Sources tell FOX Business’ Charlie Gasparino that clients are not yet reallocating assets, but voicing concerns about higher taxes on corporations ahead of a possible Biden presidency.
The Charles Schwab Corp.’s zero-fee trading helped reel in more than half a million new clients amid stock-market volatility caused by the COVID-19 pandemic in the three months through June.
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The San Francisco-based online broker opened 552,000 brokerage accounts in the period, excluding the 1.1 million added through Schwab’s closing of its $1.8 billion acquisition of USAA. Overall, the firm has 14.1 million active brokerage accounts, up 18 percent from last year.
The influx of new clients propelled daily trading activity to 1.62 million transactions, a 126 percent increase from the prior year. More accounts and the S&P 500’s 39 percent surge from its March 23 low through the end of June helped drive total client assets up 11 percent to a record $4.11 trillion.
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“Throughout the second quarter, the COVID-19 pandemic and its effects continued to dominate the macroeconomic environment, presenting myriad challenges for our clients and Schwab alike,” CEO Walt Bettinger said in a statement. “We grappled with the ongoing health crisis, a contracting U.S. economy, and sustained pressures on interest rates, yet there were some encouraging signs as the quarter progressed, including domestic equity markets recovering to pre-pandemic levels.”
Despite the rebound in financial markets, Schwab said, second-quarter profit fell 28 percent from a year ago to $671 million, or 48 cents per share. Revenue slid 9 percent to $2.45 billion.
The drop in revenue was not unexpected: Schwab warned in October that cutting trading fees to zero would cost the company up to $100 million in quarterly revenue. It became the first of the traditional brokers to eliminate trading fees of stocks and exchange-traded funds. Rivals TD Ameritrade, Fidelity, Interactive Brokers and E-Trade quickly followed suit.
Schwab announced in November an all-stock deal to acquire TD Ameritrade for $26 billion. The transaction is expected to close before the end of this year.
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Schwab shares tumbled 25 percent this year through Wednesday, lagging the S&P 500’s 1.3 percent decline.
