Charles Schwab 2015 Annual Report Download - page 49

THE CHARLES SCHWAB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Ratios, or as Noted)
- 29 -
In April 2015, the Department of Labor published notice of a rule proposal to significantly broaden the definition of
“fiduciary” under the Employee Retirement Income Security Act of 1974. If adopted, among other things, the new rule would
subject broker-dealers who provide non-discretionary investment advice to retirement plans and accounts to a “best interest”
standard, as well as other conditions and requirements. The second comment period for the rule proposal ended on
September 24, 2015 and the rule proposal is subject to further modification. The Company will continue to evaluate the
impact of the proposed rule.
RESULTS OF OPERATIONS
Net Revenues
Year Ended December 31,  2015 2014 2013
 % of % of  % of
Growth Rate Total Net Total Net  Total Net
2014-2015 Amount Revenues Amoun
t
Revenues Amount Revenues
Asset management and administration fees 
Mutual fund and ETF service fees (1) 5 % $ 1,479 23 % $ 1,413 23 %
$ 1,339 25 %
Advice solutions 7 % 898 14 % 840 14 %
 718 13 %
Other (1) (3)% 273 4 % 280 5 %
 258 5 %
Asset management and administration fees 5 % 2,650  41 %  2,533  42 %
 2,315  43 %
Net interest revenue                    
Interest revenue 12 % 2,657 42 % 2,374 39 %
 2,085 38 %
Interest expense 29 % (132) (2)% (102) (1)%
 (105) (2)%
N
et interest revenue 11 % 2,525  40 %  2,272  38 %
 1,980  36 %
Trading revenue                    
Commissions (4)% 822 13 % 857 14 %
 864 16 %
Principal transactions (12)% 44 1 % 50 1 %
 49 1 %
Trading revenue (5)% 866  14 %  907  15 %
 913  17 %
Other (4)% 328  5 %  343  5 %
 236  4 %
Provision for loan losses 175 % 11 - 4 -  1 -
N
et impairment losses on securities (100)% - - (1) -  (10) -
Total net revenues 5 % $ 6,380  100 % $ 6,058  100 %
$ 5,435  100 %
(1) In 2015, Other third-party mutual funds were reclassified to Mutual funds and ETFs. Related revenues have been reclassified from Other asset
management and administration fees. Prior-period information has been recast to reflect this change.
Asset Management and Administration Fees
Asset management and administration fees include mutual fund service fees and fees for other asset-based financial services
provided to individual and institutional clients. The Company earns mutual fund and ETF service fees for shareholder
services, administration, and investment management provided to its proprietary funds, and recordkeeping and shareholder
services provided to third-party funds. These fees are based upon the daily balances of client assets invested in these funds.
The Company also earns asset management fees for advice solutions, which include advisory and managed account services
that are based on the daily balances of client assets subject to the specific fee for service. The fair values of client assets
included in proprietary and third-party mutual funds and ETFs are based on quoted market prices and other observable
market data. Other asset management and administration fees include various asset based fees such as mutual fund clearing
fees, trust fees, collective trust fund fees, 401(k) record keeping fees, and non-balance based service and transaction fees.
Asset management and administration fees vary with changes in the balances of client assets due to market fluctuations and
client activity. For a discussion of the impact of current market conditions on asset management and administration fees, see
“Item 7A – Quantitative and Qualitative Disclosures About Market Risk.”