasure of releasing you all for a short break, and we'll see you back again at 1:30 PM.

[Break]

Coveted spot right after lunch -- I have to cover the spot right after break and before the CFO you want to hear from. So I will try to keep you entertain until then. I'm the Chief Technology Operations and Data Officer. I've been with Schwab since 2014. I've been the Chief Information Officer since 2016 and recently moved into this role earlier this year. And glad to be here. Thanks for coming.

I wanted to talk a little bit about how our priorities and technology align to the context you've heard today. There's a lot more, of course, in technology that are priorities, cyber, et cetera. This is really about how we fit into the discussion today. And that first is how are we an enabler of growth, how do we support clients. We are technology operations and data, these single large support function for the client-facing enterprises. Everything from build and technology to operational support, to data analytics, et cetera, is in this organization.

We are prioritizing efficiency. And by doing that, we've actually had a series of transformation programs happening across the organization. Mostly to do 2 things: one, find direct savings; two, find capacity unlock or people capacity unlock that can be applied to new initiatives and new business priorities. Of course, the savings can too, and you'll hear a little bit more about that from Mike, but he makes a decision whether that goes to the bottom line or into investments. But the goal for us in technology is to self-fund as much of the new things that the company wants to do as possible.

We have a pretty diverse road map. And in that road map, we've got to do everything from efficiency, scale, support growth, do innovation, launch AI, all the things you've heard today and seen, we've got to be able to support. And in doing that, we're having to find balance around run, grow and optimize spend. You'll hear Mike talk more about this. But within technology, what we're having to do is really balance those competing interests to make sure we're returning those savings, building all the new cool things you've heard about today, as well as running all of this support apparatus behind the scenes.

So maybe a quick detour on why TOD? So this is not really an unusual structure in financial services. It's not unusual for Schwab either. We've been structured like this before. If you remember Joe Martinetto, these functions were under his umbrella at the time. But what we've seen now is that particularly with AI, particularly with the things you've heard that we're trying to do, these functions are moving together at breakneck speed, I might add. And so we brought them together to be better integrated, scalable to break down some of those silos that might exist and really be able to service the business, drive growth, continue to drive momentum.

So Andrew showed this slide as well. Maybe I could go through this quickly to tell you how we are contributing to earnings growth. Serving a growing number of clients is clearly something we've been doing for a while. Going back to the TD Ameritrade integration, we were preparing for years to take on a whole new client set, almost a client set the same size as ours, frankly. And in doing that, we had a really big challenge. We weren't just moving and migrating assets and client accounts. We were integrating 3 trading platforms into our ecosystem. We were able to step back, re-architect, completely change our data center footprint and really build something that scaled during the pandemic when no one could really predict what was happening with volumes. It's something that could scale to meet just about any demand. And what's worked out very well is we've reduced the amount of expense it takes to do that scale.

So when we've got to meet new volumes, we're much -- we're applying much less new expense to that than we were in the past. So we had a great opportunity, and we took that to build out a lot of scale, a scale advantage, I would say. But we came out of the integration. And of course, after spending the better part of $1 billion to do the integration, we had to tap the brakes. Technology has been on a huge kind of build bender, if you will. And what that meant was we had to now come in compliance with what the firm was committing to the Street, which was mid-single-digit annual expense growth. Well, tech has been growing a lot faster than that. So we really had to come into compliance quickly and slow down after -- it was really hard for tech after a long build cycle.

So we've been able to do that, been able to bring our annual expense growth down in those figures, and we've continued to do that since integration, which is, of course, helping overall with spend. But because we're returning and constantly finding savings through transformation programs, we're able to still spend more in technology but without increasing the budget. And then deepening existing client relationships, we feel like a lot of what you heard today, we built a lot of what you heard today, the operations team support the TOD organization is very much in deepening the client relationships by virtue of what we're doing to support the business.

So maybe a few examples on some of these priorities. So the first one, supporting client growth, pretty obvious. I will go into a little bit more detail on that. Enabling efficiency, enabling growth through efficiency, I should say, and then driving scale. So let me kind of walk through each one of those. So Jonathan mentioned that really one of the things that helps client growth is resilience and availability of our systems. And resiliency has been good. We did have some bumps after TD Ameritrade. We recovered from that. And as you can see on the right, recent volatility and what I was talking about with the scale that we were able to build, we've been able to handle that and be there when our clients needed us most. Now it's always great to have the growth we've seen from '24 to '25, having 18% more logged ons, 31% daily average trades. That's fantastic, but where we really have to perform is making sure that in those pretty massive peaks that we can support the client.

So talking about enabling growth through efficiency. One of the things that we're trying to do is understand and measure both savings and efficiency. And of course, one of the best ways we can do that is looking at our cost per account. Rick mentioned this quickly in his slides. He didn't provide as much data. And this is enterprise-wide data. So this is not broken out by organization. But as you can imagine, the TOD organization is a significant contributor to cost per account. So one of the things we do is monitor how we're affecting cost per account at the same time that we're seeing significant asset growth, significant account growth. In the past, we would be a much bigger contributor. Accounts went up, assets went up. We saw a corresponding increase in tech costs, in particular. But now what we've been able to do, and you can see we had -- there's a tail from TD in '23, we've been able to start to bring down that cost per account and maintain it at flat. And of course, our goal is to continue to bring it down.

And the TDA tail is important because a lot of that build-out I talked about, I mean, clearly, there's D&A associated with that. How have we done this? Because in many cases, that tail should show us continuing to go up. We actively manage all of our compute. We're removing things from the data center from the floor when we need to. We're actively managing cloud consumption, AI consumption. We're doing things like setting up the GCC in India, which I think Rick mentioned as well. That will completely change our staffing model and reduce costs. Operations is removing paper from a lot of its business processes and flows, which is actually a big deal in our industry. And of course, we're trying to do a lot more with AI, which I'll talk a little bit more about. But our transformations, we think, is working because it's showing results. And of course, this organization can move the needle on cost per account. So we see that this is a big win.

Driving scale through employee productivity and evolving client experiences. We are all in on AI. We do see it, as you've heard many times today, as a scale advantage for Schwab for our business model. And there's a lot we are currently working on, as you've heard today, and hopefully, you've been able to see. But there's a few things I wanted to mention specifically about what's happening with AI that is beyond just the products and helping our reps. We are, from an enterprise perspective, rolling out capabilities. So Microsoft Copilot is with all employees now, playing a significant role in building fluency, AI fluency across all of the employee base. GitHub Copilot, which is the software development tool is out with all developers. We've actually rolled it out to a lot of people in the business who work with technology as part of our big changes in our operating model, which we've evolved to ensure that our tech and ops work with the business, aligns with the new world of how we're going to assess and build things in AI.

So we've got a couple of enterprise tools there. We've got smaller ones as well, but we've even allowed Copilot users selectively to have additional capabilities to build apps, to build agents within that ecosystem. So lots happening on the enterprise front besides the things on the list that you saw and you've seen throughout the day. What I think is really interesting, and Rick mentioned that I had this number is our CTO, Tim Heier, who's leading a lot of the AI work, I think he would tell you, man, we were making a lot of great progress in '25. I thought so. But to look at what we've done from '25 into Q1, 4x the amount of usage of LLMs is a significant lift and shows, I think, how committed we are to what we're trying to achieve in AI.

So maybe to close things out a little bit, I mean, we are clearly an enabler of the business. We are the supporting apparatus. We have a significant impact on bottom line. The savings that we're drawing from our efficiency and in our transformation programs is being reinvested or moving to the bottom line. That is, by the way, that's not just something we're doing this year. That's a 5-year program. We have commitments out 5 years. A lot of that's being driven by AI. And of course, it's a complex world to try to do all of this plus all of our new product development, but it's certainly something we're trying to achieve. And thus far, we are. So maybe with that, I will open it up to questions.

All right, Dennis, we're going to start with one from the web console. How should investors think about your technology modernization priorities over the next few years? What's changing in terms of platforms, architecture or ways of working? And how will you measure progress?

There's a lot in there. So yes, let me start with modernization in general. So modernization, I get this question from the Board and actually from even some of the -- our employees. Modernization is no longer a milestone or single event. It is a constant. So everything we're doing to manage our environment takes continuous monitoring. We have an entire planning process that looks at nothing but modernization needs and legacy technology. So that is just the way we operate, standard operating procedure now.

What we're doing in terms of other priorities, if I heard the question correctly, we've clearly got a number of initiatives around transformation in how we work. That was one part of the question. AI is changing some of that, just good process and methodology is changing that. And so we're completely changing the way we work. In fact, if you look back just a few years when we were doing TDA, we are working, planning, funding activities much differently than we were. Most of that is driven by what we're trying to do with AI. But also, we started some of this journey several years ago. I think I hit the big items there.

How do you think about AI risk and containing it? And it sounds like it's a constant battle, but how are you addressing that?

Yes. It's a very important question. So in the world of Mythos now or I should say the post Mythos world, we're working hand-in-hand with our vendors. Most of the large vendors that are in Project Glasswing testing Mythos are partners, vendors of ours. So we're having conversations with all of them. I think there's a couple of things we're doing specifically internally to prepare. One, we know there's an onslaught of patches coming. In fact, online, I think it's being called vulnerability apocalypse, we're going to -- we are completely changing our patching processes to adapt to what needs to happen now in hours or days instead of potentially weeks, months, which is the case today.

Active conversations with the rest of the banks, all the way up at the CEO level as well as down into our security organization. And there's a lot of best practices that the industry is sharing, most of which we all engage in that we've all doubled down on. So whether it's scanning our systems and our code, whether it's checking vulnerabilities across what are massive tens of thousands of servers in our environments or going to cloud providers and making sure they're doing what needs to be done, all of that we are on top of.

The one thing that I think continues to be a risk, though, is we're at the mercy of -- actually, I'd say there's 2 things. We're at the mercy of the vendors to patch their issues. And so we're going to have to understand prioritization of those vulnerabilities and do that patching. The second part of this is it's not just about Mythos. I think any frontier model now is looking like it's going to be a risk. This is coming. And I think we all knew in technology, this was coming, just coming at us a lot faster than we anticipated. So we are certainly fully engaged and have all hands on deck.

Okay. With that, I'm going to introduce our CFO, who you really want to hear from, Mike Verdeschi.

Good afternoon, everyone. And welcome again. Thank you for spending the day with us here in Westlake, Texas. We appreciate everybody in the room making the trip down. We know that's a big commitment. So thank you very much. Those that have joined us virtually, thank you as well. We appreciate your participation. We are in the home stretch. This is it. So last presentation, and I'll get through this and look forward to your questions as well.

It's hard to believe it's been 2 years since our last Investor Day. And the reason I say that is when you heard from all of my colleagues today, it's amazing how much we've accomplished in just that short period of time. We're doing so much for clients. We've had so much success, new products, new experiences and the same exceptional industry-leading platform and that same differentiated client service. All of that comes together and has helped us deliver record financial results. To wrap up today, we're going to talk about why Schwab is so compelling. We believe no one is better positioned than we are for the future. So let's dive right in. We've got a lot to cover.

So we heard from everyone talking about all the innovations, all the priorities that we're doing. We'll talk about how those pieces come together to drive not just revenue growth, but diversification as well and how that growth is profitable based on how we manage expenses in that balanced fashion. We'll talk about the deliberate steps we've taken to improve the durability of earnings through a range of environments and how that feeds our financial formula to drive strong earnings growth through the cycle.

Our financial formula. It is quite straightforward. It starts with our through Clients' Eyes strategy and has helped us grow organically, new clients coming to the firm, asset gathering and clients are doing more across our platform. As they do more across our platform, we are deepening our relationship with those clients as they embed themselves in our platform. That gives us strong revenue diversification as well. We are investing in scale and efficiency. And of course, we've taken actions to enhance our capabilities in managing the balance sheet to support durable earnings in a range of environments, and we've also returned capital in multiple forms. All of that comes together to drive strong earnings growth through the cycle.

Over the past decade, that focus on clients, new clients coming to the firm, engagement across our platform has delivered strong financial results, mid-teen percentage growth in revenues as well as earnings per share. And of course, the steps we are now taking to improve the durability even further. This has been enabled by the evolution of our platform. That evolution has been based on organic investment as well as targeted acquisitions to give us an industry-leading platform across wealth, trading, banking, asset management, including now digital assets, alternatives and even private shares. This industry-leading platform supports over $12 trillion in client assets, over 47 million client accounts is going to continue to power our financial results in the future. So within our financial formula, we'll cover revenue, expenses and of course, the balance sheet and capital as well.

So let's just touch on 2025 revenue for a minute. Key drivers continue to be strong engagement from clients. And those near-term revenue drivers has been the momentum in lending across both our bank and nonbank platform. It's also been about that bull market for advice that we heard throughout the day, record flows coming into managed investing as well as good flow into our asset management solutions. And of course, as we heard from James and Jonathan earlier, the continued resilience of the Trader segment. All of that was helpful in driving strong revenue growth in 2025. We're going to talk about how doing so much more for clients is going to continue to drive revenue growth and diversification within each of those segments.

So let's start off with net interest revenue. A lot of times, I hear the question, how are we diversifying away from net interest revenue. Let's talk about how we're diversifying within net interest revenue. Net interest revenue more and more is being driven by strong lending activities across our bank and nonbank platform. Let's start with the bank. Neesha covered this as well. We're now over $60 billion in lending in the bank, and that's doubled in the past 5 years. Yet the pledged asset line utilization, roughly 10% is still a low utilization rate, and we're very confident that's going to move higher. We heard from Rick at the beginning of the day, how easy we made it for clients to access funds through a pledged asset line. And importantly, we're earning a good spread over the benchmark rates in the bank lending, so more than 100 basis points.

In the broker-dealer, of course, with that very active trader base, we see good engagement across margin lending, but not just margin lending, securities lending and, of course, other strategies such as long/short. Taken together, over $200 billion of lending activities. And what's important is within net interest revenue, more of the economics are being driven by the lending which has limited credit risk and net interest revenue is less driven by the path of interest rates, given we reduced our sensitivity to the path of rates by roughly 1/3. So the durability of net interest revenue is improving.

Okay. Let's move to asset management and administration fees. There are a number of opportunities within this space to continue to drive fee revenues and diverse fee revenues within this segment. So we talked about the bull market for advice. There is enormous upside here and the amount of utilization in retail households, again, is a low 5% with -- definitely with room to move much higher. Of course, positive trends as well with our in-house Schwab Wealth Advisory solution as well. Beyond advice, again, we talked about the allocation to alternatives, still upside in that space as well. And of course, as we heard from Andrew as well, monetization across the trillions we have on platform in mutual funds and ETFs. So taken together, this is a good, diverse fee revenue source that is going to continue to grow and provide us diversification.

Let's move on to trading. We have the #1 retail trading platform in the industry, #1 in daily average trades, #1 in equity volume, #1 in options contracts, and we're still going to be doing more for clients. James alluded to many of the new experiences that we're offering, including spot crypto and with the acquisition of Forge, access to private markets as well. When you combine that with our platform, the education we provide this segment, with the customer service, with traders supporting traders, the risk management capabilities, this is proving to be a more resilient group. And the more resilience we have with this group, the stronger the engagement and consistency around that, that is also providing durability to revenues.

So taken together, that strong organic growth, new clients coming to the firm, asset gathering and of course, market appreciation as well, combine that with revenue diversification from the increased engagement across our platform, we feel highly confident in generating that high single-digit to low double-digit revenue growth through the cycle. But we also expect favorable trends in revenue per account and revenue on client assets as well. So very strong momentum in revenue, and I expect that to continue.

So let's move to expenses. Schwab has a history of both being balanced and disciplined in managing its expense base. We make resources available to invest, to innovate, to grow our franchise, but we're also investing in efficiency. And you can see here, we've continued to make progress in driving down that cost, that expense on client assets to an industry low 12 basis points. And that 12 basis points is a very favorable level compared to a whole range of peers. So this is obviously enormously helpful in terms of our competitive advantage in the industry and helps us maintain that low cost to serve our client base.

So looking across our expense framework, we have run, grow and optimize buckets. That run bucket, of course, are the expenses needed to operate the day-to-day franchise. It also includes the expenses that are volume-based. And of course, those expenses can range as market sentiment shifts and client engagement evolves. In that grow bucket, these are the investments we're making to help bring new clients to the firm and to help those clients do more across our platform. And then optimize, 2 items with optimize. We're freeing up resources to reinvest in the franchise. And of course, we're investing in efficiency that gives us the flexibility to do more for clients or to allow that to fall to the bottom line in certain environments. Overall, our focus here, constant improvement, scale efficiencies and of course, investing in our future. And any given year, of course, our ultimate spend is going to be informed by our strategic priorities, the macro environment and, of course, client engagement. But we feel really good about this balanced approach to expense management.

A few examples or several examples in both grow and optimize and grow, you've heard us talk about expanding branches, hiring financial consultants and wealth advisers. That's going to help bring new clients to the firm and do more across our platform, especially as we invest in wealth and that opportunity in advice, and of course, the use of AI to reach many more clients and do more for them as well. In optimize, Dennis just talked about all the efficiencies and the investments we're making in our infrastructure to free up those resources as well, in part enabled by artificial intelligence. But as we saw in the videos earlier today from Jonathan, we're doing so much more in artificial intelligence that is going to free up resources. It's going to make our client-facing reps much more efficient with tools like knowledge assisted.

So again, we have a good amount of grow and optimize initiatives to drive us forward. So in total, in expenses, that focus on profitable growth as well as the efficiency has been able to generate strong positive operating leverage through the cycle. And also here, again, favorable trends that we expect in that cost per account as well as that expense on client account, the ability to continue to grind that lower and also gives us the flexibility to shift resources in that labor mix, meaning that we can continue to invest in people and have people-facing clients to bring new clients to the firm and do more across our platform.

Okay. Let's move on to the balance sheet. Since I joined here 2 years ago, an enormous amount of focus on the balance sheet. We've taken deliberate steps to enhance our capabilities, and they've been guided by 3 basic principles. Our balance sheet is going to be managed in a way that's going to continue to support our client needs, that activity can be managed on a foundation of safety and soundness. And lastly, through our balance sheet capabilities, we're also going to support durable financial outcomes through a range of environments.

Here, we have a set of examples of what we've been able to achieve with this approach with the balance sheet. We've supported strong client engagement in lending. Lending has been up 45% since the end of 2024 and again, with limited credit exposure. In ALM, that's had an enormous amount of focus. In fact, I think 2 years ago, I think it was my third day on the job was the question I got, what are you going to do about ALM? Well, we focused a lot on ALM. We've reduced our interest rate sensitivity by roughly 1/3. We've enhanced our understanding of client behavior and how they manage their cash in a range of environments that improved understanding of how clients move their cash around in different environments informs that investment portfolio duration range of 2 to 4 years.

For example, if you see spikes in cash that you expect to be temporary, you may not invest that at all or maybe you invest that in the very short end of that range. And last example, our enhanced funding diversification. Our client cash remains our primary source of funds, but we purposely complement that primary source of funds with a diverse set of funding programs deliberately. We have programs in our bank as well as in our nonbank. We have secured and unsecured funding programs as well as short-term and long-term programs. The reason we have these programs in place, it helps us meet our evolving client needs, which can certainly be dynamic, especially in the broker-dealer with an active client base and traders that engage in margin lending, but also having a broad set of funding solutions, it allows us to put together a mix of sources of funding to be the most economically efficient in meeting our client needs. So a good set of activities that we've been engaged in on the balance sheet.

We are very well positioned in capital as well. Capital is there to support the growth of the franchise and to meet our clients' evolving needs. But at the same time, given our strong earnings momentum, we've been able to return capital in multiple forms. We've increased our dividend. We've selectively redeemed preferred securities, another way in which we've returned capital. And of course, we've been opportunistic and have done stock buybacks as well. So we've done close to $15 billion in returning capital to shareholders since the end of 2024. Again, this has been important capital to meet our client needs, but at the same time, an important part of our financial story as we return capital in excess of what we need to operate the franchise. So taken together, the balance sheet durability, the focus on returning capital in addition to supporting our client needs further bolsters our financial story and durability of our financials.

Okay. Our financial formula in summary, that focus on organic growth and the ability to have achieved diverse monetization, which is only going to continue, gives us great confidence in driving high single-digit to low double-digit revenue growth through the cycle. That balanced approach to expense management, investing in our future as well as investing in efficiency, that allows us to achieve continued positive operating leverage, and the discipline around managing our financial resources, our balance sheet, our capital, that also adds to our financial story. It gives us confidence in our mid-teen EPS growth through the cycle. The focus on clients, the industry-leading platform, all the capabilities that we've enhanced all come together to drive outcomes in this financial formula. And I want to be very clear. We are very focused on continuing to drive strong earnings outcomes.

Okay. So the part you've all been waiting for. I had said that perhaps we weren't going to do a financial scenario until July, and we will do another financial scenario refresh in July. But given how much the markets have been moving. And I did hear from some of you that if you were coming all the way to Westlake, you wanted to talk about financials. So here we go. Let's go, financial scenario update.

Just a quick recap of where we were in the winter. At this time, 2 cuts had been priced into the market, okay? And at the same time, I'm sure you've gone through this already, so I won't hit every point, but that client engagement in terms of those daily average trades, we had assumed at 7.4 million. We've been wrong on that. And of course, a couple of notes there on the bottom in terms of what was excluded at that time. Now let's move forward to today. No rate cuts are priced into the market today. No hikes either, but no cuts at this point. So flat Fed funds. Equity markets rebounded very nicely in the month of April.

So we are assuming a roughly 10%, but we know equity markets continue to be on the move. Of that same organic growth rate of roughly 5%, we lifted daily average trade somewhat to 8.7 million. But as you've seen, that has been incredibly strong. And then when we get to the bottom section, again, we continue to exclude any buybacks we may do in the future, but now we include Forge because we closed on Forge. So what you see in the financials is a lift and shift of their revenue and expenses on to our revenue and expense base, which you see come through on the next page.

Okay. So where does this leave us? Strong revenue growth, 14% to 15% versus the prior year, and that's up from 9.5% to 10.5% from the winter business update. Also, given the strong engagement in lending and the lack of rate cuts, we're getting a lift in net interest margin as well, 3% to 3.10% for the full year and 4Q average NIM in that 3.25% to 3.30% range. On expenses, 8.5% to 9.5%, again, that is up from the winter business scenario. Important to note, though, the underlying expense versus what we showed you in the winter business update is unchanged. So everything is playing out as planned. The lift is coming from that strong client engagement. It's lifting volume-related expenses, including performance-based compensation. But of course, it's more than offset on the revenue line and it's certainly accretive to our earnings.

And then lastly, that lift in Forge by taking their expense base, putting it on to ours, it lifts that expenses by 100 basis points. On the revenue side, that would have been roughly 50 basis points. So strong full year expectations through this particular scenario. And again, as I said, when you look at those daily average trades, they certainly have been on the move. We include sensitivities in the materials that you could model your own assumptions on daily average trades and the additional revenues that you could perhaps achieve.

Then a couple of comments on 2Q as well. Same drivers, sustained strength, giving us a strong revenue expectation of 16% to 17% year-over-year and another expense lift 10.5% to 11.5%. And again, there are a couple of onetime factors in here. Once again, you have the lift of Forge onto our expense base. And then you had the return of the SEC 31 fee. Remember, that fee had been suspended. It comes back in 2Q that adds to that expense lift. And of course, those other volume-related expenses that we've talked about. I think for 2Q, your EPS, you're around that $1.50 level in this particular scenario.

So very good momentum. I feel good about the financials. And again, coming off record results in 2025, great first quarter. That client engagement has remained robust. I feel very good about the strength of our financials and what we see going forward.

So with that, let's go into Q&A.

Brennan Hawken from BMO. Mike, I'm curious, when you first came on board, there were some thoughts around maybe shrinking the balance sheet. Have you had any updated thoughts on that, particularly given all the anxiety around what the future state of cash optimization and what the value might be of having a larger balance sheet than you would need to facilitate some of the client engagement that you talked about?

Thank you for the question, Brennan. And as we've talked about throughout the day, that bank platform is important to help us meet our client needs. We are meeting our client needs on both the asset side and the liability side of their needs. Obviously, the bank provides a place for them to have cash to be redeployed. It provides FDIC insurance. And at the same time, there's been demand for bank lending products, solutions, pledged asset line, which we've made incredibly easy as well as mortgages.

When we've talked about the balance sheet, what's important to remember is that we have enhanced our capabilities. And importantly, some of that cash through that bank deposit program with TD, it allows us to move cash off our balance sheet when we desire to do so. It allows us to move cash back on to that balance sheet. And so that gives us a great deal of flexibility to manage cash that we say, hey, if it's temporary, we can leave that on balance sheet and leave that very short term, we can move that off balance sheet. We have a lot of flexibility.

But of course, part of that balance sheet, I would say, headwind, if you will, to growth was paying down those expensive supplemental borrowings. And I think those peaked close to $100 billion. So bringing that down had been really creating a headwind to the balance sheet. From here, the most important part is understanding what is happening to those deposits that you referenced. And we track those all the time. We talk to our clients. We are very informed about that deposit base and therefore, how do you deploy it. So we feel really good about our bank, the capabilities that we're building. It's going to be continuing to serve our client needs, and that is part of our growth story. We feel very good about it. Thank you for the question.

Alex Blostein from Goldman. Thank you for the day, by the way, really informative. So I appreciate you guys doing this. I wanted to ask a bit of a 2-part question and the interplay between NNA growth and ROCA. In the past, you guys talked about the 5% to 7%. It doesn't sound like there's an update to that, but curious how you think about net new asset growth for the firm as a whole. And it feels like there is a lot more today about ways you're looking to monetize the assets that you've built over the years. So when we think about the ROCA on the business, how should that evolve over the next couple of years, acknowledging that NII will give it a natural lift, but there might be other things that could help that ROCA dynamic as well. So how do you think about both of those?

Absolutely, Alex. Thank you for the question. So both are important. We feel good about the momentum in NNA. As you saw in our scenario, we assume that roughly 5%. That's unchanged from the beginning of the year. So NNA is important, bringing those either new clients to the firm or the asset gathering is critical. So that is still a focus area. It's something we're still investing in. Again, opening new branches, hiring FCs, all of that is going to continue to fuel that type of growth. And then again, once those clients come to us, equally important is on our platform, our clients once they become familiar with our products, our solutions, our level of service, they're doing more across our platform. And that's enabling us to drive revenue. It's diversification. Diversification means durability in most environments. So that all comes together quite nicely.

ROCA, as we said, positive trends, revenue per account, overall revenue growth, we feel good about. ROCA as well will trend favorably. Of course, the thing about ROCA, though, it's over client assets. And so when you talk about what client assets have done, not just the asset gathering, but the appreciation of markets has moved that higher, that's great. We have more assets on platform, supporting more clients. That's great. Overall, we expect favorable trends though in that ROCA given everything we're doing for clients and the revenue strength that we have from that.

Echoing Alex's earlier remarks, I appreciate the day, certainly a very comprehensive update. I wanted to unpack the mid-teens earnings growth algorithm, Mike, because that's something that you -- the company has highlighted very consistently. And at the same time, the ROCA expansion appears to be accelerating and the potential for AI efficiencies and bending the cost curve is arguably even greater than what we had seen before. I was hoping you could speak to what the implications are for incremental margins, how you're thinking about striking that balance of passing on the benefit to the customers versus the shareholders and at the same time, whether there's a credible path to maybe seeing some acceleration beyond that mid-teens given the revenue tailwinds combined with the AI efficiencies?

Steven, thank you for the question. We gave you a through-the-cycle picture. I think if you look at last year and even with this new scenario, what that implies, clearly, you're above that. So there's going to be environments where certainly we could be above that. We feel really good about the revenue strength and the earnings momentum. And again, we're trying to give you a sense of where you are through the cycle. But certainly, in the right environments, we could be above that. And I think these are good examples of where we are today.

That margin growth, again, we've talked about that as not being a target, but rather a result of a well-balanced approach to managing our financials. We're investing in growth. We're investing in innovation. And with those investments, we're bringing more clients to the firm, doing more across our platform. So that gives us great confidence in that revenue growth. And we're making sure we're making those investments. We are an industry leader. We're going to stay that way. We're going to make the investments we need to continue to solve, I would say, to meet our clients' evolving needs. That has been something that's always been a driver of what has informed what we do, meeting that client need. At the same time, investing in that efficiency is a priority.

And to your point, AI makes that even much more efficient. So we've seen favorable trends in operating leverage. In that financial scenario, the winter business update financial scenario had 400 basis points of operating leverage. The updated financial scenario, 550 basis points of operating leverage. So I think you are seeing evidence of that growth. But again, that also gives us the flexibility to invest in growth, and we're making sure we're going to do that as well. So thank you for the question.

Devin Ryan with Citizens. As we think about the environment that we're in right now, a lot of today is talking about artificial intelligence and really the, I think, the bar rising to be competitive in kind of this future world that we're in, technology costs and just innovation that's going to be required. And obviously, I think, hopefully, today, that impression comes through that Schwab is prepared for that.

As you look around the universe of all the areas where Schwab competes, how do you think about the competitive landscape and also the ability and interest in doing M&A or even like what that pipeline looks like? I'm guessing there's firms that are probably looking at themselves and saying, we haven't made these investments that we're not capable to or we don't have the scale to compete. So just talk a little bit about M&A appetite and then also just capacity now that the capital ratios are in a strong place.

So first, on your AI point, of course, we've been focused -- AI is going to be a competitive advantage for us. We're AI-enabled. We're investing in it. You can see all the capabilities that are being enabled by AI. So we're going to continue to invest and stay out in front. It's also enabling efficiency. When it comes to M&A activity, we're always going to look at our strategic priorities. What are the areas that we want to focus on, and we'll look at many different ways to do it. And I think Adele summed it up very nicely. We're going to look at what does it take to build organically, what does it take perhaps to consider an acquisition or what may be better suited for a partnership.

So we're always going to be exploring different capabilities. Of course, we'll be focused on the market valuations for those as well. But I think that has served us well. I think as Schwab has grown over time, those acquisitions have been informed by perhaps capabilities. It's informed by scale, maybe a combination of the 2. And I think in this space now, the combination of doing more for clients and focusing on those efficiencies as well, we're going to use that lens as well every time that we look at the enhanced capabilities and what we may be able to do with industry, either partnering or acquiring as needed.

All right. Let's close out with one final question.

Brian Bedell, Deutsche Bank. I echo everyone else's comments. Great, great day, really informative. Maybe just big picture longer term, as you think about the revenue mix between fees and NII. And obviously, it's an output of a lot of conditions. But how are you thinking strategically about growing the fee revenue base potentially faster than NII with the objective of potentially improving Schwab's valuation given -- even though you said NII is more durable and that makes a lot of sense, but still it has a lower valuation tied to it than fee revenue. So how strategically are you thinking about growing that?

And then if -- it's good to see that there's not a lot of movement in cash in terms of cash sorting and that seems to be the case for at least a while. But if that changes at some point, how flexible can you be to offset some of that with an acceleration of fee revenue?

A couple of points. We are seeing positive momentum in fee revenue. That is becoming a bigger part of our revenue stream, and we're going to continue to see that grow. I think over time, as a percentage, and you made the right point, the market conditions that you're in, the client engagement will ultimately inform that revenue generation. I think over time, you're probably seeing the percentage of asset management and administration fees increasing certainly relative to net interest revenue. But all of that will depend, of course, how the market plays out and how client engagement evolves as well.

But I would say that what I look at is the overall platform, how we're doing more for clients, how we're creating that revenue diversification. It is an industry-leading platform and clients are coming to us for the capabilities we have, for the service we provide, for the trust they place in us to help them build and manage their wealth. So that's a very strong place to be in. I also know that our -- we have people in the field helping our clients manage that cash. And we know that, a lot of that cash where clients are seeking a higher yield, that money has already been deployed. And we've seen meaningful rate cycles in the last few years, and that's given us a good lens on how that money can move around.

So again, I think everything we're talking about since coming to the firm, focus on the balance sheet and then focusing as we do more for clients, a natural outcome of that is strong revenue diversification. I think these trends are incredibly favorable. And given we have an industry-leading platform, again, over 47 million client accounts and over $12 trillion of assets, that puts us in a very strong position.

So thank you for the question, and we will wrap up here. Thank you all again for joining. It was great having you here. I'll just leave you all with a few closing remarks. It's hard not to be excited about how well positioned we are. This is a fast-moving industry. It's competitive, but our platform is unique. We have a competitive advantage. We have a differentiated level of service. We are a trusted financial leader in this industry with an exceptional platform. That platform operating at scale puts us in a competitive advantage where we are winning. So we are winning today. We're seeing growth on all fronts. We are seeing our strategy executed. And with that, we're going to continue to drive strong earnings through the cycle.

I will close there. Thank you all again very much.

Good morning, everyone. Thank you for joining us for Schwab's 2026 Spring business update. This is Jeff Edwards, Head of Investor Relations, and I'm joined in Westlake this morning by our President and CEO, Rick Wurster as well as our CFO, Mike Verdeschi.

Let's jump on in today, and hopefully, everyone had a chance to review our earnings release that crossed the wires earlier this morning and per the usual, slides for today's business update will be posted to the IR website at the conclusion of today's prepared remarks. Please adhere to our one-question policy during Q&A. And as always, the IR team is available to assist with any questions following today's update. And finally, the [indiscernible] wall of words or perhaps more widely known as the forward-looking statements page, which reminds us that outcomes may differ from expectations, so please stay up-to-date with our disclosures.

And with that, I'll turn it over to Rick.

Thank you, Jeff, and good morning. Thank you for joining us for our spring business update. I hope you walk away from the call this morning with three overarching messages. One, our Through Clients' Eyes strategy drove record client growth and financial results in the first quarter. Two, Schwab is delivering for clients and is uniquely capable of meeting client needs across investor types and investment environments. And three, we are innovating at a rapid pace with tangible progress in AI, digital assets and client capabilities and experiences.

Our Through Clients' Eyes strategy continues to drive results with strong growth across all fronts in the first quarter. Clients remain highly engaged, and they continue to turn to Schwab through volatile and uncertain markets. Clients opened 1.3 million brokerage accounts up 10% over last year. Excluding a onetime mutual fund clearing outflow, we attracted $158 billion in core net new assets, a first quarter record that brings total client assets to $11.8 trillion. March was our second highest month of NNA ever behind only December of 2021.

Clients continue to turn to us for more of their financial lives with strong engagement in our wealth and lending solutions. Managed investing net flows were up 46%, reaching an all-time record. Bank lending was up 29% year-over-year with bank product balances and pledged asset line balances reaching all-time records. We supported a record 9.9 million daily average trades. This engagement led to record financial results with revenues up 16% [indiscernible] $1.43, up nearly 40% over last year. Behind those numbers are people of all life stages who are turning to Schwab to invest and trade through a period of heightened market volatility.

In the first quarter, we continued to execute across our key strategic focus areas and deliver innovations at a fast pace to help clients grow and protect their wealth. I'll highlight just a few, starting with growth. We're continuing to hire financial consultants and wealth advisers while expanding our branch footprint with about a dozen new branches planned for 2026. When clients have a direct relationship with a financial consultant, their Client Promoter Scores increase 10 points and they trust Schwab with 2.4x more net new assets. We launched the Schwab Team Investor account, giving young people ages 13 to 17, an engaging way to get started on their lifelong investing journey. Our differentiated joint account structure allows parents to monitor and engage as needed as their teams trade and invest. We are still in the early days, but have seen great interest and enthusiasm so far.

We believe it is important for teenagers to learn the benefits of saving and investing. The merits of compounding over messaging from the more gambling oriented messaging from some competitors. We completed the acquisition of Forge, which will allow us to provide clients with direct and indirect access to shares of pre-IPO companies through direct private share purchases, single company funds and multicompany funds. We'll roll these capabilities out to clients over time and look forward to sharing more details in the months ahead.

We are building a healthy pipeline in our recently launched private issuer equity services service which offers capital people management solutions for pre-IPO companies that combines the expertise and capabilities of our workplace business with Qapita's flexible technology and offers a seamless transition to our public stock plan services capability. With the Forge transaction now closed, we continue to see upside in engaging the private market ecosystem with a solution that offers them pre-IPO stock plan services, liquidity solutions for their employees and equity holders and lending solutions for their employees. This win-win opportunity creates value for the issuer while creating a pipeline of stock plan services clients and greater access to private company shares to grow Forge.

We also increased our strategic investment in Wealth.com which we are already using to bring AI-powered estate planning tools to our clients. We're also working to launch their AI-powered tax planning capability in the near future. We successfully began the rollout of our structured asset line offer to adviser clients, expanding the type of securities they can use as collateral, including alternative investments. We'll talk more about our AI progress in a moment, which is helping us drive both growth in scale and efficiency.

When it comes to brilliant basics, we were there for our clients in the first quarter. We supported over 600 million trades, more than 7.8 million calls to our service centers and about 570 million digital log-ins up about 12% from the first quarter of last year. Clients reaching out to our service centers had their calls entered in less than 30 seconds on average. We're also making it easier for our clients to do business at Schwab. In Advisory Services, we're continuing to enhance our digital experiences across RIA workflows like move money, account open and account maintenance while also modernizing tools on our adviser platform. Taken together, these enhancements help RIAs get routine work done faster and with fewer errors.

We're also continuing to enhance our digital experience across the retail and workplace ecosystem, including expanding our digital experiences and bringing workplace on to Schwab Mobile. Most importantly, we continue to delight our clients. Client Promoter Scores are up 9 points over last year in Investor Services nearing all-time highs. Our [ ASCG ] score also remains near an all-time high. Our capabilities are differentiated and aligned to support clients in all markets, including the more volatile environment that we experienced in Q1.

Our formula for driving earnings growth over the long term is straightforward, and you see it here on the screen. I want to spend a few minutes highlighting just a few of the ways we are accelerating our pace of innovation to deliver for clients and drive our strategy as we look ahead. We have a diverse set of opportunities to deepen relationships with our 47 million client accounts while also diversifying our revenue streams. I'll spotlight two areas where we are helping clients conduct more of their financial lives at Schwab, wealth and digital assets.

Flows into our managed investing solutions reached all-time highs. This was driven by strong engagement with our flagship Wealth offer Schwab Wealth Advisory where net flows reached a record $10 billion, up 90% over last year. Approximately 30% of the flows into our managed investing solutions came from legacy Ameritrade clients. Clients in our managed investing solutions have the highest client promoter scores at the firm and bring in approximately 2x the revenue on client assets, and we still have runway to grow this business as our clients' financial lives become more complex, and we continue to add to our capabilities to help clients grow, protect and pass along their wealth.

Another way we will deepen relationships with clients is with Schwab Crypto, our new spot crypto offer. I'm excited to share that the employee pilot is underway, and we expect the phased client rollout will begin in the coming weeks. We are starting with the two most popular coins, bitcoin and ether which together represent approximately 3/4 of the crypto market. Pricing will be competitive at 75 basis points on the dollar value of each trade. We plan to add additional cryptocurrencies to the platform over time as well as transfer capabilities for both deposits and withdrawals, allowing clients with existing digital assets that bring them to Schwab alongside their other investments. Most importantly, we are launching our spot crypto offer the Schwab way with a powerful combination of education, research, risk management and service all at great value.

Finally, I want to spend a few minutes diving into how artificial intelligence is accelerating our strategy and the fast pace at which we are launching impactful AI capabilities. I want to start by highlighting three points. One, Schwab is already an AI-enabled company. We have been using machine learning and AI capabilities for years and have made recent progress launching new AI capabilities. Just as we have embraced and flourished during other periods of seismic technology change, we are doing the same now benefiting from our massive scale, data and technological prowess.

Two, AI will accelerate our strategy. On the growth front, AI opens up new distribution channels and allows us to create personalized relationships with clients we have not been able to serve with a person-to-person relationship. AI is already having significant impact in driving scale and efficiency, both in our technology and operations and in the way we serve clients.

Three, we are harnessing the power of AI in the Schwab way, bringing the best of people and to engage the way they prefer.

AI is accelerating our strategy in several ways. First, AI will help fuel our ability to serve more clients. As prospects and clients increasingly use consumer AI tools for research, we are making sure Schwab will be there providing the trusted education and expertise that we already bring to clients on other digital channels today. We're already reaching a growing number of clients through the answer engine optimization work that our marketing team is doing to ensure we show up on the AI platforms where investors are turning. We are working with these platforms now, and you'll see us do even more.

AI will help us with our second growth lever, deepening existing client relationships. AI can help us create personalized and deeper relationships with the clients we can't currently serve at scale with one-to-one relationships. We know investors are using AI today, 77% of U.S. investors use AI today, though more than 90% still prefer human involvement in addition to AI. Next month, we will begin the rollout of portfolio insights and AI-enabled experience that will deliver tailored insights to our clients about their investment portfolios, how they are performing relative to indices, the news about their holdings and the relevant proprietary research from Schwab. We have already tested this capability with employees. We will expand these capabilities throughout 2026, providing clients with insights on topics like concentration risk, asset allocation and technical indicators.

We will also be launching a generative search capability for clients looking for information on schwab.com. The first iteration will launch this year. Starting over the summer, we will introduce the first of several AI assistants that will enable our clients to interact with chat and voice to address their most frequent service and support needs. Our first iteration of the investor AI assistant will launch in June. This capability will be able to answer general questions and we will start to test a set of actions the agent can take on behalf of clients. For example, clients will be able to interact with the voice agent to set beneficiaries. We are ensuring clear handoffs to human agents and strict guardrails. This agent and others like it will get smarter with each release as we introduce new skills. We are working with a leading AI agent firm on this build-out and look forward to sharing more details soon.

We are also now able to meet our clients' trust needs with an AI-powered capability from wealth.com. We will do the same with tax. Over time, these efforts will create opportunities for enhanced experiences and new fee-based offers that will create value, we believe our clients will be willing to pay for. According to research, more than half of our clients are willing to pay for AI financial tools.

AI is already driving scale and efficiency in two ways. First, it is helping us drive productivity across the firm. Every one of our sales, service and advice professionals is using AI every day to elevate every interaction they have with clients. A few examples. Schwab Knowledge Assistant gives our phone professionals answers to complex client questions in seconds. And Schwab Research Assistant synthesizes market insights from the Schwab Center for Financial Research. Schwab AI Service Assistant, which we've rolled out in retail and will follow in Advisor Services instantly transcribes approximately 60,000 live interactions a day, captures notes and assist client-facing professionals with next steps. Within Advisor Services, we've introduced large language learning models to analyze millions of calls to provide better coaching to our service professionals. In our branches, we are launching a relationship management assistant. If an FC has a client meeting coming up, this capability quickly summarizes past client interactions using AI, shares a view on actions that would help the client, records the client meeting and prepares an action-based summary of the meeting for the client. We believe this tool will make our financial consultants more productive and able to serve more clients more deeply and more effectively.

Second, AI is helping us transform how employees work. We have equipped every one of our 33,000 employees with AI tools and are seeing tremendous creativity as they are developing fluency in AI and embracing the ways it can transform how we work. We are accelerating the pace at which our Schwab engineers build technology. More than 8,000 of our technologists are using AI to design, code, test and fix bugs, all of which increases our speed. And we are streamlining back-office processes and operations, risk and across the firm to save time and resources.

We are confident that we are incredibly well positioned to continue unlocking the benefits AI can bring to our clients and our business, including, one, enhancing the client experience by bringing personalized insights to more clients at scale and serving more clients more efficiently; two, increasing productivity and efficiency, which will lower our cost to serve while enabling us to continue to reinvest in our growth; and three, create future monetization opportunities with AI-powered capabilities that clients value. The outcome is AI is accelerating our Through Clients' Eyes strategy to help us drive profitable growth through the cycle. I look forward to sharing more detail with all of you at our Institutional Investor Day on May 14, including demos of some of the AI capabilities that we'll launch soon.

To summarize, we have strong momentum as we head into the second quarter, and we're well positioned to deliver earnings growth through the cycle.

With that, I'll turn it to Mike to speak more in detail on our financial picture.

Thank you, Rick, and good morning, everyone. During today's call, I will discuss our strong start to 2026, where our sustained business momentum drove record financial results for the first quarter. In addition, I'll cover our disciplined approach to managing the balance sheet, which allows us to support the evolving needs of our clients across different environments. And lastly, highlight how by doing more for our clients across our platform, including the continued deployment of AI, enables Schwab's model to become even stronger and more diversified allowing us to provide individual investors and RIAs with an industry-leading value proposition.

Starting with 1Q. Revenue increased 16% year-over-year to a record $6.5 billion for 1Q, including another quarter of double-digit year-over-year growth across all major line items. The reduction of higher cost borrowings at the banks increased utilization of our lending solutions by clients and interest in long-short strategies helped drive a 16% increase in net interest revenue versus 1Q '25. While equity markets were increasingly volatile over the course of the quarter, strong asset gathering and client interest in Schwab's wealth and asset management offerings drove 15% year-over-year growth in asset management and administration fees to a record $1.8 billion. Trading revenue for the quarter was up 20% versus 1Q '25 as our best-in-class retail trading platform supported record levels of engagement, including 9.9 million daily average trades. Bank deposit account fees also increased 20% year-over-year due to an improved net yield as lower-yielding fixed-rate obligations continue to mature and convert into higher yields across both the floating and fixed rate buckets.

Moving on to expenses. Adjusted expenses for 1Q grew 5% year-over-year reflecting first quarter seasonality and strong client engagement across our trading, wealth and banking solutions. We also continue to invest to support our key strategic initiatives, including organic growth, new products, AI opportunities and ongoing scale and efficiency efforts. Record quarterly revenue combined with balanced expense management, resulted in an adjusted pretax profit margin of 51.4% and first quarter adjusted earnings per share reached a record $1.43, a year-over-year increase of 38%.

Transitioning to the balance sheet. We continue support of our clients' evolving needs as they navigated a challenging environment in 1Q '26. Demand for our bank lending solutions remained strong as total bank loan balances grew to $61 billion, up 29% from 1Q '25 and 5% versus the prior year-end. Client margin loan balances ended the quarter at nearly $127 billion, up 13% from year-end 2025 levels, reflecting continued interest in certain long short strategies as well as increased trading related margin balances despite a pullback in activity during the month of March. We also continue to utilize the combination of our interest rate hedge programs and investment portfolio to match off our assets and liabilities enabling us to efficiently maintain a more modest asset-sensitive position. Client cash followed typical seasonal trends to begin the year. However, as volatility increased during the back half of the quarter, clients took a slightly more defensive posture, which in conjunction with the cash build from organic growth and the long short strategies contributed to $25 billion of cash inflows during the month of March resulting in an $8 billion sequential quarter increase in client transactional sweep cash. For the second quarter, we still anticipate the typical drawdown in client cash due to tax payments in April. And similar to past years, we expect this activity to impact both transactional sweep cash as well as other liquid cash alternatives such as money market funds. Beyond seasonal considerations, continued market volatility could influence client cash allocations. And lastly, in line with our stated principles, we continue to prioritize flexibility in managing the balance sheet to remain well positioned to navigate a wide range of environments. Capital levels remained strong with our adjusted Tier 1 leverage ratio, finishing the quarter within our 6.75% to 7% objective range. Our adjusted ratio of 6.8% reflects a 19% increase in our common stock dividend, the repurchase of common shares for $2.4 billion during the first quarter and sequential growth in the balance sheet. 1Q '26 represented a strong start to the year with growth on all fronts, including healthy organic growth, record client trading activity, as well as robust engagement across our broader suite of modern wealth solutions, which we converted into record revenue and earnings. Given our strong performance in 1Q and based on what we see today in terms of the expected path of rates and strong client engagement, we are tracking higher than the $5.70 to $5.80 EPS range implied by the scenario we shared back at the winter business update in January, which excluded the impact of buybacks and Forge. We'll provide a more comprehensive update on our full 2026 financial scenario at the next business update in July.

Finally, before we move on to Q&A, I wanted to take a moment to build on Rick's AI comments, specifically the conversation relating to cash. There are three key points to remember. One, Schwab provides an industry-leading value proposition to individual investors and RIAs. Two, with help from Schwab, our clients are actively managing their cash allocations. And three, Schwab's ability to help clients with more of their financial lives enhances the flexibility of our client-driven model.

So first, the overall value of Schwab's platform. We have created an exceptional offering in the marketplace that is highly trusted and valued by individual investors and RIAs, which has led to approximately 47 million total accounts and investors entrusting us with approximately $12 trillion in total client assets. Clients value our firm's focus on helping them build and manage their wealth while providing all of these services at highly attractive all-in costs for them. Second, we provide a broad suite of cash management solutions that offer clients a range of products with different features to help meet their diverse needs. We also proactively seek to raise awareness around the cash options available on the platform and efficiently enable them to move between the various options with as little as one click of a button. At the same time, independent RIAs continue to help their end clients manage their portfolio allocations, including cash to help meet their individual financial goals. Today, this has resulted in total cash levels running around 10% of client assets were transactional cash allocated at about a 4% level or approximately $10,000 per account. And as we see demand for new products or capabilities for cash, you would expect us to deliver those to our clients.

Importantly, given how easy we have made it for clients to move their cash between different solutions and based on the trends observed over the past few years, client cash is actively allocated today. To the extent additional efficiencies are enabled down the line, the broader evolution of the platform enables continued flexibility in managing our economics.

Finally, as Rick noted, we view the emergence of artificial intelligence as a tailwind to Schwab's strategy. So by continuing to put clients first, Schwab's platform has built up immense flexibility. Our motto is informed by investors' preferences for lower explicit fees without sacrificing product access, convenience or service. To the extent those preferences change at some point in the future, Schwab has a lot of flexibility to continue supporting investors and RIAs in the way they have come to expect from us while still delivering strong returns for stockholders.

And with that, Jeff, let's move on to Q&A.

Operator, Could you please remind everyone how to ask a question?

[Operator Instructions] Our first question comes from Steven Chubak with Wolfe Research.

I wanted to ask on the outlook for NIM and cash growth, just recognizing the backdrop in March is anything but normal. Entering the year, you spoke to a low 2.90s exit rate on the NIM. It also contemplated modest IEA growth. And at the time you laid out the guidance of forward curve had multiple cuts, we're anchoring to a lower 10-year. So given the evolving rate backdrop, how does that inform both the NIM outlook exiting this year as well as expectations for IEA growth in a higher for longer backdrop?

Steven, thank you for the question. Certainly, it's been a favorable environment in terms of that client engagement in the first quarter. And as you highlighted during the winter business update, when we laid out our financial scenario, that included two rate cuts. I think there was a June and September rate cut there. And looking at the forward curve now, perhaps the market is anticipating no cuts. So that is more favorable for us.

And at the same time, when you look at cash, we had a good first quarter for cash and typically, over the course of the year, you will see that seasonality play a factor certainly in 2Q. But stepping back, we're expecting the continued upward trajectory of cash being driven by organic growth. So we think over the course of the year, certainly favorable, where the lack of rate cuts perhaps as well as the strong client engagement, both bringing us new assets in cash with that but also on the asset side as lending has remained robust, that will provide continued upward momentum. And I feel good about the NIM growth, both what we had laid out in that scenario, but also perhaps some upside to that when we come back in July with a refresh of our financial scenario, we'll provide more details. Thanks for the question, Steven.

Our next question comes from Ken Worthington with JPMorgan.

ETFs have been an area of strong asset growth for Schwab, and it seems like the economics of the value chain are shifting in favor of intermediaries. When we think about Schwab's approach to charging where value is provided in win-win monetization, how is Schwab thinking about its value as an ETF distribution platform? And is there a distinction that you'd make for that value when considering active ETFs versus passive ETFs?

Ken, thanks for the question. We think there is value for us to be earned as it relates to ETFs, and we are actively working on that. We've been in negotiation with the 400-plus asset managers or so that are on our platform, and those are going well. We've started with the big firms and knock those out. So we feel really good about by the end of the year, having an ETF monetization strategy in place and live. And that's our current plan. I think timing can always shift, but we're taking all the steps to make that happen.

In terms of active versus passive, I think I would draw the distinction mainly on fees. The way we're thinking about it is as a percentage of the ETF fees. And so active strategies tend to have more higher fees versus passive. And so there'll be more of an economic opportunity there.

Our next question comes from Bill Katz with TD Cowen.

So a bit of a complicated question, but it looks to me, right, you're doing a better job of managing the interplay between balance sheet growth and capital return. And with the adjusted Tier 1 leverage ratio sitting at 6.8%, sort of nicely nestled between your range that you sort of look to keep the firm at. So as you look ahead, I guess the question is, how are you thinking about maybe the growth of earning assets, the remixing of that between lending and other higher-yielding opportunities versus capital return, certainly given a very strong now 3 quarters in a row of buyback.

Bill, thank you for the question. So as we look out on horizon, we feel good about the client engagement and as we said this morning, we've seen that across the board. As it pertains to some of that lending activity, we've seen good continued momentum in both that bank lending product, certainly driven by the pledged asset line. And that, of course, comes at a very healthy spread over above what we could earn on just leaving it in cash or allocating it to securities. So that's been a good boost as well as margin lending. And so I think with the continued volatility in markets, we're seeing engagement across the board, but we feel good about that lending space as well. And of course, as clients bring us more cash and as they keep cash on the sidelines, that is used to fund those lending activities very efficiently. So we see that expansion of the balance sheet. It was modest in the quarter but continue to be fueled by that client activity, which has certainly been accretive to the firm in terms of earnings and certainly accretive relative to capital.

Now with that, we continue to look at capital, and we prioritize capital for the growth of the franchise, and it's going to be there to support our clients and their evolving needs. But with strong earnings growth, it's given us flexibility as well to return capital across our framework. We increased the dividend in the first quarter. Of course, over the course of the year, we'll have a look at those preferred securities that will become redeemable. And if we decide we wish to keep that form of capital in our capital stack, we'll evaluate the economics around leaving those preferreds outstanding or perhaps redeeming them and replacing them or some portion. And then, of course, that leaves you then with buybacks. And again, given the ability to continue to have capital to support the growth of the franchise as well as the strong earnings, we've had a lot of flexibility on capital. So we feel good about how the client growth has been evolving and how we've been able to support that in quite an accretive way.

Our next question comes from Brennan Hawken with BMO Capital.

So investors have been rather focused on an announcement that JPMorgan has made in rolling out a product to reduce the friction around brokerage cash. Are you considering similar tools you spoke a lot in your prepared remarks about cash and continuing to innovate? And how should investors be thinking about your flexibility in adjustment both to the competitive environment and the realities of the economics of the business.

Brennan, thanks for the question. We've been trying to make it easy for clients to allocate their cash in the appropriate way forever, really. And we do lots to support that, whether it's our FCs proactively reaching out to clients and letting them know they have cash balances in sweep cash and understanding what their intention is for that cash and explaining other options than when someone logs in, a high proportion of the time, their first screen is earn more on your cash at Schwab. And certainly, our advisers as part of their fiduciary responsibility are managing cash tightly. So we've done everything we think to make it as easy as possible optimize and be intentional about where your cash sits today. And so we feel good about that.

The second thing I would say is there's a lot of reasons why when given the choice between cash options, clients are choosing to be in our sweep cash program. Number one, they needed to be able to move money around to pay their bills to afford their life. We've got a couple of hundred billion that move in and out of the firm every month in terms of cash. They needed to be able to trade. And over a 2-day period, we trade roughly $300 billion of equities. And so there's cash needed to move, to support that trading level. So there are lots of reasons why we think clients have their cash intentionally allocated and why a big portion of it is on the balance sheet.

In terms of an agentic capability, we are launching an agentic capability this summer. It will have basic agentic capabilities to start with and take on a few tests. Over time, I expect that everything you can do at Schwab today by going and pointing and clicking to move around the website or through a mobile app, will be able to done -- or most of it will be able to be done through an agentic experience over time. And our launches will incrementally add to that over time. And so the one click it takes to move cash today may become an agentic experience over time.

Now if clients want their cash managed as part of a broader asset allocation, we think that would be a fee-based solution, and that's something that we're -- that we will be prepared to offer as well.

The final -- I mean I'd make on cash in addition to the fact that we think clients have optimized and been intentional about their cash is that we believe we have many ways to charge clients for the value we add. Our Client Promoter Scores are at all-time highs. Clients love working with us. We offer no trade-offs experience in periods like we've just been through this last quarter, the clients really see the value of what we do. how we have charged our clients over time for that value proposition has changed. It used to be heavily reliant on commissions. And certainly, we've adapted our business to deal with a declining commissions environment.

So my views on this are really fold. One, we think clients have been intentional about their cash, and we've tried to make it really easy. Two, [indiscernible] agentic capabilities that will make everything at Schwab very easy. And three, we've got lots of flexibility in how we monetize at Schwab for the value that we provide. So we feel we're on a strong footing and are incredibly excited about AI as an accelerant to our strategy, not as a headwind.

Our next question comes from Brian Bedell with Deutsche Bank.

Great. Maybe you could just zoom in on March a little bit more. I mean very strong metrics in both NNA and transactional cash build. Any color around -- first on the NNA, we've seen the adviser side grow faster than the retail side drop for a while now. Any contribution from RIA conversions, bringing in new RIAs from wirehouses that would be sort of elevated in the month. And then on the deposit side, is it your sense that deposit build is more due to risk off or potentially more due to cash build ahead of tax payment season?

March was an exceptional month of NNA. It was our second highest month of NNA ever behind only December, which December is always seasonally strong. So outside of one December, it's the strongest month of growth we've seen in net new assets, which is really exciting to see. And you mentioned the consistent strength we've had in adviser services. What's even more reassuring about March and more exciting is in investor services reached an all-time monthly high of net new assets and actually had higher net new assets in March than Advisor Services did. So we saw strength really across the board, both in Investor Services and in advisory services. I think it's a reflection of our value proposition. In Advisory Services, we continue to have the leading custodial offer. We say it's one of the Schwabiest choice. And I think that's becoming more and more true because we continue to invest in this business, make it easier for advisers to do business with us. We've rounded out our offering to them in terms of adding more lending capabilities, which they wanted and now they're getting. We were launching -- and just recently launched a structured asset lending program, which has opened up advisers' ability to have their clients borrow against alternative investments, borrow against their restricted shares, private shares things along those nature. And our advisers love that because, historically, they've had to introduce a big bank to do that lending and now they can keep that wealth relationship and do the lending through us. And so our value proposition to advisers has never been stronger. And importantly, the advisers continue to win in the marketplace because the fiduciary model works because there's a bull market for advice and convenience and the independent advisers have a great model. And so as they win and we're successful in supporting their growth, we win as well.

On the retail side, I think -- or on the Investor Services side, our growth is a combination of our value proposition, some engaging market that has clients interested in bringing assets to Schwab and how we stand apart from others in the industry. It's -- we're going through a period of heightened market volatility where what we do and the way we do it and the way we see through client size really stands out. And so I think that's helped with our NNA.

Mike, do you want to talk about cash?

Yes. Thanks, Rick. In terms of the cash, yes, Brian, we did see that good pickup in the month of March, and there were a few factors that caused that. As you highlighted, if you look at the quarter, it was really March where you began to see that decline in equity markets and that shift in sentiment. So that certainly was a contribution to that pickup in cash that we saw late in the quarter. But then in addition, other activities such as that long short strategy brought in some cash as well but also with the strong net new assets over the course of the quarter and in particular, in the month of March, that also served to bring us cash as well. Now I don't know how much of that may have been related to the tax. I think the drivers that I described were more of the primary drivers, but it may mean that, that cash was not put back into the market too quickly. If clients were selling then that cash may have just remained on the sidelines, and we'll go out for tax reasons in the month of April. And as I said, in April, where we're expecting and everything we're seeing so far is that normal tax season or it's the combination of that transactional cash as well as money market funds contributing to those tax statements. But thank you for the question.

Our next question comes from Michael Cyprys with Morgan Stanley.

I just wanted to circle back to your comments around the cash sweep monetization and customers choosing to pay for services in part through a lower yield on cash. I was just curious how you monitor and assess the scope for changes in customer behavior and preferences around that? And how might the competitive landscape? And technology advances maybe impact that. And I was hoping you could maybe elaborate a bit more on if monetization evolves away from cash sweep. What might future monetization and potential lever to look like at Schwab?

Thanks for the question, Michael. And I want to be clear, before we get into how we would change our economics, we do not see this currently as a big risk. We believe our clients have intentionally allocated their cash, and we go out of our way to make it incredibly easy to make sure clients land in the right cash solution for them. And there's lots of reasons, as I mentioned, like clients choose sweep cash in both our advisory business and our Investor Services business. So that's point one.

Point two, in terms of how it evolves, I think we have lots of levers to pursue. We make money in lots of different ways. And whether it's trade or trading or wealth or lending, potentially fee-based solutions that leverage these agentic AI capabilities, there's lots we can do. If someone is going to want us to proactively move cash for them without their -- without them being involved in that movement, that is likely an advisory offer, and we charge for advisory offers and would for an Agentic advisory offer. So there are numerous ways and Listen, when I look at our company and where we stand and the value that we have, the 47 million clients that we have on our platform, I'm incredibly bullish about our ability to grow our revenue in any environment. We have built long-standing deep relationship with clients that highly value what we do. And just as we figured it out, as commissions went down, we'll figure it out if the economics changed in this environment, but we're also very confident that we've gone out of our way to make sure our clients' cash is intentionally allocated and that we'll support them in any way they can with all of their business.

And it's important to remember that client cash is, I believe, less than 4% or so of overall relationships that clients have here. We're helping them on 100% of their financial life. There's lots of ways we're going to be able to monetize those relationships as if things were to change.

Our next question comes from Mike Brown with UBS.

I wanted to ask about the digital asset offering here. So it's imminently coming. And I guess when you think about the strategic objective here, is it mainly retention? Is it focus on new asset gathering, higher engagement or just kind of building a broader financial ecosystem. And when you talked about maybe some assets coming over to Schwab, is there any way to kind of catalyze that movement to bring assets over and help individuals consolidate the digital assets on to Schwab?

Thanks for the question. In terms of why launch crypto, number one, we've always have stood for client choice. And we have many clients that want to invest in crypto and are investing in crypto through Schwab today, whether it's an ETP or future or closed-end fund. And they want exposure to crypto and they've wanted spot exposure, and now we'll be able to give it to them, and I couldn't be more excited about that. And we're doing it in the swab way at a great value with lots of research and education around it.

In terms of how to catalyze clients moving their crypto from their current provider to us, they are -- they've been begging us to launch this so they can move their crypto assets to us. So I think they will proactively do that. Certainly, our financial consultants will have conversations with clients and encourage them to consolidate their financial life in one place. They've been asking us for it. And the reason they ask us for it is there's a couple of reasons. One is they trust us. They view us as a safe institution. And second, the more they can consolidate their financial life, the more we can help them guide them through the financial life provide the resources and capabilities they need to live their best financial life. And they know we offer the service the pricing, the capabilities that can't be matched. And so they proactively wanted to move. So I don't think we're going to have to catalyze it. I think it will happen but we certainly will have many conversations with clients to our financial consultants.

The last point I'd make is you asked about the strategic importance of this. The other point I would highlight is that we have gone about this in a way where we are building our own books and records in our own custody capabilities. That is a prelude to being able to offer clients choice in how they want to hold their equity someday with the potential for some -- or in fixed income, some wanting to tokenize those securities. And we're building optionality through this launch that allows us to support the future of tokenization should that be of interest to clients.

Our next question comes from Dan Fannon with Jefferies.

So in terms of trading, obviously, a very active quarter, but the [ RPT ] came in a lot and understanding mix always plays a role here, but curious if there are other inputs in terms of pricing? And then also just on the digital asset offering, I was hoping you could talk about the -- what informs your pricing strategy with the rollout of that offer.

Absolutely. Let me start with trading and then digital pricing, and I'm just jotting these down. Sorry, what was the first part on trading? Revenue per trade Yes.

So let me describe how our traders are feeling. Our traders are feeling more uncertain about the geopolitics, about potentially the economy. As a result, and I talked to a group of traders two weeks ago and what they shared with me is they are taking smaller positions, holding them for less duration because they have less conviction. And so they are trading more frequently as a result. But because they're smaller trades, they're generating less revenue per trade. And so that's what sort of lines the high level of daily average trades you're seeing with the revenue per trade that we're experiencing.

In terms of crypto pricing, our crypto pricing, I believe, among the major terms, we will have the lowest price for the first dollar traded and we wanted to be competitive and at the same time, we know launching crypto is expensive. There's risk with launching crypto. And so we wanted to make sure that there was a healthy fee. And we thought -- we think we've hit the mark in terms of having a very competitive fee while still generating attractive economics.

Our next question comes from Devin Ryan with Citizens.

Question on prediction markets. It sounds like something you'll potentially look at. It doesn't sound like sports or gambling related are interesting. But how do you see the markets evolving more broadly, particularly the areas that are maybe closer to Schwab's core, like corporate events or economic events? How significant could those areas be over time? And then is there a time line that you can share just around how you are thinking about potentially entering or signposts that we can look at for Schwab potentially entering there.

Devin, I think you hit the nail on the head in terms of how we think about it, which is we do differentiate between financial related events and supports politics, pop culture. Where even the power of ownership and the power of compounding over time and owning equities, owning fixed income assets, being an investor over time and having that ownership leads to higher levels of wealth. And our goal as a company is to help our clients live their best financial lives. And so prediction markets that are not aligned to that, are not something that we want to pursue. And if you look at the stats on the success of gamblers, they're not strong and people generally lose money. And so as a company that is in business to help people live the best financial lives, we have kept sports and other things off to the side.

In terms of a time line, I think this quarter was a quarter in which we accelerated our innovation at one of the fastest spaces that I've ever seen with the company in terms of -- we launched crypto to employees. We made significant progress in AI. We opened up a new lending capability that our advisers love, we launched [ keen ] accounts sending a really strong message to parents and teenagers about what we stand for and the way we think clients should engage in markets. So we closed the deal on Forge to be able to provide private shares to our clients. So we had a significant number of launches. And when we ask clients what they're looking for, prediction markets is very low on the list. I spent time with a large group of clients a few weeks ago, and I asked every one of them, "Hey, what do you think of prediction markets", and it wasn't a tremendous interest to our clients. That said, I think at some point, we likely will have production markets. And I also think that there will be intermediaries that bring these to market. And so if you look at some of the announcements by folks like CBOE and others, they're coming up, I believe Nasdaq might be also doing something. They're coming up with binary options on different financial events and contracts that I think will act and behave very much like prediction markets, and that's something certainly we will take a hard look at and then will be quite straightforward for us to offer. So more to follow on production markets. It's not at the top of our clients' list. We're ready to move when and if needed and when we do, we'll stay away from gambling.

Our next question comes from Alex Blostein with Goldman Sachs.

There's been clearly a lot of turbulence in retail channel for alternative products. Schwab's been fairly committed to that as a strategy. So I was hoping to get your perspective on what you're hearing on the ground from advisers with respect to their reception to Evergreen private alts in the RIA channel, but obviously also with respect to your own launch and how those products are being onboarded. And slightly separately, but within the alts category, I was hoping you could also comment on balance sheet capacity for the long short tax advantage strategies within that.

I'll start with [ ops ] and then I'll have -- Mike will talk to the balance sheet. So on all its -- you asked about the advisers specifically. If you look at the proportion of alternatives that our advisers have as their broader asset allocation, it's relatively small. I expect when you take a 5- or 10-year view, that will grow. As we look at our platform today, we think we could do more to curate and help advisers along the way choose the right alternative investments for their clients and create a platform that is very helpful to them. In doing so, we believe there will be opportunities for us to monetize the provision of those alternatives to our advisers as that develops. It's also critical that we make investing in alternative investments easy for our advisers, and that's something we've leaned into heavily this year, and we'll make lots of progress on by the end of the year.

So lots of opportunity there. And with that, Mike, do you want to talk about the long short program?

Sure. Thank you, Rick. And in terms of that long short program, we've certainly seen that become of greater interest. And it's an activity where, of course, there's a long position offset with a short. From a balance sheet perspective, there's a netting aspect to that. And then, of course, a fee that we earn on that activity. So it's not a balance sheet capital-intensive type of activity. But that being said, we work closely with those fund managers. We understand the different strategies and perhaps how those strategies evolve in different environments and making sure we have the resources on hand to as needed if we see some of those strategies evolve over time. But we feel good about supporting the client need for that strategy, and we could continue to see some growth and it will depend on how the market evolves over time. But we certainly have the resources to support it.

Operator, looks like we have time for one final question.

Our last question comes from Ben Budish with Barclays.

Maybe just a follow-up on the earlier commentary on training activity. Rick, I think you mentioned that traders are taking smaller positions, holding them for less duration. Just curious if there's any other color you can share the sort of breadth of engagement. The trading mix, I know can have an impact on revenue per trade. Just thinking -- trying to think through how we might think about some of those KPIs into April over the course of the rest of the year would be helpful.

Ben, it's Mike. Thanks for the question. So yes, in the quarter, we did see strong engagement from clients. We did see that spike in daily average trades to a record $9.9 million. It's those types of environments where you see that volatility and high engagement. You tend to see that more weighted towards equities as opposed to derivatives. And that's what we did see. I think Rick brought in those other important factors, while weighted towards more equities, you did see smaller trade size, less shares per trade, less option contracts per trade. And I think that is an indication of the environment that we were operating in, highly volatile, but also less conviction. So we'll have to see how the macro backdrop evolves over the course of the year, but you see this dynamic where you see these spikes in daily average trades quite accretive, of course, to earnings but having that pressure on that revenue per trade, if you perhaps see a more moderate set of volatility impacting the market, if you saw that reduction in volume of trades you could see a little bit of a lift in that revenue per trade. But again, it's really going to be dependent on how the environment evolves. Overall, we're very happy to support the client engagement. It's been a highly accretive activity.

Thank you for your questions and engagement. We've covered a lot of ground today, but I want to leave you where we started. First, our Through Clients' Eyes strategy continues to drive strong client growth and financial results. Second, we are continuing to deliver for clients and are uniquely positioned to meet client needs across investor types and market environments. And finally, we are innovating at speed, making tangible progress in helping our clients conduct more of their financial lives at Schwab so they can grow and protect their wealth over the long term. Thanks for your time today. Take care.

Good morning, everyone, and welcome to Schwab's 2026 Winter Business Update. This is Jeff Edwards, Head of Investor Relations. I'm joining [ Westlake ] today by our President and CEO, Rick Wurster as well as our CFO, Mike Verdeschi. During our time together this morning, the team will review 2025 a year where the business delivered growth across all fronts and discuss the growing set of opportunities we see to help clients even more in 2026 and beyond.

A quick rundown on the housekeeping front. The slides for today's business update will be posted to the usual spot on the IR website at the end of the prepared remarks. Q&A remains 1 question, no follow-up and please try to limit the nested but boosted all questions. If you have multiple questions, we encourage you to simply hop back into the queue and ask another one if time allows.

And as always, the IR team is here to assist with any questions following today's update. And last but not least, the ever present forward-looking statements page or the artist formally known as the wall of words, which reminds us that outcomes may differ from expectations, so please keep in touch with our disclosures.

And with that out of the way, I'll turn it over to Rick.

Thank you, Jeff, and good morning, everyone. Thanks for joining our winter business update. 2025 was a record year for Schwab, guided by our through client-size strategy and with a supportive market, engage clients and strong execution, we delivered growth on all fronts with clients across our solutions and in our financial results.

We attracted $519 billion in core net new assets or NNA, a 42% increase over last year. In 2025, clients opened 4.7 million new brokerage accounts, a 13% increase over 2024. Solutions growth one measure of deepening relationships with clients by helping them conduct more of their financial lives at Schwab, reached new records.

Managed investing net flows grew 36% over 2024, achieving a new record. Bank lending balances reached an all-time high of $58 billion. This diversified combination of client and solutions growth supported by our disciplined financial management approach resulted in record financial growth. Total net revenues reached a new record high of $23.9 billion, and we delivered record adjusted earnings of $4.87, up 50% over last year.

With strong execution across our strategic focus areas, growth, scale and efficiency, brilliant basics and our people. We continue to innovate to help our clients grow, manage, enjoy, protect and pass on their wealth. This is how we've always approached innovation at Schwab with a focus on helping our clients achieve better financial outcomes. I'll share just a few examples from 2025.

We opened 10 new branches and hired hundreds of financial consultants and wealth advisers. Clients with an FC bring in more than 2x the NNA are more engaged with our wealth solutions and have higher client promoter scores. We strengthened our lending, wealth and trading offers. We leveraged artificial intelligence to serve clients more efficiently.

In our Advisor Services business, we launched Advisor ProDirect, a subscription service supporting RIAs wherever they are in their journey to independents. We launched a long, short, separately managed accounts program and nearly doubled the size of our institutional no transaction fee mutual fund platform. We entered it will help us provide clients with multiple ways to access alternatives while democratizing, we also made a strategic investment in Capita, a complete equity management solution designed to support private companies in the late stages prior to IPO.

With Forge and Capita, we are creating an ecosystem where we can administer private stock plans while providing access to liquidity for private company employees and investors, a pipeline of future stock plan services clients for Schwab. We took an ownership stake in wealth.com and began rolling out their estate analysis capability to our specialists, giving us more tools to help clients integrate their estate planning into their investment life.

We delivered this -- all of this in a year where our clients achieved record levels of wealth through market ups and downs. As the year came to a close and from where we stand today, market valuations are high, but the economy remains strong. All of this fueled record levels of client engagement. We supported 1.9 billion trades, more than 30 million calls to our service centers and about 2.2 billion digital logins, up approximately 18% from 2024.

Clients reaching out to our service centers had their calls answered in less than 30 seconds on average as our professionals fielded client questions ranging from whether stocks were overvalued to how to navigate market volatility, to inquiries about cryptocurrencies to how to protect their wealth. Millions of investors consumed our educational content. While clients embrace our easy and intuitive digital experiences, they showed us they want more than an app when what's at stake is their financial future.

In short, we were there for our clients when, where and how they needed us. You can see this in our third-party recognition and more importantly, in strong and improving Client Promoter Scores across retail, Advisor Services and our workplace business. We ended the year with more than 46 million client accounts and nearly $12 trillion in total client assets, reinforcing our position as an industry leader and ranking #1 among peers by total client assets, RIA custodial assets and daily average trades with 0.7 million a day for the year.

We are entering 2026 and our momentum is strong. I want to spend a few minutes laying out what collectively positions us to continue delivering earnings growth through the cycle. Most importantly, we are taking a holistic view of growth. We have 2 important levers: serving more clients and deepening relationships by serving more of their financial needs. Attracting more clients will always be important. But with nearly $12 trillion in assets and more than 46 million client accounts, doing more for our clients is as important a source of growth as acquiring new clients.

We are equally focused on growing NNA and growing our wealth, lending and product areas. This growth is key to our revenue growth and our revenue diversification. There are 2 more critical pieces to the puzzle. First, our share scale combined with efficiency efforts that make it easier for clients to do business with us keeps our cost to serve clients low. This also allows us to invest in client capabilities that will fuel our growth and few experiences that drive more efficiencies.

Second, our disciplined financial management approach and capital return underpins it all. Taken together, when we deliver on each of these effectively, we're able to deliver earnings growth through the cycle. I'll spend the next few minutes unpacking growth and scale and efficiency, and Mike will dive into our financials. Serving a growing number of clients and attracting net new assets is our first growth lever. And in 2025, the organic growth rate of core NNA reached 5.1%.

In Advisor Services, we are attracting net new assets from new and existing advisers of all sizes as we help them serve their clients global businesses and succeed in an increasingly competitive industry. No matter in RIA size, we serve them all in a way, no competitor can. [indiscernible] million new retail households turned to Schwab in 2025. These new households representing broad [indiscernible] diverse client base. [indiscernible] Gen-Z investors comprise nearly 1/3 of new retail client accounts opened in 2025 and nearly 60% are under the age of 40. About 1/3 new clients are affluent, and the volume of new trader clients continues to increase.

To sum it up, we are winning with investors of all ages, wealth tiers and time horizons. Clients expect all aspects of their lives to be more convenient and they want to conduct more of their financial lives in one place. At our scale, we have an incredible opportunity to do more for existing clients at a magnitude that can't be easily replicated. With existing clients entrust more of their assets to Schwab, it is a win for clients because it makes their financial lives easier, and we're delivering the value they want. It is a win for the firm because it helps us diversify our revenue streams. Guided by our through client-size strategy, we have a diverse set of monetization opportunities that are providing value to clients across both advisory services and retail.

I want to specifically call out the priority opportunities we see in Advisor Services. First is wealth. We're expanding our wealth services offer, which is designed to simplify processes and help advisers compete and serve their clients' comprehensive needs. This includes our growing model market center platform and alternative investments.

Second, [indiscernible] Finally, we're delivering industry-leading trading capabilities. At a later date, I'll share more on the high-touch trading service for block trades we're launching in Q1. I'll share more detail on the opportunities we have across wealth, banking, trading and alternative investments. We have made significant investments in our wealth offer over the last several years, including rounding out our product offer with solutions like Wasmer Schroeder fixed income strategies and Schwab personalized indexing. Within our flagship offer, Schwab Wealth Advisory, we've reduced the practice size of our wealth advisers and hired to serve more clients. We've created a business development officer role focused solely on growing the business, so wealth advisers can focus on their clients.

We've improved our tax trust and estate capabilities, and we've built out specialty teams catering to the unique needs of our higher net worth clients. These investments are paying off. Managed investing net flows have nearly quadrupled since 2022, and we still have a meaningful opportunity ahead of us.

Approximately 5% of retail households at Schwab engaged with our managed investing solutions, yet about 31% say they are willing to pay for advice. The reason we have confidence we'll continue to close this gap as Client Promoter Scores for our managed investment [indiscernible] at the firm. At the same time, return on client assets or ROCA, for managed investing solutions is 2x that of retail, which diversifies our revenue streams as we delight clients.

We [indiscernible] Asset line client experience is best-in-class with average digital cycle times of about a day and nearly 3/4 of originations completed in less than a day. With these investments in client experience opportunity we have ahead of us. We are not taking our foot off the gas [indiscernible] remains relatively low. Within retail, only 9% of ultra high net worth clients have originated a PAL. In AS, 23% have a PAL.

We are continuing to invest in the experience with expanded power collateral capabilities, including borrowing against Schwab Managed investing solutions and more enhancements to follow in the year ahead with an average spread to securities [indiscernible] Schwab is the place for traders of all experience levels. We're the #1 firm by daily average trades with no close second. Handling about 10% of the total U.S. notional trading volume in 2025.

Traders come to Schwab because we provide the platforms, capabilities, education, coaching and service. They need to grow their wealth, engage in markets, take advantage of opportunities and hedge their portfolios. In 2025, about half of new to firm retail clients initiated access to our industry-leading thinker swim platform. Schwab clients hold about a 20% share of spot crypto exchange traded products, and we remain on track to launch spot trading on Bitcoin and Ethereum in the first half of this year.

Traders are highly engaged bringing in 9x more NNA than retail clients in 2x the ROCA. We'll continue to enhance our offer to meet their unique needs. We're also deepening relationships with our higher net worth clients by continuing to strengthen our alternatives offer. With our acquisition of Forge, which we expect will close in the coming months, we'll be able to provide retail and RIA clients with alternatives from leading managers, passive exposure to alternatives via funds and direct investing in private companies. The opportunity is meaningful.

In a recent survey of clients with $1 million or more in assets, retail clients said they expect to allocate approximately 5% of their portfolios to alternatives. And today, less than 40% of our RIA clients have an allocation to Alts. Building out our alternatives offer and helping more people participate directly in the growth of private companies provides opportunities for wealth creation and diversification that we believe will be attractive to qualified individual investors and the advisers who serve them.

I spent quite a bit of time talking about our 2 growth levers. Our scale and efficiency initiatives make it easier for clients to do business with us while keeping our cost to serve low and enabling us to reinvest in capabilities for clients. With more than 220 use cases, we are leveraging artificial intelligence to help our professionals serve clients more efficiently. We also continue to automate high-volume client requests, improving accuracy, speed and our client experience.

We progressed efforts to improve status notifications to clients and remove more paper from our system, reducing not in good order errors and saving time for our clients and professionals. Our scale combined with our expense discipline have allowed us to decrease our cost per account 20% over the last 5 years, while driving our ability to remain the industry leader as measured by expense on client assets or EOCA, which you can see is a clear competitive differentiator for us.

On an adjusted basis, EOCA has decreased from about 15 basis points in 2020 to about 11 basis points today. The fourth lever that positions us for earnings growth through the cycle is our disciplined financial management and capital return.

I'll turn it to Mike now to speak more in detail on our approach.

Thank you, Rick, and good morning, everyone. During today's call, I will discuss how we converted our strong business momentum into record financial results for 2025.

I'll highlight some of the steps we took to further enhance our capabilities to meet our client [indiscernible] for 2026. Fourth quarter results, total revenue was up 19% year-over-year to a record $6.3 billion. Net interest revenue increased 25% versus the prior year. As we further reduced wholesale funding at the bank to the lower end of our BAU range and clients increase their utilization of our margin and bank loan offerings.

[indiscernible] Asset management and administration fees versus 4Q '24. Daily average trades of $8.3 million, the second highest quarter on record drove a 22% year-over-year increase in trading revenue. [indiscernible], we're up 6% versus 4Q '24, bringing full year adjusted expense growth to 6% and as we supported record levels of investor engagement across our suite of trading, wealth banking and asset management solutions. While we had anticipated some moderation in client trading activity towards the back end of the year, we instead saw an acceleration in activity, which contributed to higher volume-related costs inclusive of performance-based compensation.

This incremental expense was more than offset by the significant pickup in revenues and, therefore, supported stronger earnings. Putting everything together, we recorded an adjusted pretax profit margin of just over 52% in the fourth quarter and grew adjusted earnings per share by 38% year-over-year to a record $1.39. This strong finish to the year helped us print record financial results for 2025 [indiscernible] margin expansion of nearly 800 basis points to 50% and adjusted earnings per share reaching a record $4.87, representing year-over-year earnings growth of 50% and putting earnings above the upper end of the updated scenario range we shared during the fall business update in October.

Moving on to our balance sheet. We continue to support our clients as their needs evolve. Demand for our lending solutions increased during the quarter. Led by Paul, total bank loan balances grew to $58 billion representing a year-over-year increase of 28%. Client margin loan balances exceeded $112 billion at quarter end, up 34% versus year-end 2024, reflecting equity market strength and investor engagement.

On the cash front, we observed typical fourth quarter seasonality, including over $26 billion of cash inflows in December to bring the quarter end balance to $453.7 billion, which represents a sequential quarter increase of $28.1 billion or approximately 7%. This building cash, along with the use of investment portfolio proceeds and balances transferred from the BDA, allowed us to further reduce high-cost funding at the bank to $5 billion, the lower end of our $5 billion to $15 billion business as usual range.

We'd expect [indiscernible] in proportion with the franchise. With history suggesting we could pick up some modest amounts of incremental cash if interest rates move lower from current levels. We also expect typical intra-year cash seasonality trends to persist in 2026, including clients redeploying the fourth quarter cash build early in the first quarter as well as seasonal tax payments during 2Q.

Capital levels remained strong with our adjusted Tier 1 leverage ratio finishing the year just above the upper bound of our 6.75% to 7% objective. At 7.1%, our adjusted ratio also reflects the repurchase of common shares for $2.7 billion during the fourth quarter, bringing year-to-date total capital return across all forms to $11.8 billion. As we move into the new year, our capital management framework remains unchanged. We will continue to prioritize capital levels that support long-term business growth and the evolving needs of our clients across a range of environments.

Beyond that, we would seek to opportunistically return excess capital to stockholders in multiple forms. While the absolute level of capital return may vary over time, we believe capital return will continue to be a meaningful part of our through-the-cycle financial growth story.

Transitioning to the setup for 2026. As is the case in any year, our financial outcomes will be influenced by a range of factors, beginning with select macroeconomic factors, our 2026 financial scenario [indiscernible] end of 2026, [indiscernible] putting market returns, which is consistent with the long-term average. We expect to sustain our momentum from 2025 into the new year, make asset growth of around 5%.

At the same time, we will continue to deepen relationships with the 46 million total accounts and nearly $12 trillion of client assets already on Schwab's platform today. Increased investor utilization of our expanding set of solutions across trading, wealth, banking and more helps to further diversify our revenue, as well as support franchise growth over time as clients with deeper relationships tend to consolidate more of their assets at Schwab.

Specifically on trading activity, given the record volumes we supported last year, our 2026 scenario does allow for a slight pullback in volumes to roughly 7.4 million daily average trades for the full year. This level aligns more closely with volumes observed in early 2025. Under this scenario, we would expect total revenue growth of 9.5% to 10.5% in 2026.

Full year net interest margin expands to a range of 2.85% to 2.95% with average 4Q 2026 NIM expected to finish above 2.9% despite assuming the Fed funds rate comes down by another 50 basis points. Full year 2026 interest-earning assets are expected to expand modestly year-over-year following the paydown of supplemental borrowings at the bank.

From an expense planning perspective, we initially anchored to mid-single-digit year-over-year growth and adjust for a range of factors, including the macroeconomic backdrop, client engagement levels, our strategic initiatives and, of course, the revenue outlook. Therefore, within this financial scenario for 2026 [indiscernible] to range from 5.5% to 6.5%.

Our spending plan aligns to our key strategic initiatives and aims to help us continue delivering financial growth through the cycle by driving new client growth and deepening relationships with individual investors and RIAs by further expanding our leading suite of offerings to serve their evolving needs, bolstering our best-in-class service experience while also harnessing incremental scale and efficiency.

[ Select ] examples for 2026 include investing in branches, adding more financial consultants and wealth advisers, advertising and marketing, expanding our digital asset offering to include spot crypto trading and incorporating more AI across the firm, particularly within our service and technology organizations.

So putting all the pieces together, a combination of strong topline growth and balanced expense management implies meaningful operating leverage within this scenario, with further pretax margin expansion into the low 50s. If you follow the math down to the bottom line, this full year scenario implies potential adjusted earnings of around the $5.70 to $5.80 range, which would represent year-over-year earnings growth in the upper teens.

As always, while rates, client activity and other variables may differ from what we have outlined within today's scenario, we are confident in our ability to drive strong financial outcomes across a range of environments. Similar to last year, we have provided a set of static revenue sensitivities based on year-end 2025 levels. These high-level sensitivities are intended to serve as a complement to the scenario we just walked through, helping you adjust estimates and shape your own perspective around 2026.

While most of you are quite familiar with this page, given the focus on the potential path of interest rates, it may be worth spending a moment on the net interest revenue sensitivity throughout 2025, we took a number of steps to further enhance our flexibility and financial management capabilities, including standing up a hedge program that helped reduce our interest rate sensitivity by about 1/3. We have continued to build out these capabilities in the early days of 2026 by putting in place a modest amount of income hedges against our margin loan book. Therefore, if you were to assume the Fed funds rate moves much lower than the current market expectations, perhaps approaching the 2% level, we would still anticipate delivering year-over-year earnings growth of at least 10% probably a bit better, holding all else equal.

Of course, considering that environment. And although interest rates are an important macro factor, the combination of our enhanced balance sheet management and inherent offsets within our model keeps us well positioned for financial growth across a range of environments. We are entering 2026 with strong momentum, following a record 2025 where we delivered growth on all fronts.

Yet, as Rick outlined earlier on the call, we have tremendous opportunities still in front of us across nearly all areas of our business. Schwab's combination of an increasingly diverse revenue mix, industry-leading scale, enhanced financial capabilities to manage across a range of environments as well as capital return position us to deliver meaningful earnings growth through the cycle.

And with that, Jeff, let's turn to Q&A.

Operator, can you please remind everyone how they can ask a question today?

[Operator Instructions] Our first question will come from Devin Ryan with Citizens Bank.

Question just on the balance sheet. Obviously, great work on the supplemental funding normalization there. With that largely complete and where capital ratios are right now, how should we think about the next phase of asset remixing? And as we look maybe even beyond kind of the pledged asset growth and margin lending, what should we be thinking about for the securities portfolio potentially growing again?

How do we think about the timing, size, maybe duration of that as well?

Thank you for the question. So yes, 2025, we certainly saw the aggressive pay down of supplemental borrowings. And from here, I think about the story more on the asset side, meaning we saw a terrific lending momentum in 2025. We're looking for strong lending opportunities in 2026 as well. And that would be with our bank product as well as margin lending.

So I think the growth of lending will continue. In terms of securities, now that we pay down those supplemental borrowings, as those proteins become available, Yes, we do have the opportunity not just to again support the loan growth but also reinvest in the securities portfolio. A couple of thoughts on that. As I've talked about the securities portfolio before, serves as 2 purposes.

One, it's a store of liquidity. So with that in mind, we're going to maintain highly liquid product. The majority of that allocation would go to U.S. treasuries. I would say, short dated. And then perhaps allocation to high-quality asset-backed securities. But the main driver would be investing in U.S. treasuries. And we talked about that duration range being the overall portfolio into that 2 to 4-year range. So the expectation would be that those treasury investments would be on the shorter end of the curve.

So we feel good about how the balance sheet has evolved. We're in a very good position to continue to support our client needs. And certainly, that activity will help us support strong earnings growth going forward.

Our next question comes from Ken Worthington with JPMorgan.

I love an update on the alternatives platform. How is engagement in the new platform? And if possible, I'd love to get a sense of assets and the initiative is very young, but have there been any indications? Or do you anticipate that the ALT program pricing is disruptive enough to attract either new customers or assets to Schwab.

Ken, thanks for the question. We are seeing the ALS program grow and succeed and most importantly, delight our clients and in particular, are higher net worth clients. And our goal has been to be the premier destination all clients, including those higher net worth clients. And over the past few years, we've rolled out new product capabilities for them, including alternatives we rolled out back lost harvesting capabilities for them to manage their capital gains.

We've rolled out a concentrated position management for them. We've done more to help them integrate their financial life. We've gone out and hired a bunch of wealth consultants who are experienced in helping the higher net worth clients navigate their financial life. All of those things are leading to a more robust ultra-high net worth offer than we've ever had and alternatives has proven to be an important part of that. We see a real backlog for wanting to speak with our alternative investment consultants, meaning there's been more interest than we would have expected. We're dealing with that. But that's a good situation to be in. There's a lot of a lot of interest, and we are seeing clients engage in it. We're not putting out any asset numbers yet. I think it's so early in the process of rolling all this out.

But I think ultimately, this will be the place for the ultra-high net worth investor and need place for them to get alternatives because we will have a great platform of leading alternatives managers. We will supplement that with a fund-based structure to access alternatives in a passive way or privates in a passive way. And then for those clients who want to buy an individual private company through our Forge acquisition, we'll be able to [indiscernible]. They know they can get liquidity, and we want to be the place where clients come.

And I do think, over time, that will help our net new asset growth. Because I do think we'll attract clients to Schwab, and we'll get more of them to bring all of their assets to us, whereas in the past, some of our higher net worth clients might go elsewhere for their alternatives, now they're finding it at Schwab. So I think it will help our net new asset formation. So thanks for the question, Ken.

Our next question comes from Brennan Hawken with BMO Capital Markets.

I'd like to maybe hear a little bit of color and context around the growth recently. And could you maybe speak to the differences that you've seen in trends between advisory services and investor services in recent quarters and your expectation? And then maybe how these recent investments in the high net worth offering might have an impact on the Investor Services side.

Thanks for the question. We've seen our growth accelerate across the board. Our net new asset $519 billion last year was a 42% increase year-over-year. So we were pleased with that rate of growth, if you break it down, we grew about 33-ish percent in retail and a little more than the 42% in our adviser business.

So both are growing really strongly. What's so exciting to me about our retail growth is that we are winning with every demographic and every type of investor. We're winning the young investor. Our average age of our client has fallen by about 10 years in the last decade and is now in the 1/3 of our new-to-firm clients last year were Gen-Zs investors, and we're going and attracting them in the places they are. We're all over TikTok and Instagram and we're the most followed financial services company on YouTube.

So we're going to where they are, and we're sending a message about power of compounding, the power of saving and investing and how we can help the part of enriching their financial life. And that's winning. We're winning with active traders. We're winning with buy and hold investors and we're winning with the high net worth in retail. And as I look forward, I think in the coming years, there's a number of things that will power an acceleration of our investor services NNA.

Number one, I think when you fully launched crypto and have the ability for clients to transfer assets. I do expect us to see our long-standing clients that have held crypto at other places bring that back. That will be a source of growth. I think that got to get bigger in workplace and that will be a source of growth. And then -- our -- the reason we continue to add branches and FC is that we see NNA will accelerate when there's a dedicated relationship. When there's a financial quarter back in the client's life steer them to help them achieve their financial dreams. And so we're investing in those relationships. We did so last year, we'll continue in the coming years. And I think that will accelerate our retail growth. So in the coming years, I do expect to see retail and our Investor Services M&A accelerate.

On the Advisory Services side, we're winning across every dimension. And I think it's hard for other firms to compete with our size, scale and the breadth and strength of our capabilities, whether it's the custody offering, which we continue to make better, we continue to make easier and more straight forward for advisers, whether it's the consulting and advice and expertise that we bring, the support we bring to help them in their drive to independents. I think the product capabilities and platform.

When you add it all up, it's really hard for anyone to match what we can do in that custody space, which is why we continue to see such strong organic growth levels, I think we grew that business at 6.5% organically last year or roughly around that level. So we're winning an [indiscernible] Advisor Services. I couldn't be more pleased about the NNA growth in 2025 and yet at the same time, as I take a 3 to 5-year look, I think there's a lot of things to be excited about in terms of accelerants to our growth over the longer term.

Our next question comes from Dan Fannon with Jefferies.

I just wanted to ask about your lending offerings, clearly a focus and an area of growth. What do you see as a reasonable level of penetration of your existing clients in the next couple of years for these offerings?

I think there's still tremendous upside on our lending business, both with existing products and one we may consider in the future. As I shared earlier, our higher net worth clients, there's only 9% penetration of our pledged asset line capability. And I think that number could be far higher as it's such a convenient, easy way to borrow. And if clients have assets at Schwab, the rates they can access are, I think, best or among the best in the industry. And yet for us, are still an attractive spread to security. So it's a win on all fronts. I think on the advisory front, when I go around and I speak to hundreds of advisers every single year to hear, what are we doing well, what can we improve, the number one thing I often hear about is doing more for them in banking and lending. And I think the Pledged Asset Line has been a wonderful start. And you see the penetration rate up to 23%.

I think that number will go higher and find other ways to bank and lend to the clients of our RIAs. If you put yourself in a position of an RIA, they're fiduciary. They're bringing that independence and to the client relationship and clients love that aspect of it. They do, from time to time, compete against the wealth divisions of wirehouses. And that independence means a lot to clients and is why they have grown their share. At the same time, I think the wirehouses are doing a better job of leveraging their banking capabilities. And the RIAs want to be able to match that, and we're the natural provider of that.

So while I think we are doing extremely well, growing our lending today, and you see it with the 85% growth in originations in the last year of a Pledged Asset Line. I think we're just getting started with our banking journey, and I couldn't be more excited about it.

Our next question comes from Alex Blostein with Goldman Sachs.

I was hoping we could touch on your capital return assumptions into 2026, but also beyond, when you're thinking about sort of the $570 to $580 in earnings that you suggested in your scenarios of '26, maybe just level set us what you assume for buybacks then? And again, how are you thinking about longer-term trajectory?

Thank you for the question. So that -- what we provided in that scenario and the implied math does not include buybacks. But in terms of our thoughts on capital, the framework remains unchanged, where capital is going to be there to support the growth of the franchise, the needs of the clients. And beyond that, the capital framework that we have in place and will continue as we think across the capital forms and the way in which we can return it for dividends, we still think in terms of a 20% to 30% payout of GAAP earnings. We'll look at our preferred securities and over the course of this year, we'll look at a couple of securities in terms of perhaps might we wish to redeem those or leave those outstanding or perhaps replace. And so that will be a function of how we want the capital stack to look and the inclusion of those preferred securities.

And then lastly, with buybacks, again, we'll talk about things like where we are in the ratio and of course, the growth of the overall franchise and making sure our capital will be there to support the growth of the franchise. But again, with the strong earnings momentum that we've seen we feel good about returning capital in multiple forms over the course of '26.

Our next question comes from Steven Chubak with Wolfe Research.

So I wanted to ask on some of the tax advantage, long/short strategies. It's an area where you've seen tremendous growth the balances, they're NII accretive, but they do come in at lower spreads. I just wanted to better understand how much further you can deepen penetration rates across the RIA channel given such strong demand and the types of returns you're generating on the balances relative to PAL and other potential balance sheet growth opportunities.

Stephen, thank you for the question. Yes, this is a product that our advisers are using this strategy with high net worth clients. As a way to drive enhanced returns through leverage. And so it's a pairing of a long with some short. It's been a good tactical solution for those clients. And you're right, this is something that -- there's a net balance sheet treatment from it.

So from our perspective, we're providing a service. It doesn't gross up that balance sheet, if you will. And so there is a fee associated with that. So I think it is a win-win. We're supporting clients and their need to manage their portfolio positions. There's some tax optimization that they can utilize with this portfolio. It helps them with concentration as well. But this is something that we still see is likely to grow in 2026. It is fee-based. Again, it's one of those revenue diversification opportunities that we have. And so again, it's a win-win from our perspective.

I might just add a couple of things, Mike, that really well said. A couple of things. As we broaden this out to the retail side as well, we'll see a couple of things. Number one, we will have the ability to offer this on a proprietary basis. And our Schwab personalized indexing capability has been something that our clients have absolutely loved and that has had added tremendous client value. As we go to a long short, again, I think there's a win-win opportunity here related to that. We're also seeing the opportunity to have broader discussions with our clients and to have for wealth relationships when we see clients with large concentrated positions. When we see them with big tax gains that they want to manage over time. And those conversations in those situations are part of what is powering our record growth in our wealth business.

With nearly $70 billion of flows into our managed investing solutions last year. That was up 36% or so over the prior year. So all of these capabilities need to be viewed within the lens of a much broader relationship. It is a huge win for a client because our highest Client Promoter Scores at the firm are those ones where we have a broader relationship and the economics for us are compelling because we're growing our fee-based revenue in our wealth business.

So we love these conversations because they help clients and their part of our strategy of continuing to grow and diversify how we generate our economics.

Our next question comes from Brian Bedell with Deutsche Bank.

Maybe, Rick, can you just comment on your views on prediction markets? I know you've talked about this in the press and interviews. Clearly, sports betting and prediction markets on mentions and culture is clearly something you're not interested in. But if the contracts were to develop in more broadly in fundamental investing and other economic types of contracts. Is that something you would be interested in launching on the platform? And how would you evaluate that? And what are you hearing from trading clients on that?

Thanks for the question, Brian. I'd love to expand on this one. A couple of principles that will drive my response. Number 1 is we always see through client size, and we want to deliver what's of importance to them and what they want. And number two, our mission is to champion our clients' financial goals with passion and integrity. [indiscernible] Building an investment available. As we work with our -- particularly our active traders to identify the thing. So the things that we're hearing from our [indiscernible] expanding into thing we can to help our or these gambling apps leave with more money than they put in. And I contrast that to the all-time record high wealth that our clients hold. It's just a fundamental different fundamentally different mission.

And so that's our thoughts. We're open to prediction markets. Should there be client and industry interest. We're not interested in the sports gambling. We'll leave that to the the FanDuels and Robin Hoods, and we'll stay away from that.

Our next question comes from [indiscernible].

Just want to unpack to your [indiscernible] you'd be right around 5% organic growth for 2026. That would be a bit of a deceleration just actually from the $5.1 you put up to $25. This was supposed to be a transition year. So you beat your goal for this year despite big transition here. So maybe you can unpack why only 5%. Are you still thinking of 5% is the right long-term goal. And then separately, just coming back to your commentary on the buyback. How should we think about your adjusted Tier 1 leverage ratio with 6.75% to 7% still the right way to think about that.

Otherwise, if you don't buy back a ton of stock, that ratio is going to ramp pretty dramatically given your guidance.

I'll start with the NNA numbers that Mike highlighted. And then, Mike, you can take the second part of that question. But on NNA, I still believe 5% or higher is the right long-term expectation. In the near term, we're focused on 5%. I think that's a realistic target. It's important to keep in mind that our total client assets grew by 18% year-over-year.

So the target, despite being similar to what we delivered last year, keeps going up. In the longer term, as we -- as I mentioned earlier, as we invest in our workplace business, we fully launched crypto. We add more retail relationships. I believe in the right market environment. We -- that above 5% still remains very much possible. But in the near term, that 5% with the asset growth we've seen from clients, that's the number we're -- we're shooting for.

[indiscernible] So that is still our objective. And keep in mind, obviously, as we see the growth of the franchise. There is a component of that ratio as interest rates move around, it will change the value of the securities portfolio, that change in value impacts the adjusted Tier 1 ratio. So you could find us operating above that from time to time. But there's no change in that operating objective. That is still very much where we intend to be.

Our next question comes from Benjamin Budish with Barclays.

First question there, just on the 5% expectation for the year. Could you give an update on the legacy Ameritrade customer base? I know in the past, you've indicated that, that cohort has been quite a bit inflowing slower than the legacy Schwab base. So what are you seeing lately there and maybe unpack that 5% a little bit in terms of investor services versus advisory services? Are you expecting any kind of mix shift, any acceleration? Or does that still remain sort of the longer-term expectation?

Thanks for the question. We're seeing Ameritrade behavior right where we'd want to see it, which is it has accelerated meaningfully in terms of assets in terms of engagement with the platform and engagement with our other solutions. They've been between 1/3 and 40% of the flows that are going into our wealth solutions into our lending solutions.

So it's just -- it's great to see the transformation of where we've gone with Ameritrade clients. And it's as expected. We expected during the transition that it would be a challenging time period and it was. We saw Ameritrade clients that with net new assets that were slightly negative as a group. And now they've moved meaningfully positive and are very much in line with both what we expect and what we see from Schwab clients. And so we're right where we want to be. It's very encouraging. And again, the outlook on M&A, we're very bullish about our growth and I think you saw that this year, we continue to be both in the as -- particularly as I think longer term, there's a number of areas that we can invest in that are going to be accelerants to our NNA, whether it's our workplace business, our crypto business, our retail relationships, our wealth business. And equally as important to that growth, we're just as focused on spending just as much time on doing more for our clients because with $12 trillion in assets 46 million client accounts, a huge source of our growth can be doing more for clients.

They want that from us, they're happier when we do that, and it diversifies our growth creates stickier, longer lasting relationships that ultimately build more wealth for our clients, and that's what we're in the business to do.

Okay. I'm looking at the clock, I think I'm out of time for 1 final question.

Our final question comes from Mike Brown with UBS.

Great. So I just wanted to ask about on the margin here. So guide for the low 50s for 2026, great to see that the margin continues to march higher here. How should we think about that longer-term potential? What's the ceiling there? And then specifically on the AI opportunity, can you maybe talk about some of the measurable revenue lift that we could see in terms of conversions, retention, adviser productivity, service triage. And what are kind of the key KPIs we should track here to know how well it's working and then how you're key proprietary data gives you an advantage over some of the new entrants in the FinTech space.

Mike, thanks for the question. So first on the margin lending growth, margin growth, sorry. The way we think about that is we've seen good margin expansion. Again, that is the result of a well-balanced approach to how we're managing our financials. As you've heard Rick and I talk about today, we're doing more for clients. We're seeing good take-up of our broader suite of products. And with that comes good revenue diversification, and that supports the durability of those revenues. I'll put that alongside a balanced approach to our expense management. We're investing in our strategic priorities. But at the same time, we're investing in efficiency and that's ensuring that we can maintain a low cost to serve that also helps to grow margin expand.

From here, we could see greater margin expansion. But again, there is no arbitrary target on that or ceiling on that per se. It is a result of that approach that we take to managing the financials. In AI, we're already seeing efficiencies where we've invested in having our client-facing reps use AI, we've grown client accounts. We've grown assets and we've been able to moderate the amount of client-facing reps that we've grown.

So we are already seeing efficiency. We want to continue to roll out AI, especially in our technology organization and continued in our service areas. I think the key metrics that we'll continue to focus on is that [indiscernible] is that cost per account. I think you'll see that come through and continue to be relevant. We plan to continue to maintain that low cost to serve and continue to drive those costs lower.

Thank you for your questions and engagement. We have an incredible opportunity ahead of us to deliver for clients and stockholders alike as we look to 2026 and beyond. We have 2 equally powerful levers for growth. Attracting more clients and doing more for the 46 million client accounts that we have.

Our scale and efficiency initiatives will continue to fuel our ability to invest in our clients while keeping our cost to serve them low. Taken together with this disciplined approach to financial management and capital return that Mike just described, we are confident that we'll continue to deliver earnings growth through the cycle. Thank you.

We're joining live from the Schwab Impact Conference in Denver, where a lot of exciting conversations around the independent advice space have been taking place all week. Of course, today, we had some more exciting news across the wires. Hopefully, you've had a chance to review our press release earlier this morning announcing our acquisition of Forge Global. During today's short call, management will share some initial perspectives on this great opportunity, as well as facilitate a short Q&A session.

First, before we dig in, let's take a quick look at the wall of words, which reminds us, as always, that expectations may change and evolve over time, so please stay in touch with our disclosures. And with that, I'll turn it over to Rick.

Thanks, Jeff, and good morning, everyone. Thank you for joining us on such short notice. For more than 50 years, Charles Schwab has focused on helping individuals achieve better financial outcomes by democratizing access to investing and innovating to help our clients manage, grow, protect and pass on their wealth. Chuck founded this firm because he passionately believes in the powerful idea that companies are meant to grow, and anyone can participate in the growth of public companies to build their wealth over the long term. And that remains true today.

At the same time, companies are staying private for longer than they once did. And the market for buying and selling shares of pre-IPO firms is fragmented, inefficient and ripe for democratization. We believe helping more people participate directly in the growth of private companies is a meaningful opportunity for wealth creation that will be attractive to qualified individual investors and the advisers who serve them.

Our acquisition of Forge will allow us to round out our alternatives offer by providing retail and RIA clients with alternatives from leading managers, passive exposure to alternatives via funds and direct investing in private companies. It also positions us to bring our Through Client's Eyes innovation to this important and growing slice of the economy in the form of expanded access, deeper liquidity and increased transparency. This deal brings together leaders in public markets and private marketplace transactions, and the combination positions Schwab to offer a best-in-class experience across both markets for individual investors and the registered investment advisers who serve them.

Schwab serves nearly 46 million client accounts and $11.59 trillion in assets, making us #1 among peers who report on that metric. We are #1 in RIA custodial assets. We're #1 in retail trading as measured by daily average trades, and there's not a close second. And in the last 12 months, Schwab clients have traded nearly $18 trillion in equities.

Forge offers investors private share access through direct share purchases, single-company funds and multi-company funds. It is a leader in the space with more than $17 billion in private market transaction volume since its inception, more than 3 million unique users and more than 625 private firms traded on their platform. If transactional activity in the private market grows to become even a small fraction of the public market, it will be a huge win for our clients who are looking to participate in the growth of pre-IPO companies. And it will be an attractive source of revenue diversification for Schwab.

Forge is a pioneer in democratizing access to private company markets. It is #1 in the private market space as measured by the number of trades in pre-IPO company shares and the size of its issuer network, earning its place as the leader because of its issuer-friendly business model. This is notable, as Forge's model seeks a company's approval before executing a sale of their shares, which will support Schwab's efforts to deepen relationships with private companies across our entire business ecosystem.

Forge has an attractive combination of a direct marketplace for trading private shares, along with asset management capabilities, private company solutions, proprietary data and custody services. This holistic set of capabilities sets it apart in the space and creates attractive synergy opportunities, which Mike and I will talk more about.

But first, I want to spend a moment on the size of the opportunity that we see in private markets. The momentum in private markets is driven by a couple of broad trends. First, there's significant value creation taking place within our economy within private companies.

Looking back 25 years, companies had to go public to raise capital for growth. That's no longer the case. Companies are waiting more than twice as long to go public. The median age of VC-backed IPO companies in 2024 was 14 years compared to 6 years in the year 2000. That's a big part of the reason that the number of IPOs has decreased 85% since then. As a result, the median valuations of the IPOs we do see are more than 3x what they were 25 years ago.

Second, higher net worth investors are increasingly looking to private markets for diversification, and we expect the market to grow significantly through the cycle. Looking at alternatives more broadly, private wealth capital allocated to alternatives globally is expected to surge from $4 trillion today to $13 trillion by 2032. We believe there is $9 trillion of potential supply in private securities today, about 20% of which is estimated to be tradable.

Incorporating Forge's private market capabilities builds on our continuing focus on innovation that helps our clients manage, grow, protect and pass on their wealth. This direct access to private securities builds on our retail alternatives launch earlier in the year, which provides access to leading alternative solutions supported by a team of Schwab experts.

For traders, we've expanded the 24/5 trading and are readying our crypto launch. Direct and indirect access to private securities provides traders with another investment option. For advisers, we've enhanced our wealth services infrastructure to support our advisers. We've launched Advisor ProDirect and have continued to enhance the industry's leading Pledged Asset Line experience.

Finally, we've innovated to help our higher net worth clients manage their wealth with offers that include discretionary wealth management, help with concentrated positions and investments in trust and estate capabilities. The acquisition of Forge will help us meet even more of our clients' evolving needs while also supporting organic growth, helping diversify revenue through the cycle and creating symbiotic opportunities across the business lines of both firms.

Within our existing client base of 46 million client accounts, millions of existing clients across retail and adviser services have assets north of $1 million at Schwab. When you apply the most basic accredited investor lens of income and think about assets our clients have held away, the number of eligible clients at Schwab today who are looking to diversify with alternatives and in private markets specifically is unmatched in the industry. Schwab will be the place for private market sellers to find interested buyers and vice versa across our Retail and Advisor Services client segments.

And that's not all. Our purchase of Forge, combined with our recent launch of Schwab Private Issuer Equity Services, helps us create an ecosystem where we can administer private stock plans while providing access to liquidity for employees and investors, all while creating a pre-IPO pipeline of future stock plan services clients for Schwab. Our plan is to expand our private market capabilities to all qualified retail RIA and stock plan services clients with a fully integrated experience in the medium term, which I estimate to be within the next couple of years. But we will hit the ground running as soon as the deal closes, and we'll continue to roll out offerings in the near and medium term.

Starting immediately after close, we will roll out Forge's offer to select ultra-high net worth investors, launch '40 Act funds that will offer indirect access to private markets for retail and RIA clients and continue to integrate and enhance the client experience. In the near term, we'll expand access to 1 million-plus retail clients, launch our RIA experience, expand fund offerings and continue to integrate Forge into our existing infrastructure. Finally, in the medium term, we'll expand retail access to all qualified investors, enhance our stock plan services capabilities, launch additional proprietary solutions and provide clients across the firm with a fully integrated experience.

We see tremendous opportunity. And if it plays out successfully, this capability will be worth many multiples of the purchase price.

I'll turn it now to Mike to talk through the specifics of the transaction.

Thank you, Rick, and good morning, everyone. Let's take a moment to walk through some of the high-level transaction details. This is structured as an all-cash deal at $45 per share or an implied Forge equity value of $660 million. Given our strong levels of capital and liquidity, we plan to fund this deal with cash. The transaction has been unanimously approved by both Schwab and Forge's respective Boards of Directors and is subject to customary closing conditions and reviews. We anticipate closing this transaction during the first half of 2026. Inclusive of expected synergies, this transaction will be accretive. However, it is not expected to have a material impact on our near-term financials, including the 2026 financial scenario we plan to share at the upcoming January business update.

Although the near-term financial impact may be limited, we believe this acquisition has the opportunity to meaningfully enhance stockholder value over time. Therefore, while we do expect to realize some modest expense synergies in the post-close, the upside lies primarily in the medium-term revenue opportunity across all aspects of Schwab's platform.

Bringing Forge into the Schwab ecosystem helps further enhance our capabilities for clients and accelerates our speed to market within the alternative investment space. As Rick outlined, we'd expect both the client and financial benefits to begin within our retail business. However, over time, we see meaningful upside across our adviser services and workplace businesses as well. As we integrate a growing set of private market capabilities alongside our current suite of modern wealth solutions, we expect the breadth of the offering to support franchise growth and help to further diversify our revenue mix through the cycle.

So in conclusion, we believe this acquisition is a win-win. Importantly, it is a win for Schwab's clients. Following the close of this deal, they will have access to a best-in-class modern wealth experience that spans across both the public and private markets. It is also a win for stockholders, as this transaction has the opportunity to strengthen our momentum by further enhancing our leading competitive position in the marketplace, supporting our long-term organic growth objectives and diversifying our revenue mix over time as clients engage with an expanding suite of offerings.

Of course, today is just the first step. There's still more work to be done to get this closed and the initial client rollout underway next year. So we look forward to sharing additional perspectives on the exciting possibilities we see for Schwab within the private markets over time.

And with that, we set aside time for a short Q&A. Operator?

[Operator Instructions] Our first question comes from Bill Katz with TD Cowen.

Okay. Thank you very much for the information and the update. Maybe my question is just in terms of the client overlap, I'm sort of curious that they have about 3 million clients, looks like you have obviously, a much larger footprint. How does that look in terms of the incremental opportunity to cross-sell? What does the client base look like for them in terms of maybe AUA per client, et cetera? Just trying to understand, maybe the opportunity for cross-sell seems very powerful to me.

I think that the reason we're taking on this transaction is about bringing Forge's capabilities to our 46 million clients, and that's where we see tremendous upside. If you look at the RIA community, our RIAs, we have $5 trillion of assets. We've got roughly 1% to 2% exposure to alternatives among our RIAs on our platform.

We think that number over time is likely to grow quite significantly, and we think it will grow in a few ways. One, through alternative asset managers. And we've been improving our platform there, both for RIAs and individual investors. Two, we think that many -- like people participate in public equity markets via an index-type fund strategy. We think a lot of investors will want exposure to a broad basket of private companies. And we're excited in the first quarter of next year that Forge is going to be launching a '40 Act fund, which will provide exposure to the 60 biggest private companies, creating a diversified basket. We think that will appeal to a lot of RIAs and a lot of retail clients.

And then finally, we know investors are engaged in individual stocks, and to be able to participate both in public and private markets will be a significant opportunity across both RIAs, but in particular, among our more active traders. So I think the real synergy here is taking the capabilities of Forge, offering them to our 46 million clients and seeing it grow. That said, we will certainly mine the 3 million clients at Forge and would love to make as many of them as possible, Schwab clients.

Our next question comes from Brennan Hawken with BMO.

Congrats on the deal. This is interesting. And the interesting thing to me about it is about Forge's relationships with the corporates, which seems like you guys are planning to fit in with the stock plan offering that you have at Schwab. Could you speak a little bit more about what they offer to the privates, just to help us get a better understanding about those services and how deep those relationships are?

Thanks for the question. So Forge sources liquidity from a variety of areas. One important one, as you know, is private companies. And they have the deepest set of relationships in the market with over 625 relationships with private companies, which is the largest number in the market.

That was something that was really attractive to us because we want to be in a position to sell -- or for clients to be able to buy actual ownership in the company. And in order to do that, you need to have a relationship with the private companies. And Forge has those ties and has the infrastructure and team to be able to expand on that, build on those relationships and grow them. And we expect that as we make this market more efficient and larger, that the private companies will find it even more attractive to work with us, and that number and that roster will grow.

As it relates to the -- serving them in their cap table management or private stock plan administration, we do think that is also a real opportunity. So the combination of the announcement we made in recent weeks about the partnership with Capita, where we took an ownership position in Capita and at the same time, are launching a commercial relationship where we will use their technology capabilities to administer private stock plans. That, in combination with the ability for those private companies to create liquidity for their employees via Forge's capabilities is a very powerful combination. And in combination with the strength of our broader stock plan business and our retail footprint, it's going to be really hard to match what we can do for private stock plan administration.

Our next question comes from Devin Ryan with Citizens.

Congratulations. I know the Forge team well, really interesting combination here. Question on just the client base as well. So Forge has a number of institutional customers that are providing liquidity on the platform, buying and selling. I'm curious if you're going to keep the offering open to institutional investors to buy and sell? Is this going to give you a better connection with institutions? So I want to get a thought there.

And then -- just -- if I could squeeze another kind of thought in on kind of just the primary capital opportunity as well. You have such a big network, and the demand you're talking about is going to be very valuable to issuers to potentially access your network for primary issuance as well on the private side.

Sorry, do you mind repeating the first part of the question? Sorry about that.

Yes. Sorry, it was a long question. Yes, just a connection point to institutional investors, given that Forge has a lot of institutions on the platform that are both buying and also selling shares?

Got you. So yes, it's something we'll evaluate, but at the moment, we certainly expect to continue those relationships. In general, we want as much liquidity flowing through the platform as possible. We want supply from the company side. We want as much demand from our clients, from institutions, wherever it comes from on both sides. I think we want to expand this marketplace, provide efficiency and grow it. So the immediate answer is yes, we have plans to keep that. But we'll, of course, as we get into the business more deeply and learn about it, we'll find out more.

Our next question comes from Brian Bedell with Deutsche Bank.

Congrats on the deal. Maybe just think about it broadly for the future Schwab organic growth opportunity, how are you thinking this can enhance that? It sounds like there's a lot of ways it can in terms of potentially having people bring more assets to the platform to qualify for the private company, individual private companies, not to mention just the attraction of the overall ecosystem that could help enhance organic growth. And then, of course, even potentially founders of companies in terms of wealth management. Maybe if you could just talk a little bit about -- is that something that you think can materially enhance your NNA growth rate over time? Or is it -- is this a little bit small in the grand scheme of that concept?

Well, I think it will enhance our NNA, and I'll share a few reasons why I believe that will be true over the medium term. I also think it provides us with a meaningful call option on what transpires in private markets and the many directions that it could take, having the leading public equity market provider and the leading private marketplace for private securities. As the private marketplace evolves, the upside there is potentially tremendous in a variety of different ways.

But let me touch on where I see the NNA opportunity. First, with our active trader group, which is a big group of our retail business and one that contributes a lot of NNA and is a profitable group to serve. This gives them another way to engage on our platform, another asset class of great interest to them. Many of -- companies which they know and are familiar with that they would love to invest in. So I think it will appeal to traders.

Second, we do have a lot of high net worth and ultra high net worth investors who have kept some portion of their assets away from us because they wanted access to alternatives. And with the launch we rolled out with our retail alternatives platform and with this acquisition of Forge, I think in the future, there's no reason for a Schwab -- ultra high net worth Schwab client to hold some of those assets away. And so I think by keeping those assets at Schwab and bringing some of them back, I think that will be an accelerant to NNA.

Third, the stock plan business. I expect that we will be an appealing partner for pre-IPO companies and that we could see NNA there. And then finally, in the RIA space, as you know, we are the leading provider -- leading custodian, and we've got a decent margin ahead of the second one. One of the areas where I think that we need to strengthen our capability is around alternatives. And it's why the RIAs on our platform have somewhere between 1% and 2% allocation to alternatives. And it's because the alt-heavy RIAs likely are somewhere else because our platform hasn't been quite where we wanted it.

And I think the combination of the work we're doing to improve that platform now, the opportunity for RIAs to invest either directly in single name private securities or to own a basket of them, diversified basket fund and -- or access a leading alternative manager, I think that's going to change that dynamic. It will lead to us winning even more business with RIAs because outside of that, unquestionably, we are winning with the RIAs and have an offer that can't be matched. So I'm thrilled about what this does across every one of our businesses, the RIA business, our retail business and our stock plan business.

Thank you. And at this time, I would like to turn the call back to the speakers.

Super. Well, thanks, everyone, for joining on such short notice. And thanks for your time and engagement this morning. We are incredibly excited about the opportunity we have to help more clients across our business lines build wealth and diversify their portfolios by participating directly in the growth of private companies.

Combining Schwab and Forge, both leaders in our respective markets, means we can bring Through Clients' Eyes innovation to an important and growing slice of the economy by expanding access, deepening liquidity and increasing transparency. The deal helps us meet even more of our clients' evolving needs, supports organic growth, creating symbiotic opportunities across the business lines of both firms and helps us diversify revenue through the cycle. We look forward to sharing more with you in the months ahead, and thanks again for joining and for your engagement this morning.

Good morning, everyone, and welcome to Schwab's 2025 Fall Business Update, broadcasting live from our Westlake headquarters. This is Lauren Gaspar, Managing Director of Investor Relations, and I am joined by President and CEO, Rick Wurster and CFO, Mike Verdeschi.

Hopefully, everyone has had an opportunity to review our strong results for the third quarter were released about an hour ago. The team is looking forward to sharing additional insights into those results, along with the broader strategic and financial update as we head into the final chapter of 2025.

As always, let's quickly hit on the typical housekeeping items. The slides for the business update will be posted to their usual spot on the IR website at the conclusion of today's prepared remarks. Q&A remains structured as one question, no follow-ups. And please, let's try to avoid the multilayered questions disguised as one. This will allow us to address as many questions as possible during our time together.

As always, please don't hesitate to reach out to your friendly IR team with any follow-up questions after today's business update. And last but certainly not least, everyone's favorite part of these business updates, the forward-looking statements page.

Given the importance of these statements, I would like to break from tradition and read them out loud in their entirety. Just kidding, but seriously, they are important. So do take a look at them and remember that outcomes can differ from expectations, so please keep in touch with our disclosures. And now it is my pleasure to turn it over to Rick to start us off.

Thank you, Lauren, and thanks, everyone, for joining us for our fall business update. Our [ true ] client size strategy continues to drive growth on all fronts. In the third quarter, clients opened up 1.1 million new brokerage accounts and trusted Schwab at approximately $138 billion in core net new assets. Year-to-date, we've attracted nearly $356 billion in core NNA.

Clients are deepening their relationships with us by conducting more of their financial lives here, as seen by our record wealth and lending flows. Daily average trades remained above $7 million for the third consecutive quarter, and margin balances reached a record $97.2 billion. With engaged clients operative market and strong execution, we delivered another quarter of record results with 27% year-over-year revenue growth and a year-over-year adjusted earnings growth.

And we returned excess capital in multiple forms. As we head into the final stretch of 2025, we are playing offense with ongoing investments that will continue to drive profitable growth through the cycle.

Equity markets reached all-time highs in the third quarter and investor sentiment landed in bold territory. We are here to support investors through market cycles and make a difference in their financial lives. This quarter, I visited 19 of our branches across the country, several of our Schwab Wealth Advisory offices and met with multiple dozens of our RIA clients.

Broadly speaking, our clients are happy because markets are up. Client wealth is at all-time high, and they are asking us how to protect it, pass it along and grow it. And this is when they turn to Schwab. We provide exceptional service platforms and advice in the channel of our clients' choice.

In the third quarter, we supported nearly 570 million digital logins, 7 million calls 36% growth in interactions with our research content and thousands of interactions in our 400 branches in local communities across our country and overseas. We are here for clients when, where and how they need us.

Our Through Clients' Eyes strategy, combined with our diversified business model and ongoing investments in client experiences and capabilities is powering growth on all fronts with clients across our solutions and on all financial measures.

Starting with client growth, investors opened more than 1 million new brokerage accounts, and we attracted in core net new assets in the third quarter, a 44% increase over last year. We said we'd make progress in getting back to our historic organic growth range. And as you can see, we've made substantial progress on our path to 5%.

We believe we are positioned incredibly well in the 2 fastest-growing areas of the market. Through the cycle, we remain confident in our ability to grow at levels consistent with our historic range. This quarter, our strong NNA was helped by the market environment, improvement with legacy Ameritrade clients and high client satisfaction and engagement.

We're continuing to deepen relationships with former Ameritrade clients who have been positive contributors to NNA throughout 2025. While they have not yet reached the organic growth rate levels we see among legacy Schwab clients, CPS scores among former Ameritrade clients have improved 11 points this year.

Turning to our solutions growth. Clients are deepening their Schwab relationships by conducting more of their financial lives with us across our wealth, lending and trading solutions. Managed investing net flows increased 40% year-over-year with 30% of flows from legacy Ameritrade clients.

Schwab Wealth Advisory, our flagship wealth offer achieved another quarter of record flows and continues to delight clients with a record Client Promoter Score of 85. Bank lending balances are up 24% overall with power balances reaching record levels.

Traders continue to turn to us for our world-class offer. thinkorswim adoption among Schwab legacy clients has increased 98% over last year. We're also here for our clients who are looking for crypto exposure. Visits to our digital assets content on Schwab.com are up 92% year-over-year, and Schwab has approximately a 20% share of the spot crypto ETP market.

We know that our clients who have allocated a small portion of their portfolios in spot crypto at other firms are eager to bring those assets to Schwab. We remain on track to launch spot crypto in the first half of 2026, starting with Bitcoin and Ethereum. We'll watch this offer to Schwab way with a powerful combination of education, research, risk management and the service clients expect all at great value. Our offer will allow clients to access crypto directly alongside their existing investments and our banking capabilities, which will be a strong differentiator.

Our financials are the third dimension of growth, and we delivered record results this quarter. Net revenues increased 27% year-over-year to a new quarterly record and we delivered record quarterly adjusted earnings per share of $1.31. As we look to the future, we're confident in our ability to continue driving growth on all fronts and across a range of environments and I'll spend the next few minutes highlighting why.

One we are in a strong competitive position. We serve 45 million client accounts and $11.59 trillion in assets, making us #1 among peers who report on that metric. We are #1 in RIA custodial assets and we're #1 in retail trading as measured by daily average trades with no close second.

We continue to receive recognition from respected third parties because we stand apart by putting clients financial well-being at the forefront of every decision. Our no trade-offs approach offers an unmatched breadth of capabilities, education, research and service with a combination of industry-leading digital experiences and deep client relationships to help clients achieve their desired outcome.

Two, our business fundamentals are healthy. We look at this across a few dimensions. First, clients are highly engaged with both Schwab and the markets. Total client interactions within our branches on chat, e-mail and on the phones are up 19% year-over-year. and we exceeded 500 million digital client log-ins across mobile and web for the third consecutive quarter. Daily average trades remained above $7 million during the quarter and clients have increased their use of margin to record levels, up 33% over last year.

Second, we're delivering world-class service. We're entering the phones in less than 30 seconds on average and more than 75% of questions are answered without the need to transfer the call. And third, most importantly, clients are happy. Overall satisfaction scores for our service organization are at an all-time high of 88%.

Client Promoter Scores for IS and AS are at record levels, meaning we are delivering for clients when and where they need us. It's important to remember that for 50 years, we have championed our investors' financial goals and done everything we can to make clients better off in their financial life.

Three, we're attracting a diverse range of clients. We're continuing to attract and serve RIAs of all sizes and our Advisor Services business is thriving. In our retail business, we are attracting and serving investors of all ages, and we see significant engagement from younger clients.

When we think about our mission and the opportunity to get more Americans invested, it is encouraging that industry research shows Gen Z is 45% more likely to start investing by the age of 21 as compared to Millennials. And we see these trends playing out among our client base. This year, nearly 1/3 of new-to-firm retail households at Schwab are Gen Zers, investors between the ages of 13 and 28.

One of the reasons they're turning to Schwab is because we're meeting them in the channels where they turn for information about investing. We know they learn about finances primarily through social media and family. Their top online resource is YouTube, and we're the #1 financial services firm on YouTube by followers.

And younger investors at Schwab are highly engaged in building their wealth over the long term. In fact, 1/3 of retail households who created a financial plan within the last 2 years are under the age of 40. While client assets are more concentrated among older generations today, the average age of our clients continues to get younger.

Finally, a growing portion of new to firm households are traders. Traders of all ages and experience levels are coming to Schwab, including younger traders. Younger traders are turning to us because they recognize the potential that trading has in helping build wealth over time. And they're turning to Schwab because we have the platforms, tools, education, coaching, expertise and service they need to help them succeed, a combination that cannot find anywhere else.

Finally, we remain committed to our 4 strategic focus areas to meet the evolving needs of our clients. At the start of the year, I laid out our priorities: growth, scale and efficiency, the brilliant basics and our people. I'll spend just a few minutes sharing highlights on progress we've made.

Our first focus area is driving growth by deepening relationships with our clients. I'll highlight just a few ways we're delivering on this priority. In our Advisor Services business, we're deepening relationships with 16,000 RIA firms we serve by building a broader support ecosystem that extends beyond custody alone to add value for RIAs. We've grown our lending support, alternatives capability and expanded our institutional no transaction fee mutual fund platform to include funds from nearly 60 managers with no transaction fees for clients. We also launched [ Adviser Pro Direct], which helps breakaway advisers on their path to independence. Finally, we supported the largest adviser transition in the history of our industry by welcoming [ Open Arch ] to our platform in September.

In our retail business, we're expanding our branch footprint and hiring financial consultants and wealth consultants to serve even more of our higher net worth clients. These investments are important because we know that clients who have an [ Fc ] relationship have higher CPS scores, while also bringing in more than 2.5x the NNA and engaging more in our trading, wealth and banking solutions.

We're investing in deepening relationships within clients and enhancing how we support their financial life. We've enhanced Schwab Wealth Advisory adding a discretionary offer. We've launched alternatives. We've invested in tax, trust and estate capabilities, and we've added more experts to support more clients. Within our banking offer, our budget asset line experience continues to lead the industry with cycle times of about 1 day and clients can now borrow against most managed investing assets they hold at Schwab, meaning they can borrow more and we're continuing to invest in our trader experience.

Our second focus area is creating value with scale and efficiency. These initiatives, which are primarily centered within service, operations and technology are a win for clients and are also helping enable us to keep our cost to serve clients low so that we can reinvest in our growth.

We're using AI to supercharge our professionals through capabilities like our Schwab Knowledge Assistant and the rollout of our service AI assistant, which helps our client-facing professionals create post call summaries and notes, among other capabilities. These efforts will help our reps serve clients more efficiently. We've also made progress on improving status notifications to clients and removing more paper from our system, reducing not in good order errors and saving time for our clients and professionals.

Our third focus area is delivering on the brilliant basics. At the heart of it, this means being there for clients when and where they need us and delighting them in every interaction they have with us. It means our systems are available and experiences are easy. One measure of this is our client easy scores, which are near all-time highs. 94% for our retail client service organization and 93% ease of doing business score for adviser services.

Finally, our finance team has done a great job of enhancing our approach to managing our balance sheet. Last but not least, the fourth focus area is investing in our people. We couldn't do what we do without 32,000 employees working together united by a single mission. We're continuing to invest in our people and culture to retain and attract the best talent in the industry.

To wrap up, we've sustained positive momentum through 2025 and are continuing to deliver growth on all fronts. We are looking towards the future from a position of strength continuing to play offense to power profitable growth over the long term. With that, I'll turn it over to Mike to dive into details on our financial results.

Thank you, Rick, and good morning, everyone. Schwab delivered strong third quarter results across all fronts, highlighting our momentum as we continue to meet the evolving needs of individual investors and independent advisers.

The combination of our firms focused execution across key strategic objectives and favorable macro tailwinds yielded record results. We saw another step-up in our organic client growth trends during the period and client engagement across our broad suite of products and solutions also remained robust. This sustained momentum translated into record revenue and earnings for the quarter, including year-over-year revenue growth of 27% to $6.1 billion, adjusted pretax margins exceeding 51% and adjusted earnings per share of $1.31, an increase of 70% versus 3Q '24.

Client cash levels continue to reflect normal behavior, inclusive of organic growth, seasonality and strong client engagement as equity markets reached record levels. We made further progress in reducing supplemental borrowings, which ended the quarter at $14.8 billion or just within the upper bound of our business as usual range.

We also returned meaningful excess capital via common stock repurchases. Inclusive of these actions, our capital ratios stayed relatively flat versus the second quarter finishing 3Q slightly above our target range.

Now let's impact some of the key drivers influencing these record 3Q results before sharing our perspectives on the final chapter of 2025. Revenue increased 27% year-over-year to a record $6.1 billion for 3Q, the fourth consecutive quarter of double-digit year-over-year growth across all major line items. Our further reduction in supplemental borrowings at the banks, client loan growth and another strong quarter for securities lending activity helped to expand net interest margin empowered a 37% increase in net interest revenue versus 3Q '24.

Strong equity markets, healthy asset gathering and sustained client interest in Schwab's wealth and asset management offerings, drove 13% year-over-year growth in asset management and administration fees to a record $1.7 billion. Trading revenue was up 25% versus 324 as our leading retail trading platform facilitated another robust quarter of activity including 7.4 million daily average trades and approximately $6 trillion of gross notional value traded across equities, ETFs and mutual funds.

Bank deposit account fees moved higher year-over-year due to an improved net yield as lower-yielding fixed-rate obligations continue to mature and converted into the floating rate bucket. September marked an inflection point for the BDA as we transition into the new $60 billion to $90 billion operating range for the remainder of the agreement and we gained the flexibility to move balances between the BDA and our balance sheet. During the third quarter, we transferred $3 billion worth of balances to Schwab to accelerate the paydown of bank supplemental borrowings.

Turning to expenses. Adjusted expenses for the quarter were up 5% versus 3Q '24 as we continue to make ongoing investments to support sustainable growth including opening new branches and hiring financial consultants, supported very strong and sustained client engagement across our broad suite of modern wealth solutions and seek to further unlock incremental efficiencies across our business.

Further progress in reducing high-cost borrowings at the banks, equity market strength and sustained trading volumes drove regular top line growth. In conjunction with balanced expense management, Schwab's adjusted pretax profit margin reached 51.3%. Quarterly adjusted earnings per share equaled a record $1.31, a year-over-year increase of 70%. Note that 3Q EPS included a $0.03 benefit related to state tax matters. With the majority of this benefit realized in 3Q '25, we expect our corporate tax rate to remain around the 23% to 24% zone in future periods.

Moving on to our balance sheet. We supported our clients as their needs evolve against a shifting backdrop. Client demand for our lending solutions increased during the quarter. Outstanding power balances grew to $23.4 billion, representing a year-over-year increase of 37%. Client margin loan balances rose to $97.2 billion at quarter end, up 16% versus year-end 2024, reflecting rising equity markets and improved investor sentiment and certain tactical client trading activities, such as long/short strategies.

Transactional suite cash trends continue to reflect normal client behavior. Following modest outflows during July and August related to typical seasonality and client net buying activity we saw $19 billion of cash inflows in September to bring the quarter end balance to $425.6 billion. which represents a quarter-over-quarter increase of $13.5 billion or approximately 3%.

This sequential building cash, along with the use of investment portfolio proceeds and balances transferred from the BDA allow us to further reduce high-cost funding at the banks. We'd expect normal cash behavior to continue in 4Q including typical seasonality, such as adviser payments in October and the December cash build. Staying on high-cost bank funding for a moment, we made great progress during the third quarter, reducing supplemental funding balances by another $13 billion, bringing outstanding balances down to $14.8 billion or approximately 85% below the peak in May 2023.

This level is just inside the upper bound of our business as usual range of approximately $5 billion to $15 billion, which aligns with our long-term diversified funding profile. While outstanding balances may come down further and move around this range over time, we'll continue to support client loan needs and begin to focus more on new security purchases versus paydown activities.

Our capital levels finished the quarter slightly above the upper bound of the firm's adjusted Tier 1 leverage objective of 6.75% to 7%. The quarter-over-quarter build was primarily driven by earnings and the continued pull to par of unrealized marks. The ratio also reflects our repurchases of common shares for $2.7 billion, bringing year-to-date total capital return across all forms to $8.5 billion. Looking ahead, we will continue to prioritize maintaining capital to support the needs of our clients and the growth of the franchise while returning excess capital in multiple forms as part of our through-the-cycle financial growth story.

Turning to our full year 2025 scenario. During the summer business update in July, we provided an updated financial scenario informed by several inputs, including calling for 225 basis point cuts to the Fed funds target rate. Equity market appreciation of roughly 9% for the full year and client trading volume that represented a slight pullback from levels observed during the first half of the year.

Moving forward to today, the interest rate curve now calls for a total of 325 basis point cuts during 2025 versus a previous expectation for only 2 cuts. Markets continue to move higher during the third quarter and client trading remains robust. However, the last couple of weeks remind us the environment can shift quickly. So in terms of the remainder of the year, we are likely to see various puts and takes as both rates and the broader markets evolve with the macroeconomic backdrop.

So far in October, we continue to see good engagement from clients, which can increase revenue as well as volume-related expenses. Assuming this engagement persists, we could see a lift in earnings of around 2% or a bit better relative to the upper end of the financial scenario range we shared back at the July business update.

In terms of next year, we are still working through our annual planning process, but we expect to keep building upon our 2025 momentum. And like most years, we will need to navigate in an evolving macroeconomic environment including potential shifts in sentiment and engagement levels. We remain confident in our ability to continue balancing the investments necessary to support the needs of our clients while delivering on our near-term financial objectives, such as top line growth and positive operating leverage across a range of environments. So please stay tuned, and we'll come back to you with a more detailed 2026 financial scenario in January.

In closing, as we approach the final months of 2025, we are excited with our progress to date. Momentum with clients continue to strengthen as they entrust us with an increasing amount of their assets and execute our broad suite of solutions, including wealth, trading, asset management and banking.

Schwab's diversified model, along with record equity markets and strong client engagement have positioned us to deliver record financial results for the full year. While that is certainly a great position to be in, obviously, our time horizon extends beyond a single year. We remain relentlessly focused on maintaining the strength of our diversified model with the ability to efficiently serve the needs of individual investors and the independent advisers who serve them through a range of environments. And with that, let's move on to Q&A. Lauren, back to you.

Thanks, Mike. Operator, can you please walk everyone through the instructions for the Q&A session?

[Operator Instructions] Our first question come from Ben Budish with Barclays.

Rick, you talked a little bit about the adviser business in your prepared comments. I was wondering if you could unpack the recent trends a little bit more -- it seems like from some of your other publicly traded peers, they're calling out a bit of a slowdown environment across the industry, maybe since April the kind of volatility events we've seen, your results seem to be bucking that trend.

So could you talk a little bit about what's going well more recently. To what extent is the NNA growth in that channel coming from existing advisers versus kind of net new firms to Schwab? Maybe talk a little bit about your engagement an activity with sort of legacy Ameritrade advisers that are now part of Schwab. Help us understand a little bit what's going on there?

Ben, thanks for the question. our adviser business is really thriving and growing at an accelerated rate. We've seen NNA pick up substantially in our adviser business this year versus last year. And I think it's a combination of things.

Number one, I think we're executing and delivering for clients as strongly as we ever have. And part of that is having gone through the integration with Ameritrade, where we picked up some capabilities, integrated them into Schwab's already strong offering and put them together. And so I think we had some clients, particularly Ameritrade clients and others who during the transition, we're wondering how it's going to play out.

And now they've had the chance to see how strong the combined offering is and they're loving it. And so we're winning on all fronts as it relates to advisers. And I'm not surprised that's resulting in others growing more slowly because our metrics like transfer of asset ratios and things like that are up meaningfully over last year, meaning we're winning more and more this year.

You asked about what's driving it. We see it across every dimension. We look at growth in a few different fronts. First, growth from existing clients of advisers that we already work with existing advisers that bring on new business and win new business at the direct towards us. and then new advisers that transition to us. And across every one of those dimensions, we've seen an acceleration.

In particular, among advisers converting to us and choosing independents and choosing to be with Schwab and why wouldn't they? I think our offer is far and away the best in the industry, and that's -- I think that's reflected in the NNA that you're seeing.

Our next question comes from Alex Blostein with Goldman Sachs.

I was hoping you guys could expand on dynamics you're seeing sort of core deposits, [ realized ] build over the course of the quarter. And more importantly, as you think about the trajectory of interest rates and sort of sensitivity to trajectory of core deposits on the back of that, how are you thinking of that over the next couple of quarters here? Because obviously, it's a pretty important component to the overall earnings growth profile.

Alex, thank you for the question. As we've said, we've looked at deposits this year, and we're seeing really that normal environment play out. In that normal environment means you're seeing us attract deposits just from the core growth, of course, where -- as we're growing net new assets, a component of that is going to be in cash.

We typically see seasonality, of course, as well. And so that's played out from quarter-to-quarter. And then, of course, client sentiment plays a big part in that as well where early in the year, you saw a more pronounced selling and then subsequent months, cash going back into the market as clients began to continue to engage and invest.

From here, the path of rates, if you look at the forwards is, of course, rates heading lower. We tend to pick up cash in that environment, how much remains to be seen. But we feel really good about what we've seen this year. Cash still operating in that normal environment, again, with an ability to pick up cash as rates begin to trend lower from here. So we think that will be supportive of continued strong earnings as we go into next year and conduct activity throughout the year.

Our next question comes from Ken Worthington with JPMorgan.

Are you looking at crypto as a driver of near-term profit? Or is crypto really about bringing in the next generation of future Schwab investors? And to what extent is aggressive pricing below the level of competitors like Coinbase and Robinhood, a factor that you're using to drive crypto clients to Schwab?

Ken, great to hear from you, and thanks for the question. First, we're winning in crypto today. Our clients are highly engaged. Our traffic on our crypto site has gone up 90% year-over-year. Clients own 20% of the crypto exchange traded product in the industry. And so most of our clients, we find are not using coins to transact on the blockchain most are wanting to get invested in the price change of crypto and they feel very comfortable doing that in ETFs with a company they really trust. And so that's why we're seeing what we're seeing in crypto.

That said, we do want to launch spot crypto and I hear from clients all the time, that, hey, I've been a longtime Schwab client. I've got 99% of my assets with you, but I've got a little account over it, a digital native firm where I keep my crypto. And I can't wait until I can bring it back to Schwab. And we're excited -- we're incredibly excited about that.

In terms of both profitability or using it kind of to attract the next generation, I would say both to that. And here's why I would say that is the spreads at the moment and the amount of money that these digitally native firms are making in crypto are enormous. And you can see it in the revenue on client assets of some of the digital and native public firms. And so there's room, I think, to be both aggressive on price to deliver great value and generate a profit for the firm. So I think that's how I would think about it.

In terms of attracting the next generation Ken, I want to be really clear. Crypto will be great for clients and will certainly appeal to young investors, but we are absolutely brushing it with young investors today. One in 3 of our new-to-firm household numbers, which are really strong new to firm numbers are under the age of 24. 1/3 are Gen Zers under the age of 28 and they're not just engaging with us in trading.

They're engaging with us across the board. They're responsible for a lot of the financial planning conversations that we've had. They'll come in and want to consolidate loans into a pledged asset line balance, so they can pay off their student debt. They'll talk to us about how to buy house in the future. These are clients that really want to be investors for the long term and wanticipate our help navigating it. And no one can compete with us as it relates to delivering for the young investor.

I have 1,000 colleagues that wake up every day that are former trading professionals that answer the phones for any investors that want advice and expertise on how to trade. -- we put on 35 hours a week of live content for our investors about how to learn, how to trade, how to learn how to invest the power of things like compounding. And the engagement in those types of things is off the charts.

So it's just -- I think what we can offer the young investor in terms of the support, the service the education and, of course, the leading platform with thinkorswim and our digital capabilities, I think, is unmatched and that's why we're having so much success with young investors. I think crypto will be additive, but we're already winning with them.

Our next question comes from [ Brennan Hawken ] with Bank of Montreal.

Not only we have the wholesale funding back in the normal operating range, Mike, as you called it. We saw some BDA movement, as you identified in between the cash buckets. How are you thinking about redeployment and reinvestment? Should we be thinking that securities will be the likely target and kind of what level of duration would you expect? Or is the floating rate bucket on the BDA side attractive as a capital-light option.

Thank you for the question. So yes, we're happy with the progress we've made in the pay down. We could see a little bit more reduction in that supplemental borrowing balance. But you're right, as we have now cash coming in, we will deploy that into, of course, meeting our client borrowing needs. We've seen good momentum in lending, and we will continue to deploy funds, of course, to support that need.

We, of course, have the opportunity then as well to invest in securities. And that's with new cash, but also as we see the securities portfolio maturing, we'll reinvest those proceeds, and keep in mind, those yields on the existing securities are under 2%, so we'll get a nice lift on that.

You asked about the duration. I've talked about this before, where the average duration for the portfolio probably be in that 2- to 4-year range. That will give you some sense of where the overall duration will be. That will be a function of how we look at the liability side of the balance sheet and the composition of deposits you can have certain investments that are shorter than that 2 to 4 years, some that could be longer. Certainly, agency mortgages will extend a little bit beyond that, but we could buy very short-dated treasuries as well. But we're going to maintain that 2- to 4-year duration.

In terms of the BDA, this is it's something that gives us a tremendous amount of flexibility. In terms of size, it's $60 billion to $90 billion, the range that we operate in but it also allows us to manage across our risk sides efficiently. And that means capital, liquidity and our interest rate risk profile.

So as you saw us do less in the third quarter, we moved funds from the BDA onto our balance sheet and use those proceeds to pay down supplemental borrowings. But of course, we have the flexibility to place proceeds into the and that could help us with our interest rate risk management profile where we could either place it at a floating rate or if we wanted to match off some of our deposits, we could also place in out of fixed rate. And of course, as we've talked about before, if we wanted to free up some capital, we could also place some funds into the BDA with that consideration in mind as well.

But I think from here, we're in really good position, continue to meet the needs of clients in terms of their borrowing needs, while also investing in securities in that 2- to 4-year duration, which will give us a very nice lift in earnings as well.

Our next question comes from Dan Fannon with Jefferies.

Rick, I wanted to follow up on just the Ameritrade customer. You mentioned that growth is improving, but that's still where you want it to be. So I was hoping you could put some numbers around that and or think about the journey and where you think -- how long it will take to get them to the appropriate growth rates you are expecting?

Yes. Thanks for the question, Dan. I think we have continued upside with our Ameritrade clients. If you look at over the last 18, 24 months, they've gone from being net negative contributors to NNA to being net positive. Not yet at the level that we see from legacy Schwab clients but I think that's just a matter of time. And the reason I believe that's just a matter of time is that -- a couple of things.

When we measure their client satisfaction scores relative to Schwab clients, is it legacy Schwab clients? And they've gone up dramatically over the last 12 months, but even more so if you look over the last couple of years. So that's really encouraging.

I also want to get the chance to be in our branches and talk about how our Ameritrade clients are doing or talk to them. They've gone from being frustrated that they got moved to another firm without being asked and trying to figure out how to navigate a completely somewhat new platform to them and a different experience to saying I don't know how I lived without Schwab while when I was at Ameritrade, we have so much more here.

And we see that because they're engaging in banking, they're engaging in wealth. I think they account for 30-ish percent of all our record well flows that we're seeing. They're engaging in all kinds of activities that didn't have access to at Ameritrade. So I am bullish our ability to get them to the level of NNA growth that we see from Schwab clients. And I'm hopeful that the progress we've seen and going from negative to 0 to now positive, there's still a few percentage gap between Schwab and legacy Ameritrade, but I'm confident in the coming months. that we'll continue to make progress in closing that. I couldn't be more enthusiastic about what we're seeing from our Ameritrade clients and how we're showing up and delivering for them.

Our next question comes from Brian Bedell with Deutsche Bank.

Maybe, Mike, just back on the guidance for the rest of the year. Any color on the revenue and expense components of that? Obviously, things are trending much better than initially expected. So I just wanted to see if you were able to offer a range? Or how much you think we could be beating that 18.5% to 19.5%. And then similar on expense, obviously, that would bring higher expenses, of course. But will we still be in that range? Or are you targeting a specific margin target?

And then I guess any color on 4Q NIM and NII, if we think NII can expand at least in 4Q given the balances are growing nicely?

Brian, thanks for the question. A lot packed in there. So as you know, we provide the scenario twice a year, meaning that we give you a preliminary scenario in January. We updated it in July. What we wanted to do today is really just give you the direction of travel. As we've been saying, we've seen outstanding client engagement -- the macro environment has been favorable.

And so I wanted to give you the direction of travel where I mentioned earnings, again, relative to that July updated scenario, the top end of that range implied EPS, up 2% or a bit better. And so you will see a lift in earnings is what we're expecting. The components, yes, a lift in revenue. We're not going to update the range, as I mentioned, a lift in expenses as well.

Again, this is volume related, therefore, variable expense. And where we updated the scenario in July, we gave that 5.25% top end of that expense range. So we'll be up against that or a bit above perhaps that will just depend on the client engagement and volumes. But again, keep in mind that is going to be seeing a revenue on the other side in terms of the transactions and overall earnings accretive.

What pretax profit margin, the way I think about it is that's a result of a very well balanced approach to how we manage our financials. The more we see clients engage with us across our suite of products, we see good revenue diversification coming out of that. And of course, with our expenses, we take a balanced approach. We're making resources available for growth, but we're also investing in efficiency.

And that supports durable earnings across a range of environments. And the pretax profit margin is really an output of the way we manage that balanced approach with revenue diversification and expenses. And so you asked about net interest margin were up this quarter. Again, keep in mind that we now have 3 cuts at least that's what the market is indicating for the full year. So we expect to still be into the 280s for net interest margin to close out the fourth quarter.

And again, we'll come back to you in January with the 2026 scenario at that time. Again, based on what we see today, rates are going to be around that 3% range to end the year. We feel really good about the ability to continue to drive our earnings in a range of environments even in that lower rate environment.

On the NIM side, we talked about asset sensitivity before. And while we have some asset sensitivity Keep in mind, we were proactive in cutting out roughly 1/3 of that net interest revenue sensitivity. And as I mentioned earlier on this call, as rates head lower, we tend to pick up cash. And so that will be a nice offset as will be the reinvestment of securities. So even in that lower rate environment despite the asset sensitivity, I expect some meaningful offset to the impact of lower rates and the impact it would have on in. So we feel really good heading into 2026.

Our next question comes from Bill Katz with TD Cowen.

It seems like there's a significant inflection in the business here now that you're done sort of paying down -- predominantly done paying down the high cost. Your organic growth is great. Cash is building a little bit. So how should we think about the interplay between interest earning asset growth and capital return, clearly bought back a ton of stock this quarter off to a good start relative to the $20 billion. Just trying to think through where you are strategically thinking about driving the balance sheet growth versus maybe more sustained capital return to investors?

Thank you. This year, yes, as we have talked about with the paydown of supplemental borrowings, interest-earning assets, probably coming down modestly. Now that we've paid down the vast majority of those borrowings. As I said earlier, we'll probably pay down a little bit more there. You're likely to see us in the lower end of that supplemental borrowing range that I provided earlier.

Over the course of next year, I think it will be more about the growth of our client borrowing needs. So we've seen good momentum in lending in the range of environments, we would expect that to continue. But again, I think that would be reasonably modest growth of interest-earning assets. Again, we'll come back to you with a scenario that's more specific. But on the capital side, we also feel very good in this environment where we've been -- over the course of the year, we've been able to return capital across our framework. And as we've said before, that's an important part of our financial story.

We're generating very good earnings that's building capital for us. And so we continue to be in a very flexible position to generate good earnings to meet the needs of our clients while being able to return capital in multiple forms. So we think we're in a very good position.

Our next question comes from Kyle Voigt with KBW.

Maybe just regarding the strong pledged asset line growth. Just wondering if you could comment on what inning you think you are in, in terms of penetrating your existing client base there. And I think you effectively began to hedge some of those loans in the fixed. Can you just give us an update on how that trended in 3Q and how to think about future hedging as those balances continue to grow strongly from here?

Thanks for the question, Kyle. Yes, we've seen good momentum in [ PAL ]. As we've talked about before, we've made that experience very easy for clients to engage in that product, we've seen a good lift. We expect continued engagement in that product. Again, this is something that we're going to be responding to client needs.

In terms of penetration, when you look at our bank lending activity, it's relatively low penetration. So we do think there is good upside that we could experience there. So we are looking forward to that. Yes, we have hedged some of those power balances. That just gives us another tool for how we match our assets and liabilities.

Typically, we've invested in securities as a way of matching. But again, using these interest rate swaps against our underlying assets and liabilities just creates another flexible tool to manage that interest rate risk profile. As those balances grow, that continues to give us flexibility. But we'll also look to broaden out how we think about those hedges. Are there other underlying assets, floating rate assets, for example, that we could utilize?

So all of this is with the intent of building additional flexibility in how we manage our balance sheet. So again, this is a win-win. We're meeting our client needs. We think there's more upside there. But also we're ensuring that we're building ourselves flexibility in how we manage the balance sheet and drive efficiency and good financial outcomes.

Our next question comes from Devin Ryan with Citizens.

Rick and Mike, a question on retail investor engagement. Obviously, you're seeing great results here, and they're clearly highly invested right now with low transactional cash, debts are elevated. Margin balances are at a record. At the same time, a number of other ratios aren't stretched. And so a question we've been getting a fair amount recently is whether we're kind of in an extended level for retail investor engagement or if this is something normal. So I just love to get some thoughts there.

Devin, it's a good question. Daily average trades are definitely up above what they were when you look back 12 or 18 months ago, it used to be $5.8 million or $6 million was a good month and now we're running at $7.5 million as being pretty normal. So clients are definitely more engaged. I think there's some structural elements to that and also some sort of market environment with a real strong bull market now that's gone on for a couple of years.

You've got some topics that are of great interest to investors like AI and crypto and I think that's driving engagement. So it's hard to know whether this level of engagement will persist or grow. I do think that I would call out, though, that I believe our investor base is -- tends to trade in any environment.

These aren't new investors who came in and got excited about the entertainment of investing. These are investors that do research that invest thoughtfully and are engaged in markets and they oftentimes are countercyclical traders. And we've actually seen our traders do what we've called sell the [ RIP ] and buy the dip. And so they've been very active on updates selling and then when they get a little down move, they've been back in buying.

And so I think that -- I think our engagement is likely to be more sustainable, perhaps than some others. But the overall market environment, I think will also play a role in how engaged clients are.

Our next question comes from Michael Cyprys with Morgan Stanley.

I just wanted to ask a bigger picture question on tokenization. Just curious how you're thinking about in a potential future world where investors build access portfolios and long-term investments through the blockchain curious what risks and opportunities might that present for Schwab and for the industry? What steps might you take over the next year? Imagine it could be a major cost efficiency on lock on one side. But then if there are tokenized substitutes for deposits with atomic settlement, what implications could this have for transactional sweep cash as well as revenue monetization and competitive dynamics?

Yes. Thanks for the question. First thing I'd say is for 50 years, it's been our mission to help investors get invested and to help them achieve their financial goals and dreams. So if we find an investors want to hold securities on the blockchain and that brings more investors into investing, then we're going to find a way to offer clients the opportunity to hold their securities on the blockchain and hold them as tokens if that's what they would -- if that's the way they would like to do it.

Second, I believe there's tokenization is more likely in some asset classes than others. It's -- I think the public equity market is incredibly efficient. The customer protection rules make a lot of sense. The spreads are very tight. Going to tokenization doesn't solve a lot of problems for public equity investors and introduces a number of complications and risks that make the pros and cons, I think, somewhat questionable. So -- it's hard for me to see that taking off or if it does.

Again, we're going to offer it and be ready to -- I think it's more likely to be perhaps in some fixed income markets where you could see tokenization in private markets and collectibles and areas like that. But we'll see, and we're open to any environment. We want our investors to be able to hold securities the way they want to hold securities.

On your question about what it means for our economics, I think there's puts and takes on that one. I mean if you look at the tokenization markets today and the public equities that have been tokenized and the trades that have been done, not that we would necessarily do this, but they've been done at incredibly wide spreads that are inefficient for the end trader, but there's more money to be made for the intermediary in that situation.

Now we're always going to give clients great execution, but there's definitely a put there. On the take side, maybe it's incrementally easier to move cash. I don't think it's overly hard to click 1 button at Schwab today and move your money from sweep into a purchase money fund. And not only that, we proactively remind you to do that when we see large balances in your account and when you log into schwab.com, it's very often the first thing you see is move your cash.

So there's not many barriers to doing that today. It might be incrementally easier on the blockchain because you could do it instantaneously. So it's possible there's a shift there. But I think there's going to be puts and puts and takes on the blockchain. And if clients want to participate and hold securities that way, we certainly will -- we will accommodate that and are working towards that.

And our crypto launch is different than some other -- how some others are going about it. Others, I think, are taking a of basically introducing a client to a digitally native firm and making the introduction and then the assets are custody there. We're building the books and records and capabilities so that we can custody assets. And we're doing that because we're taking a long-term view of this so that we can participate things like the blockchain and tokenization over time and offer that to our clients. So -- that's a long-winded answer probably, but those are my top of mind thoughts on tokenization.

Okay. Operator, I think we have time for one final question before we wrap up.

Our final question will come from David Smith with Truist Securities.

Staying on the vein of crypto in tokenization. You said you're on track to launch [indiscernible] crypto in the first half of next year. Are there any meaningful external constraints like regulatory clarity or anything like that, that you're still waiting at this point? Or is everything now just based on your own internal decision-making and ensuring that everything is built out fully to your standards and ready to handle the size and potential volume of your own client base?

Thanks for the question. At this point, it's in our hands, certainly, up until about 4 months ago, the regulatory environment made it challenging, which is why you don't see any banks in crypto today. And instead, you see banks announcing plans that they will be in crypto in coming months and quarters and years. But that's a result of the change in the regulatory environment.

So I don't think that's standing in our way. What takes time is all the stuff I talked about. We want to build this for the long term. We want to do it thoughtfully. We want to be able to have our own books and records and things like that. That is a completely new build, and we've got a group of technologists working on that.

And of course, we're going to want to roll it out in the right way and have people pilot it and test it and roll it out to a small group of clients and a large group of clients. So all those things take time. I think we're moving quite rapidly given the expansiveness of which we're thinking about it and the way we're building for the long term, but there's nothing from a regulatory standpoint, standing in our way.

And with that, we will wrap up. Thanks so much for your engagement today. We love the opportunity to be on the phone and have a chance to speak with all of you.

I'll leave you with 3 takeaways. First, we are delivering growth on all fronts. The tracking assets and growing accounts from new and existing clients, increasing utilization of our wealth banking and trading solutions and delivering record financial results. Two, we anticipate year-over-year revenue and earnings expansion to finish 2025. And three, we think the future is incredibly bright. We are well positioned to deliver profitable growth through the cycle.

Most importantly, as we do so, we are making a real difference in the lives of millions of investors, and we're energized by the opportunity we have to empower even more Americans to take control of their financial futures. We are in an incredible position to serve our clients and help them meet their financial goals. Thanks again, and thanks for joining today.