Schwab (SCHW) Q1 2026 Earnings Call Transcript

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Date

April 16, 2026, 8 a.m. ET

Call participants

• President — Richard Wurster
• Chief Financial Officer — Michael Verdeschi
• Chief Operating Officer — Jeff Edwards
• Operator

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Takeaways

• New brokerage accounts -- 1.3 million accounts opened, up 10%, reflecting elevated client engagement across market environments.
• Core net new assets -- $158 billion, a first-quarter record, bringing total client assets to $11.8 trillion excluding a one-time mutual fund clearing outflow.
• Managed investing net flows -- Increased 46% to an all-time record, driven by Schwab Wealth Advisory, which reached $10 billion, up 90%; 30% of flows from legacy Ameritrade clients.
• Bank lending -- Up 29% year over year with loan balances totaling $61 billion and pledged asset line balances at all-time highs.
• Daily average trades -- Record 9.9 million, signaling heightened retail trading participation.
• Revenues -- Reached $6.5 billion, up 16%, with double-digit year-over-year growth in all major line items.
• Adjusted expenses -- Rose 5%, reflecting first-quarter seasonality and investment in growth initiatives, including AI and new product development.
• Asset management and administration fees -- $1.8 billion, up 15%, a record level driven by robust asset gathering in wealth offerings.
• Trading revenue -- Increased 20% as retail trading surged, despite a pullback in activity during March impacting margin balances.
• Bank deposit account fees -- Rose 20%, led by higher net yields due to maturing lower-yield obligations converting to higher rates.
• Adjusted pretax profit margin -- 51.4%, with first-quarter adjusted EPS of $1.43, up 38%.
• Client margin loans -- Closed at nearly $127 billion, up 13% from year-end 2025, reflecting demand from both long-short and trading-related activity.
• Client transactional sweep cash -- Increased by $8 billion sequentially, driven by $25 billion March inflows and seasonal patterns.
• Capital ratios -- Adjusted Tier 1 leverage ratio at 6.8%, within the stated 6.75%-7% target range, after a 19% dividend hike and $2.4 billion in share repurchases.
• Branch expansion -- About a dozen new branches planned for 2026, coupled with active hiring of financial consultants and wealth advisers.
• Client promoter scores -- Up 9-10 points in Investor Services and for clients with direct consultant relationships, nearing all-time highs.
• Digital and AI innovation -- Broad rollout of AI across client and employee experiences, including a generative search tool, portfolio insights features, and an “investor AI assistant” launching in June.
• Crypto offer launch -- Schwab Crypto platform begins employee pilot, with client rollout imminent, offering bitcoin and ether at 75 basis points per trade and future coin and transfer additions planned.
• Forge acquisition -- Completed, providing clients with direct and fund-based access to pre-IPO company shares, opening new private market engagement and lending opportunities.
• ETF monetization -- Management expects an ETF monetization strategy to be “in place and live” by year-end following negotiations with 400+ asset managers, with greater revenue opportunity from active ETF fees.
• Full-year EPS guidance update -- Management tracking higher than the $5.70-$5.80 EPS range previously implied, with more specific forecasts due in July.

Summary

Charles Schwab (NYSE:SCHW) reported record client and financial growth, driven by strong asset gathering, expanded lending activity, and strategic digital innovation. The management emphasized the firm's readiness to leverage artificial intelligence for both client-facing and operational efficiency, with new products, including a crypto platform and pre-IPO share access, positioned as future growth levers. Operational progress included technology rollouts to streamline RIA workflows, the integration of AI tools for all employees, and a focus on cross-segment innovation such as joint accounts for minors. Strategic commentary pointed to Schwab's adaptability and multiple avenues for future monetization as client preferences and industry economics evolve.

• Michael Verdeschi stated the net interest margin outlook could benefit from a “lack of rate cuts” in the current monetary environment, with “upward momentum” expected for both NIM and client cash growth.
• Richard Wurster outlined that Schwab is developing “agentic capabilities” enabling clients to seamlessly reallocate cash and perform most account actions via AI-driven interfaces, with broader capabilities expected over time.
• Management indicated that alternative investment offerings are being made more accessible for advisers, with future opportunities to monetize platform enhancements as advisor allocations to alternatives expand.
• Verdeschi explained that long-short strategy support is “not a balance sheet capital-intensive type of activity,” positioning Schwab to back client demand as these strategies scale.
• Client cash levels remain “actively allocated” at about 10% of assets, with transactional cash near 4% or “approximately $10,000 per account,” reflecting proactive client and RIA portfolio management.
• Management expects “typical drawdown in client cash due to tax payments in April,” with market volatility cited as a driver of defensive cash positioning at quarter-end.
• Wurster clarified, “we have many ways to charge clients for the value we add,” highlighting flexibility to shift monetization approach if client preferences or economics change.
• ETF platform negotiations distinguish revenue potential between “more higher fees” for active strategies versus lower-fee passive ETFs, underpinning the planned monetization model.
• The firm’s commitment to innovation was illustrated by the launch of wealth.com estate planning tools, an incoming tax planning AI feature, and private issuer equity services for pre-IPO company partnerships.
• Trading activity was characterized by “smaller positions, holding them for less duration,” which increased trade frequency but reduced revenue per trade, attributed to elevated client uncertainty and volatility.

Industry glossary

• Core net new assets: Net new client assets excluding nonrecurring or one-time outflows or inflows, providing a measure of organic growth in assets under management.
• Pledged asset line: A lending facility allowing clients to borrow against the value of eligible securities held in their brokerage accounts.
• Transactional sweep cash: Client cash automatically moved into deposit accounts or short-term investment vehicles for liquidity and transaction purposes.
• ASCG score: Schwab’s internal measure of client satisfaction, distinct from industry benchmarks.
• Agentic capability: AI-driven automation enabling user-initiated or automated account actions, such as reallocating cash or managing investments, through conversational interfaces.

Full Conference Call Transcript

Richard Wurster: Thank you, Jeff, and good morning. Thank you for joining us for our spring business update. I hope you walk away from the call this morning with three overarching messages. One, our Through Clients' Eyes strategy drove record client growth and financial results in the first quarter. Two, Schwab is delivering for clients and is uniquely capable of meeting client needs across investor types and investment environments. And three, we are innovating at a rapid pace with tangible progress in AI, digital assets and client capabilities and experiences. Our Through Clients' Eyes strategy continues to drive results with strong growth across all fronts in the first quarter.

Clients remain highly engaged, and they continue to turn to Schwab through volatile and uncertain markets. Clients opened 1.3 million brokerage accounts up 10% over last year. Excluding a onetime mutual fund clearing outflow, we attracted $158 billion in core net new assets, a first quarter record that brings total client assets to $11.8 trillion. March was our second highest month of NNA ever behind only December of 2021. Clients continue to turn to us for more of their financial lives with strong engagement in our wealth and lending solutions. Managed investing net flows were up 46%, reaching an all-time record. Bank lending was up 29% year-over-year with bank product balances and pledged asset line balances reaching all-time records.

We supported a record 9.9 million daily average trades. This engagement led to record financial results with revenues up 16% [indiscernible] $1.43, up nearly 40% over last year. Behind those numbers are people of all life stages who are turning to Schwab to invest and trade through a period of heightened market volatility. In the first quarter, we continued to execute across our key strategic focus areas and deliver innovations at a fast pace to help clients grow and protect their wealth. I'll highlight just a few, starting with growth. We're continuing to hire financial consultants and wealth advisers while expanding our branch footprint with about a dozen new branches planned for 2026.

When clients have a direct relationship with a financial consultant, their Client Promoter Scores increase 10 points and they trust Schwab with 2.4x more net new assets. We launched the Schwab Team Investor account, giving young people ages 13 to 17, an engaging way to get started on their lifelong investing journey. Our differentiated joint account structure allows parents to monitor and engage as needed as their teams trade and invest. We are still in the early days, but have seen great interest and enthusiasm so far. We believe it is important for teenagers to learn the benefits of saving and investing. The merits of compounding over messaging from the more gambling oriented messaging from some competitors.

We completed the acquisition of Forge, which will allow us to provide clients with direct and indirect access to shares of pre-IPO companies through direct private share purchases, single company funds and multicompany funds. We'll roll these capabilities out to clients over time and look forward to sharing more details in the months ahead. We are building a healthy pipeline in our recently launched private issuer equity services service which offers capital people management solutions for pre-IPO companies that combines the expertise and capabilities of our workplace business with Qapita's flexible technology and offers a seamless transition to our public stock plan services capability.

With the Forge transaction now closed, we continue to see upside in engaging the private market ecosystem with a solution that offers them pre-IPO stock plan services, liquidity solutions for their employees and equity holders and lending solutions for their employees. This win-win opportunity creates value for the issuer while creating a pipeline of stock plan services clients and greater access to private company shares to grow Forge. We also increased our strategic investment in Wealth.com which we are already using to bring AI-powered estate planning tools to our clients. We're also working to launch their AI-powered tax planning capability in the near future.

We successfully began the rollout of our structured asset line offer to adviser clients, expanding the type of securities they can use as collateral, including alternative investments. We'll talk more about our AI progress in a moment, which is helping us drive both growth in scale and efficiency. When it comes to brilliant basics, we were there for our clients in the first quarter. We supported over 600 million trades, more than 7.8 million calls to our service centers and about 570 million digital log-ins up about 12% from the first quarter of last year. Clients reaching out to our service centers had their calls entered in less than 30 seconds on average.

We're also making it easier for our clients to do business at Schwab. In Advisory Services, we're continuing to enhance our digital experiences across RIA workflows like move money, account open and account maintenance while also modernizing tools on our adviser platform. Taken together, these enhancements help RIAs get routine work done faster and with fewer errors. We're also continuing to enhance our digital experience across the retail and workplace ecosystem, including expanding our digital experiences and bringing workplace on to Schwab Mobile. Most importantly, we continue to delight our clients. Client Promoter Scores are up 9 points over last year in Investor Services nearing all-time highs. Our [ ASCG ] score also remains near an all-time high.

Our capabilities are differentiated and aligned to support clients in all markets, including the more volatile environment that we experienced in Q1. Our formula for driving earnings growth over the long term is straightforward, and you see it here on the screen. I want to spend a few minutes highlighting just a few of the ways we are accelerating our pace of innovation to deliver for clients and drive our strategy as we look ahead. We have a diverse set of opportunities to deepen relationships with our 47 million client accounts while also diversifying our revenue streams. I'll spotlight two areas where we are helping clients conduct more of their financial lives at Schwab, wealth and digital assets.

Flows into our managed investing solutions reached all-time highs. This was driven by strong engagement with our flagship Wealth offer Schwab Wealth Advisory where net flows reached a record $10 billion, up 90% over last year. Approximately 30% of the flows into our managed investing solutions came from legacy Ameritrade clients. Clients in our managed investing solutions have the highest client promoter scores at the firm and bring in approximately 2x the revenue on client assets, and we still have runway to grow this business as our clients' financial lives become more complex, and we continue to add to our capabilities to help clients grow, protect and pass along their wealth.

Another way we will deepen relationships with clients is with Schwab Crypto, our new spot crypto offer. I'm excited to share that the employee pilot is underway, and we expect the phased client rollout will begin in the coming weeks. We are starting with the two most popular coins, bitcoin and ether which together represent approximately 3/4 of the crypto market. Pricing will be competitive at 75 basis points on the dollar value of each trade. We plan to add additional cryptocurrencies to the platform over time as well as transfer capabilities for both deposits and withdrawals, allowing clients with existing digital assets that bring them to Schwab alongside their other investments.

Most importantly, we are launching our spot crypto offer the Schwab way with a powerful combination of education, research, risk management and service all at great value. Finally, I want to spend a few minutes diving into how artificial intelligence is accelerating our strategy and the fast pace at which we are launching impactful AI capabilities. I want to start by highlighting three points. One, Schwab is already an AI-enabled company. We have been using machine learning and AI capabilities for years and have made recent progress launching new AI capabilities. Just as we have embraced and flourished during other periods of seismic technology change, we are doing the same now benefiting from our massive scale, data and technological prowess.

Two, AI will accelerate our strategy. On the growth front, AI opens up new distribution channels and allows us to create personalized relationships with clients we have not been able to serve with a person-to-person relationship. AI is already having significant impact in driving scale and efficiency, both in our technology and operations and in the way we serve clients. Three, we are harnessing the power of AI in the Schwab way, bringing the best of people and to engage the way they prefer. AI is accelerating our strategy in several ways. First, AI will help fuel our ability to serve more clients.

As prospects and clients increasingly use consumer AI tools for research, we are making sure Schwab will be there providing the trusted education and expertise that we already bring to clients on other digital channels today. We're already reaching a growing number of clients through the answer engine optimization work that our marketing team is doing to ensure we show up on the AI platforms where investors are turning. We are working with these platforms now, and you'll see us do even more. AI will help us with our second growth lever, deepening existing client relationships. AI can help us create personalized and deeper relationships with the clients we can't currently serve at scale with one-to-one relationships.

We know investors are using AI today, 77% of U.S. investors use AI today, though more than 90% still prefer human involvement in addition to AI. Next month, we will begin the rollout of portfolio insights and AI-enabled experience that will deliver tailored insights to our clients about their investment portfolios, how they are performing relative to indices, the news about their holdings and the relevant proprietary research from Schwab. We have already tested this capability with employees. We will expand these capabilities throughout 2026, providing clients with insights on topics like concentration risk, asset allocation and technical indicators. We will also be launching a generative search capability for clients looking for information on schwab.com.

The first iteration will launch this year. Starting over the summer, we will introduce the first of several AI assistants that will enable our clients to interact with chat and voice to address their most frequent service and support needs. Our first iteration of the investor AI assistant will launch in June. This capability will be able to answer general questions and we will start to test a set of actions the agent can take on behalf of clients. For example, clients will be able to interact with the voice agent to set beneficiaries. We are ensuring clear handoffs to human agents and strict guardrails.

This agent and others like it will get smarter with each release as we introduce new skills. We are working with a leading AI agent firm on this build-out and look forward to sharing more details soon. We are also now able to meet our clients' trust needs with an AI-powered capability from wealth.com. We will do the same with tax. Over time, these efforts will create opportunities for enhanced experiences and new fee-based offers that will create value, we believe our clients will be willing to pay for. According to research, more than half of our clients are willing to pay for AI financial tools. AI is already driving scale and efficiency in two ways.

First, it is helping us drive productivity across the firm. Every one of our sales, service and advice professionals is using AI every day to elevate every interaction they have with clients. A few examples. Schwab Knowledge Assistant gives our phone professionals answers to complex client questions in seconds. And Schwab Research Assistant synthesizes market insights from the Schwab Center for Financial Research. Schwab AI Service Assistant, which we've rolled out in retail and will follow in Advisor Services instantly transcribes approximately 60,000 live interactions a day, captures notes and assist client-facing professionals with next steps. Within Advisor Services, we've introduced large language learning models to analyze millions of calls to provide better coaching to our service professionals.

In our branches, we are launching a relationship management assistant. If an FC has a client meeting coming up, this capability quickly summarizes past client interactions using AI, shares a view on actions that would help the client, records the client meeting and prepares an action-based summary of the meeting for the client. We believe this tool will make our financial consultants more productive and able to serve more clients more deeply and more effectively. Second, AI is helping us transform how employees work. We have equipped every one of our 33,000 employees with AI tools and are seeing tremendous creativity as they are developing fluency in AI and embracing the ways it can transform how we work.

We are accelerating the pace at which our Schwab engineers build technology. More than 8,000 of our technologists are using AI to design, code, test and fix bugs, all of which increases our speed. And we are streamlining back-office processes and operations, risk and across the firm to save time and resources.

We are confident that we are incredibly well positioned to continue unlocking the benefits AI can bring to our clients and our business, including, one, enhancing the client experience by bringing personalized insights to more clients at scale and serving more clients more efficiently; two, increasing productivity and efficiency, which will lower our cost to serve while enabling us to continue to reinvest in our growth; and three, create future monetization opportunities with AI-powered capabilities that clients value. The outcome is AI is accelerating our Through Clients' Eyes strategy to help us drive profitable growth through the cycle.

I look forward to sharing more detail with all of you at our Institutional Investor Day on May 14, including demos of some of the AI capabilities that we'll launch soon. To summarize, we have strong momentum as we head into the second quarter, and we're well positioned to deliver earnings growth through the cycle. With that, I'll turn it to Mike to speak more in detail on our financial picture.

Michael Verdeschi: Thank you, Rick, and good morning, everyone. During today's call, I will discuss our strong start to 2026, where our sustained business momentum drove record financial results for the first quarter. In addition, I'll cover our disciplined approach to managing the balance sheet, which allows us to support the evolving needs of our clients across different environments. And lastly, highlight how by doing more for our clients across our platform, including the continued deployment of AI, enables Schwab's model to become even stronger and more diversified allowing us to provide individual investors and RIAs with an industry-leading value proposition. Starting with 1Q.

Revenue increased 16% year-over-year to a record $6.5 billion for 1Q, including another quarter of double-digit year-over-year growth across all major line items. The reduction of higher cost borrowings at the banks increased utilization of our lending solutions by clients and interest in long-short strategies helped drive a 16% increase in net interest revenue versus 1Q '25. While equity markets were increasingly volatile over the course of the quarter, strong asset gathering and client interest in Schwab's wealth and asset management offerings drove 15% year-over-year growth in asset management and administration fees to a record $1.8 billion.

Trading revenue for the quarter was up 20% versus 1Q '25 as our best-in-class retail trading platform supported record levels of engagement, including 9.9 million daily average trades. Bank deposit account fees also increased 20% year-over-year due to an improved net yield as lower-yielding fixed-rate obligations continue to mature and convert into higher yields across both the floating and fixed rate buckets. Moving on to expenses. Adjusted expenses for 1Q grew 5% year-over-year reflecting first quarter seasonality and strong client engagement across our trading, wealth and banking solutions. We also continue to invest to support our key strategic initiatives, including organic growth, new products, AI opportunities and ongoing scale and efficiency efforts.

Record quarterly revenue combined with balanced expense management, resulted in an adjusted pretax profit margin of 51.4% and first quarter adjusted earnings per share reached a record $1.43, a year-over-year increase of 38%. Transitioning to the balance sheet. We continue support of our clients' evolving needs as they navigated a challenging environment in 1Q '26. Demand for our bank lending solutions remained strong as total bank loan balances grew to $61 billion, up 29% from 1Q '25 and 5% versus the prior year-end.

Client margin loan balances ended the quarter at nearly $127 billion, up 13% from year-end 2025 levels, reflecting continued interest in certain long short strategies as well as increased trading related margin balances despite a pullback in activity during the month of March. We also continue to utilize the combination of our interest rate hedge programs and investment portfolio to match off our assets and liabilities enabling us to efficiently maintain a more modest asset-sensitive position. Client cash followed typical seasonal trends to begin the year.

However, as volatility increased during the back half of the quarter, clients took a slightly more defensive posture, which in conjunction with the cash build from organic growth and the long short strategies contributed to $25 billion of cash inflows during the month of March resulting in an $8 billion sequential quarter increase in client transactional sweep cash. For the second quarter, we still anticipate the typical drawdown in client cash due to tax payments in April. And similar to past years, we expect this activity to impact both transactional sweep cash as well as other liquid cash alternatives such as money market funds. Beyond seasonal considerations, continued market volatility could influence client cash allocations.

And lastly, in line with our stated principles, we continue to prioritize flexibility in managing the balance sheet to remain well positioned to navigate a wide range of environments. Capital levels remained strong with our adjusted Tier 1 leverage ratio, finishing the quarter within our 6.75% to 7% objective range. Our adjusted ratio of 6.8% reflects a 19% increase in our common stock dividend, the repurchase of common shares for $2.4 billion during the first quarter and sequential growth in the balance sheet.

1Q '26 represented a strong start to the year with growth on all fronts, including healthy organic growth, record client trading activity, as well as robust engagement across our broader suite of modern wealth solutions, which we converted into record revenue and earnings. Given our strong performance in 1Q and based on what we see today in terms of the expected path of rates and strong client engagement, we are tracking higher than the $5.70 to $5.80 EPS range implied by the scenario we shared back at the winter business update in January, which excluded the impact of buybacks and Forge. We'll provide a more comprehensive update on our full 2026 financial scenario at the next business update in July.

Finally, before we move on to Q&A, I wanted to take a moment to build on Rick's AI comments, specifically the conversation relating to cash. There are three key points to remember. One, Schwab provides an industry-leading value proposition to individual investors and RIAs. Two, with help from Schwab, our clients are actively managing their cash allocations. And three, Schwab's ability to help clients with more of their financial lives enhances the flexibility of our client-driven model. So first, the overall value of Schwab's platform.

We have created an exceptional offering in the marketplace that is highly trusted and valued by individual investors and RIAs, which has led to approximately 47 million total accounts and investors entrusting us with approximately $12 trillion in total client assets. Clients value our firm's focus on helping them build and manage their wealth while providing all of these services at highly attractive all-in costs for them. Second, we provide a broad suite of cash management solutions that offer clients a range of products with different features to help meet their diverse needs.

We also proactively seek to raise awareness around the cash options available on the platform and efficiently enable them to move between the various options with as little as one click of a button. At the same time, independent RIAs continue to help their end clients manage their portfolio allocations, including cash to help meet their individual financial goals. Today, this has resulted in total cash levels running around 10% of client assets were transactional cash allocated at about a 4% level or approximately $10,000 per account. And as we see demand for new products or capabilities for cash, you would expect us to deliver those to our clients.

Importantly, given how easy we have made it for clients to move their cash between different solutions and based on the trends observed over the past few years, client cash is actively allocated today. To the extent additional efficiencies are enabled down the line, the broader evolution of the platform enables continued flexibility in managing our economics. Finally, as Rick noted, we view the emergence of artificial intelligence as a tailwind to Schwab's strategy. So by continuing to put clients first, Schwab's platform has built up immense flexibility. Our motto is informed by investors' preferences for lower explicit fees without sacrificing product access, convenience or service.

To the extent those preferences change at some point in the future, Schwab has a lot of flexibility to continue supporting investors and RIAs in the way they have come to expect from us while still delivering strong returns for stockholders. And with that, Jeff, let's move on to Q&A.

Jeff Edwards: Operator, Could you please remind everyone how to ask a question?

Operator: [Operator Instructions] Our first question comes from Steven Chubak with Wolfe Research.

Steven Chubak: I wanted to ask on the outlook for NIM and cash growth, just recognizing the backdrop in March is anything but normal. Entering the year, you spoke to a low 2.90s exit rate on the NIM. It also contemplated modest IEA growth. And at the time you laid out the guidance of forward curve had multiple cuts, we're anchoring to a lower 10-year. So given the evolving rate backdrop, how does that inform both the NIM outlook exiting this year as well as expectations for IEA growth in a higher for longer backdrop?

Michael Verdeschi: Steven, thank you for the question. Certainly, it's been a favorable environment in terms of that client engagement in the first quarter. And as you highlighted during the winter business update, when we laid out our financial scenario, that included two rate cuts. I think there was a June and September rate cut there. And looking at the forward curve now, perhaps the market is anticipating no cuts. So that is more favorable for us. And at the same time, when you look at cash, we had a good first quarter for cash and typically, over the course of the year, you will see that seasonality play a factor certainly in 2Q.

But stepping back, we're expecting the continued upward trajectory of cash being driven by organic growth. So we think over the course of the year, certainly favorable, where the lack of rate cuts perhaps as well as the strong client engagement, both bringing us new assets in cash with that but also on the asset side as lending has remained robust, that will provide continued upward momentum. And I feel good about the NIM growth, both what we had laid out in that scenario, but also perhaps some upside to that when we come back in July with a refresh of our financial scenario, we'll provide more details. Thanks for the question, Steven.

Operator: Our next question comes from Ken Worthington with JPMorgan.

Kenneth Worthington: ETFs have been an area of strong asset growth for Schwab, and it seems like the economics of the value chain are shifting in favor of intermediaries. When we think about Schwab's approach to charging where value is provided in win-win monetization, how is Schwab thinking about its value as an ETF distribution platform? And is there a distinction that you'd make for that value when considering active ETFs versus passive ETFs?

Richard Wurster: Ken, thanks for the question. We think there is value for us to be earned as it relates to ETFs, and we are actively working on that. We've been in negotiation with the 400-plus asset managers or so that are on our platform, and those are going well. We've started with the big firms and knock those out. So we feel really good about by the end of the year, having an ETF monetization strategy in place and live. And that's our current plan. I think timing can always shift, but we're taking all the steps to make that happen. In terms of active versus passive, I think I would draw the distinction mainly on fees.

The way we're thinking about it is as a percentage of the ETF fees. And so active strategies tend to have more higher fees versus passive. And so there'll be more of an economic opportunity there.

Operator: Our next question comes from Bill Katz with TD Cowen.

William Katz: So a bit of a complicated question, but it looks to me, right, you're doing a better job of managing the interplay between balance sheet growth and capital return. And with the adjusted Tier 1 leverage ratio sitting at 6.8%, sort of nicely nestled between your range that you sort of look to keep the firm at. So as you look ahead, I guess the question is, how are you thinking about maybe the growth of earning assets, the remixing of that between lending and other higher-yielding opportunities versus capital return, certainly given a very strong now 3 quarters in a row of buyback.

Michael Verdeschi: Bill, thank you for the question. So as we look out on horizon, we feel good about the client engagement and as we said this morning, we've seen that across the board. As it pertains to some of that lending activity, we've seen good continued momentum in both that bank lending product, certainly driven by the pledged asset line. And that, of course, comes at a very healthy spread over above what we could earn on just leaving it in cash or allocating it to securities. So that's been a good boost as well as margin lending.

And so I think with the continued volatility in markets, we're seeing engagement across the board, but we feel good about that lending space as well. And of course, as clients bring us more cash and as they keep cash on the sidelines, that is used to fund those lending activities very efficiently. So we see that expansion of the balance sheet. It was modest in the quarter but continue to be fueled by that client activity, which has certainly been accretive to the firm in terms of earnings and certainly accretive relative to capital.

Now with that, we continue to look at capital, and we prioritize capital for the growth of the franchise, and it's going to be there to support our clients and their evolving needs. But with strong earnings growth, it's given us flexibility as well to return capital across our framework. We increased the dividend in the first quarter. Of course, over the course of the year, we'll have a look at those preferred securities that will become redeemable. And if we decide we wish to keep that form of capital in our capital stack, we'll evaluate the economics around leaving those preferreds outstanding or perhaps redeeming them and replacing them or some portion.

And then, of course, that leaves you then with buybacks. And again, given the ability to continue to have capital to support the growth of the franchise as well as the strong earnings, we've had a lot of flexibility on capital. So we feel good about how the client growth has been evolving and how we've been able to support that in quite an accretive way.

Operator: Our next question comes from Brennan Hawken with BMO Capital.

Brennan Hawken: So investors have been rather focused on an announcement that JPMorgan has made in rolling out a product to reduce the friction around brokerage cash. Are you considering similar tools you spoke a lot in your prepared remarks about cash and continuing to innovate? And how should investors be thinking about your flexibility in adjustment both to the competitive environment and the realities of the economics of the business.

Richard Wurster: Brennan, thanks for the question. We've been trying to make it easy for clients to allocate their cash in the appropriate way forever, really. And we do lots to support that, whether it's our FCs proactively reaching out to clients and letting them know they have cash balances in sweep cash and understanding what their intention is for that cash and explaining other options than when someone logs in, a high proportion of the time, their first screen is earn more on your cash at Schwab. And certainly, our advisers as part of their fiduciary responsibility are managing cash tightly.

So we've done everything we think to make it as easy as possible optimize and be intentional about where your cash sits today. And so we feel good about that. The second thing I would say is there's a lot of reasons why when given the choice between cash options, clients are choosing to be in our sweep cash program. Number one, they needed to be able to move money around to pay their bills to afford their life. We've got a couple of hundred billion that move in and out of the firm every month in terms of cash. They needed to be able to trade. And over a 2-day period, we trade roughly $300 billion of equities.

And so there's cash needed to move, to support that trading level. So there are lots of reasons why we think clients have their cash intentionally allocated and why a big portion of it is on the balance sheet. In terms of an agentic capability, we are launching an agentic capability this summer. It will have basic agentic capabilities to start with and take on a few tests. Over time, I expect that everything you can do at Schwab today by going and pointing and clicking to move around the website or through a mobile app, will be able to done -- or most of it will be able to be done through an agentic experience over time.

And our launches will incrementally add to that over time. And so the one click it takes to move cash today may become an agentic experience over time. Now if clients want their cash managed as part of a broader asset allocation, we think that would be a fee-based solution, and that's something that we're -- that we will be prepared to offer as well. The final -- I mean I'd make on cash in addition to the fact that we think clients have optimized and been intentional about their cash is that we believe we have many ways to charge clients for the value we add. Our Client Promoter Scores are at all-time highs. Clients love working with us.

We offer no trade-offs experience in periods like we've just been through this last quarter, the clients really see the value of what we do. how we have charged our clients over time for that value proposition has changed. It used to be heavily reliant on commissions. And certainly, we've adapted our business to deal with a declining commissions environment. So my views on this are really fold. One, we think clients have been intentional about their cash, and we've tried to make it really easy. Two, [indiscernible] agentic capabilities that will make everything at Schwab very easy. And three, we've got lots of flexibility in how we monetize at Schwab for the value that we provide.

So we feel we're on a strong footing and are incredibly excited about AI as an accelerant to our strategy, not as a headwind.

Operator: Our next question comes from Brian Bedell with Deutsche Bank.

Brian Bedell: Great. Maybe you could just zoom in on March a little bit more. I mean very strong metrics in both NNA and transactional cash build. Any color around -- first on the NNA, we've seen the adviser side grow faster than the retail side drop for a while now. Any contribution from RIA conversions, bringing in new RIAs from wirehouses that would be sort of elevated in the month. And then on the deposit side, is it your sense that deposit build is more due to risk off or potentially more due to cash build ahead of tax payment season?

Richard Wurster: March was an exceptional month of NNA. It was our second highest month of NNA ever behind only December, which December is always seasonally strong. So outside of one December, it's the strongest month of growth we've seen in net new assets, which is really exciting to see. And you mentioned the consistent strength we've had in adviser services. What's even more reassuring about March and more exciting is in investor services reached an all-time monthly high of net new assets and actually had higher net new assets in March than Advisor Services did. So we saw strength really across the board, both in Investor Services and in advisory services. I think it's a reflection of our value proposition.

In Advisory Services, we continue to have the leading custodial offer. We say it's one of the Schwabiest choice. And I think that's becoming more and more true because we continue to invest in this business, make it easier for advisers to do business with us. We've rounded out our offering to them in terms of adding more lending capabilities, which they wanted and now they're getting. We were launching -- and just recently launched a structured asset lending program, which has opened up advisers' ability to have their clients borrow against alternative investments, borrow against their restricted shares, private shares things along those nature.

And our advisers love that because, historically, they've had to introduce a big bank to do that lending and now they can keep that wealth relationship and do the lending through us. And so our value proposition to advisers has never been stronger. And importantly, the advisers continue to win in the marketplace because the fiduciary model works because there's a bull market for advice and convenience and the independent advisers have a great model. And so as they win and we're successful in supporting their growth, we win as well.

On the retail side, I think -- or on the Investor Services side, our growth is a combination of our value proposition, some engaging market that has clients interested in bringing assets to Schwab and how we stand apart from others in the industry. It's -- we're going through a period of heightened market volatility where what we do and the way we do it and the way we see through client size really stands out. And so I think that's helped with our NNA. Mike, do you want to talk about cash?

Michael Verdeschi: Yes. Thanks, Rick. In terms of the cash, yes, Brian, we did see that good pickup in the month of March, and there were a few factors that caused that. As you highlighted, if you look at the quarter, it was really March where you began to see that decline in equity markets and that shift in sentiment. So that certainly was a contribution to that pickup in cash that we saw late in the quarter.

But then in addition, other activities such as that long short strategy brought in some cash as well but also with the strong net new assets over the course of the quarter and in particular, in the month of March, that also served to bring us cash as well. Now I don't know how much of that may have been related to the tax. I think the drivers that I described were more of the primary drivers, but it may mean that, that cash was not put back into the market too quickly. If clients were selling then that cash may have just remained on the sidelines, and we'll go out for tax reasons in the month of April.

And as I said, in April, where we're expecting and everything we're seeing so far is that normal tax season or it's the combination of that transactional cash as well as money market funds contributing to those tax statements. But thank you for the question.

Operator: Our next question comes from Michael Cyprys with Morgan Stanley.

Michael Cyprys: I just wanted to circle back to your comments around the cash sweep monetization and customers choosing to pay for services in part through a lower yield on cash. I was just curious how you monitor and assess the scope for changes in customer behavior and preferences around that? And how might the competitive landscape? And technology advances maybe impact that. And I was hoping you could maybe elaborate a bit more on if monetization evolves away from cash sweep. What might future monetization and potential lever to look like at Schwab?

Richard Wurster: Thanks for the question, Michael. And I want to be clear, before we get into how we would change our economics, we do not see this currently as a big risk. We believe our clients have intentionally allocated their cash, and we go out of our way to make it incredibly easy to make sure clients land in the right cash solution for them. And there's lots of reasons, as I mentioned, like clients choose sweep cash in both our advisory business and our Investor Services business. So that's point one. Point two, in terms of how it evolves, I think we have lots of levers to pursue. We make money in lots of different ways.

And whether it's trade or trading or wealth or lending, potentially fee-based solutions that leverage these agentic AI capabilities, there's lots we can do. If someone is going to want us to proactively move cash for them without their -- without them being involved in that movement, that is likely an advisory offer, and we charge for advisory offers and would for an Agentic advisory offer. So there are numerous ways and Listen, when I look at our company and where we stand and the value that we have, the 47 million clients that we have on our platform, I'm incredibly bullish about our ability to grow our revenue in any environment.

We have built long-standing deep relationship with clients that highly value what we do. And just as we figured it out, as commissions went down, we'll figure it out if the economics changed in this environment, but we're also very confident that we've gone out of our way to make sure our clients' cash is intentionally allocated and that we'll support them in any way they can with all of their business. And it's important to remember that client cash is, I believe, less than 4% or so of overall relationships that clients have here. We're helping them on 100% of their financial life.

There's lots of ways we're going to be able to monetize those relationships as if things were to change.

Operator: Our next question comes from Mike Brown with UBS.

Michael Brown: I wanted to ask about the digital asset offering here. So it's imminently coming. And I guess when you think about the strategic objective here, is it mainly retention? Is it focus on new asset gathering, higher engagement or just kind of building a broader financial ecosystem. And when you talked about maybe some assets coming over to Schwab, is there any way to kind of catalyze that movement to bring assets over and help individuals consolidate the digital assets on to Schwab?

Richard Wurster: Thanks for the question. In terms of why launch crypto, number one, we've always have stood for client choice. And we have many clients that want to invest in crypto and are investing in crypto through Schwab today, whether it's an ETP or future or closed-end fund. And they want exposure to crypto and they've wanted spot exposure, and now we'll be able to give it to them, and I couldn't be more excited about that. And we're doing it in the swab way at a great value with lots of research and education around it.

In terms of how to catalyze clients moving their crypto from their current provider to us, they are -- they've been begging us to launch this so they can move their crypto assets to us. So I think they will proactively do that. Certainly, our financial consultants will have conversations with clients and encourage them to consolidate their financial life in one place. They've been asking us for it. And the reason they ask us for it is there's a couple of reasons. One is they trust us. They view us as a safe institution.

And second, the more they can consolidate their financial life, the more we can help them guide them through the financial life provide the resources and capabilities they need to live their best financial life. And they know we offer the service the pricing, the capabilities that can't be matched. And so they proactively wanted to move. So I don't think we're going to have to catalyze it. I think it will happen but we certainly will have many conversations with clients to our financial consultants. The last point I'd make is you asked about the strategic importance of this.

The other point I would highlight is that we have gone about this in a way where we are building our own books and records in our own custody capabilities. That is a prelude to being able to offer clients choice in how they want to hold their equity someday with the potential for some -- or in fixed income, some wanting to tokenize those securities. And we're building optionality through this launch that allows us to support the future of tokenization should that be of interest to clients.

Operator: Our next question comes from Dan Fannon with Jefferies.

Daniel Fannon: So in terms of trading, obviously, a very active quarter, but the [ RPT ] came in a lot and understanding mix always plays a role here, but curious if there are other inputs in terms of pricing? And then also just on the digital asset offering, I was hoping you could talk about the -- what informs your pricing strategy with the rollout of that offer.

Richard Wurster: Absolutely. Let me start with trading and then digital pricing, and I'm just jotting these down. Sorry, what was the first part on trading? Revenue per trade Yes. So let me describe how our traders are feeling. Our traders are feeling more uncertain about the geopolitics, about potentially the economy. As a result, and I talked to a group of traders two weeks ago and what they shared with me is they are taking smaller positions, holding them for less duration because they have less conviction. And so they are trading more frequently as a result. But because they're smaller trades, they're generating less revenue per trade.

And so that's what sort of lines the high level of daily average trades you're seeing with the revenue per trade that we're experiencing. In terms of crypto pricing, our crypto pricing, I believe, among the major terms, we will have the lowest price for the first dollar traded and we wanted to be competitive and at the same time, we know launching crypto is expensive. There's risk with launching crypto. And so we wanted to make sure that there was a healthy fee. And we thought -- we think we've hit the mark in terms of having a very competitive fee while still generating attractive economics.

Operator: Our next question comes from Devin Ryan with Citizens.

Devin Ryan: Question on prediction markets. It sounds like something you'll potentially look at. It doesn't sound like sports or gambling related are interesting. But how do you see the markets evolving more broadly, particularly the areas that are maybe closer to Schwab's core, like corporate events or economic events? How significant could those areas be over time? And then is there a time line that you can share just around how you are thinking about potentially entering or signposts that we can look at for Schwab potentially entering there.

Richard Wurster: Devin, I think you hit the nail on the head in terms of how we think about it, which is we do differentiate between financial related events and supports politics, pop culture. Where even the power of ownership and the power of compounding over time and owning equities, owning fixed income assets, being an investor over time and having that ownership leads to higher levels of wealth. And our goal as a company is to help our clients live their best financial lives. And so prediction markets that are not aligned to that, are not something that we want to pursue.

And if you look at the stats on the success of gamblers, they're not strong and people generally lose money. And so as a company that is in business to help people live the best financial lives, we have kept sports and other things off to the side. In terms of a time line, I think this quarter was a quarter in which we accelerated our innovation at one of the fastest spaces that I've ever seen with the company in terms of -- we launched crypto to employees. We made significant progress in AI.

We opened up a new lending capability that our advisers love, we launched [ keen ] accounts sending a really strong message to parents and teenagers about what we stand for and the way we think clients should engage in markets. So we closed the deal on Forge to be able to provide private shares to our clients. So we had a significant number of launches. And when we ask clients what they're looking for, prediction markets is very low on the list. I spent time with a large group of clients a few weeks ago, and I asked every one of them, "Hey, what do you think of prediction markets", and it wasn't a tremendous interest to our clients.

That said, I think at some point, we likely will have production markets. And I also think that there will be intermediaries that bring these to market. And so if you look at some of the announcements by folks like CBOE and others, they're coming up, I believe Nasdaq might be also doing something. They're coming up with binary options on different financial events and contracts that I think will act and behave very much like prediction markets, and that's something certainly we will take a hard look at and then will be quite straightforward for us to offer. So more to follow on production markets. It's not at the top of our clients' list.

We're ready to move when and if needed and when we do, we'll stay away from gambling.

Operator: Our next question comes from Alex Blostein with Goldman Sachs.

Alexander Blostein: There's been clearly a lot of turbulence in retail channel for alternative products. Schwab's been fairly committed to that as a strategy. So I was hoping to get your perspective on what you're hearing on the ground from advisers with respect to their reception to Evergreen private alts in the RIA channel, but obviously also with respect to your own launch and how those products are being onboarded. And slightly separately, but within the alts category, I was hoping you could also comment on balance sheet capacity for the long short tax advantage strategies within that.

Richard Wurster: I'll start with [ ops ] and then I'll have -- Mike will talk to the balance sheet. So on all its -- you asked about the advisers specifically. If you look at the proportion of alternatives that our advisers have as their broader asset allocation, it's relatively small. I expect when you take a 5- or 10-year view, that will grow. As we look at our platform today, we think we could do more to curate and help advisers along the way choose the right alternative investments for their clients and create a platform that is very helpful to them.

In doing so, we believe there will be opportunities for us to monetize the provision of those alternatives to our advisers as that develops. It's also critical that we make investing in alternative investments easy for our advisers, and that's something we've leaned into heavily this year, and we'll make lots of progress on by the end of the year. So lots of opportunity there. And with that, Mike, do you want to talk about the long short program?

Michael Verdeschi: Sure. Thank you, Rick. And in terms of that long short program, we've certainly seen that become of greater interest. And it's an activity where, of course, there's a long position offset with a short. From a balance sheet perspective, there's a netting aspect to that. And then, of course, a fee that we earn on that activity. So it's not a balance sheet capital-intensive type of activity. But that being said, we work closely with those fund managers. We understand the different strategies and perhaps how those strategies evolve in different environments and making sure we have the resources on hand to as needed if we see some of those strategies evolve over time.

But we feel good about supporting the client need for that strategy, and we could continue to see some growth and it will depend on how the market evolves over time. But we certainly have the resources to support it.

Jeff Edwards: Operator, looks like we have time for one final question.

Operator: Our last question comes from Ben Budish with Barclays.

Benjamin Budish: Maybe just a follow-up on the earlier commentary on training activity. Rick, I think you mentioned that traders are taking smaller positions, holding them for less duration. Just curious if there's any other color you can share the sort of breadth of engagement. The trading mix, I know can have an impact on revenue per trade. Just thinking -- trying to think through how we might think about some of those KPIs into April over the course of the rest of the year would be helpful.

Michael Verdeschi: Ben, it's Mike. Thanks for the question. So yes, in the quarter, we did see strong engagement from clients. We did see that spike in daily average trades to a record $9.9 million. It's those types of environments where you see that volatility and high engagement. You tend to see that more weighted towards equities as opposed to derivatives. And that's what we did see. I think Rick brought in those other important factors, while weighted towards more equities, you did see smaller trade size, less shares per trade, less option contracts per trade. And I think that is an indication of the environment that we were operating in, highly volatile, but also less conviction.

So we'll have to see how the macro backdrop evolves over the course of the year, but you see this dynamic where you see these spikes in daily average trades quite accretive, of course, to earnings but having that pressure on that revenue per trade, if you perhaps see a more moderate set of volatility impacting the market, if you saw that reduction in volume of trades you could see a little bit of a lift in that revenue per trade. But again, it's really going to be dependent on how the environment evolves. Overall, we're very happy to support the client engagement. It's been a highly accretive activity.

Jeff Edwards: Thank you for your questions and engagement. We've covered a lot of ground today, but I want to leave you where we started. First, our Through Clients' Eyes strategy continues to drive strong client growth and financial results. Second, we are continuing to deliver for clients and are uniquely positioned to meet client needs across investor types and market environments. And finally, we are innovating at speed, making tangible progress in helping our clients conduct more of their financial lives at Schwab so they can grow and protect their wealth over the long term. Thanks for your time today. Take care.

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