Charles Schwab 2008 Annual Report Download - page 5

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3
LETTER FROM THE
CHIEF EXECUTIVE OFFICER
through our schwabmoneywise.com website. Last year,
Charles Schwab Foundation also awarded scholarships
to 0 teens who received a perfect score on the National
Financial Literacy Challenge test.
3. Our business model helped us weather the storm.
In keeping with our purpose to help everyone be
financially fit, we’ve created a simple yet flexible business
model that serves individual investors, independent
investment advisors, and company benefit plan sponsors.
Investor Services, our traditional retail investing and
brokerage unit, helps make financial services more
accessible, affordable, and understandable for individual
investors. Last year, Investor Services generated about two-
thirds of our total revenue and profits, and it accounted
for total client assets of $482.6 billion at year-end.
We also generated strong results through our
“business-to-business” segment, which has
been reorganized into Institutional Services.
We consolidated support capabilities for our
institutional clients, including independent, fee-
based advisors and company retirement plan
sponsors, to deliver the best of Schwab’s institutional
services across our client base. The combined units
represented $654.4 billion in total assets under
management at year-end.
Serving different types of clients generates different sources
of revenue. That, in turn, helps provide more stability for
our performance during up and down market cycles.
4. We were disciplined and diligent in managing expenses.
Over the course of the year, the Federal Reserve
cut interest rates repeatedly in a series of moves
to promote capital liquidity in the markets. Rates
eventually came down to less than one-quarter of
percent, putting additional pressure on our net
interest income, which accounted for roughly 30
percent of revenue in 2008. In addition, the steep
decline in market valuations took its toll on client
portfolios, and that will continue to impact our
asset management fees, which contributed about
45 percent of revenue last year.
In response to this extraordinary environment, our
sustained expense discipline enabled us to finish the
year with a record 39.4 percent pre-tax profit margin as
well as a 3 percent return on equity. Expense discipline
Schwab’s traditional retail brokerage serves individual investors directly through our schwab.com website, at more
than 300 Schwab branches, or by phone. At year-end, Investor Services held $482.6 billion in client assets.
Advisor Services serves more than 5,500 independent investment advisory firms. At year-end, it custodied $477.2
billion in client assets.
Corporate and Retirement Services provides retirement, equity compensation, and other financial services to
corporations and their employees. At year-end, it accounted for $77.2 billion in assets under management.
INvESTOR SERvICES
Annual Revenues: $3.4 billion
Annual Revenues: $1.3 billion
Annual Revenues: $504 million
INSTITUTIONAL SERvICES
ADvISOR SERvICES
CORPORATE AND RETIREMENT SERvICES