3rd UPDATE: Schwab: Company To Be Bolder In Advertising
(Adds information on company moving up to $10 billion to its bank in 2010 and
comment from CFO beginning in the eighth paragraph.)
By Brett Philbin
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Charles Schwab Corp. (SCHW) Founder and Chairman
Charles Schwab said the discount broker plans to be more aggressive in its
advertising and provide more product offerings to clients.
However, the company also gave a higher projection for money-market fund fee
waivers in the fourth quarter, reflecting some of the damage caused by low
interest rates.
Schwab, speaking to investors and analysts at the company's fall business
update, said the company's plan to launch more exchange-traded funds is "an
important part of our strategy."
Schwab said he believes the company can "make a lot of money on ETFs," adding
the investment tools have "proven themselves through up and down markets."
ETFs, which trade like stocks, have gained in popularity over the past year as
the investment tools track a particular index, sector, industry or even
commodity.
On Monday, Schwab announced the launch of four ETFs, with four more set for
December. Schwab said the San Francisco company has $80 billion in assets in
ETFs.
Schwab Chief Financial Officer Joe Martinetto said the company expects to
waive roughly $100 million in fees on its money market funds in the fourth
quarter. That figure is up from the $86 million that Schwab's $200 million
forecast for the year had suggested.
With interest rates near zero, Schwab is waving the fees so clients' yields
don't turn negative. In its third-quarter earnings report, Schwab said it waived
$78 million of the fees.
Schwab also plans to move up to $10 billion in sweep cash to its bank that
currently sweeps to money market funds.
"The bottom line is we aren't waiting for rates to come up," Martinetto said,
referring to many of the company's intiatives in the fourth quarter.
Schwab, widely known for its "talk to Chuck" TV commercials, plans to work on
bringing more investors into its branches for consultation with financial
advisers and company representatives.
When asked about Schwab's plans to pursue any potential deals, Chief Executive
Walt Bettinger said the company doesn't see any acquisitions "on the horizon
that make economic sense."
He added that Schwab typically looks at transactions that are "more of a GAAP
nature," meaning ones that could add to its earnings under generally accepted
accounting principles.
Some investors and analysts have speculated Schwab could potentially be a
future bidder for the brokerage operations of E*Trade Financial Corp. (ETFC),
which has been hurt by losses from bad loans in its banking unit.
Schwab Executive Vice President Jim McCool said the company also continues to
gain traction adding financial advisers to its independent channel. Year-to-
date, Schwab has added 126 newly independent advisers and has added $28 billion
in net new assets from all advisers as of the end of the third quarter. He said
the breakway brokers have had an average of $85 million in assets under
management, down from about $115 million a couple of years ago.
In September, Schwab added 25 advisers who managed $2 billion in client
assets.
McCool said he expects Schwab to reach a total of 150 so-called breakaway
brokers or those that have left major firms this year. Schwab provides custodial
services to more than 6,000 financial advisory firms.
McCool acknowledged that the bulk of retention packages have been paid out to
big producers at major brokerages, but said he hasn't seen a "trend change" in
the number of advisers who are attending Schwab events and considering a move
toward independence.
Shares of Charles Schwab closed up 34 cents, or 2%, at $17.28 and are
unchanged in late trading.
-By Brett Philbin, Dow Jones Newswires; 212-416-2173; brett.philbin@
dowjones.com
(END) Dow Jones Newswires
11-05-091708ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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