Stephen Turek

Stephen Turek asked about the growth of tax-advantaged long-short strategies, their NII accretive nature despite lower spreads, and the potential for further penetration in the RIA channel compared to other balance sheet growth opportunities like PAL.

Answer

CFO Mike Verdeschi explained that advisors use these strategies for high net worth clients to drive enhanced returns through leverage, providing a fee-based service that supports portfolio management and tax optimization without grossing up the balance sheet. President and CEO Rick Wurster added that these capabilities broaden client discussions, leading to fuller wealth relationships and contributing to record growth in the wealth business, with managed investing net flows up 36% last year.

Stephen Turek asked about Schwab's tax-advantaged long-short strategies, specifically their growth, NII accretive nature despite lower spreads, and the potential for deeper penetration rates within the RIA channel given strong demand and returns relative to other balance sheet growth opportunities.

Answer

CFO Mike Verdeschi explained that these fee-based strategies are a win-win, supporting advisors and high net worth clients in driving enhanced returns through leverage, portfolio management, and tax optimization, and are expected to continue growing as a revenue diversification opportunity. President and CEO Rick Wurster added that expanding this to retail, including proprietary Schwab Personalized Indexing, fosters broader wealth relationships and contributes to record growth in the wealth business, driving fee-based revenue.