The Charles Schwab Corporation (SCHW) Earnings Call Transcript & Summary

Ladies and gentlemen, now, Rich Fowler.

All right. We're live. Welcome, everyone, to the Schwab Winter 2021 Business Update. I'm Rich Fowler, Head of Investor Relations for the company. Thanks so much for joining us virtually today. I'd like to be able to declare it a top-down day, but that would be a bit of a stretched even out here. I know that's certainly not the case for many of you. So hopefully, the weather is behaving or at least on its way to doing so where you are. And we certainly hope everyone remains safe and well. I sincerely hope also that this might be both the first and last all webcast winter update, not only because being in person is so much better, but because my facility with all the technology involved is, frankly, pathetic. We have a terrific lineup for you today, though, involving 9 speakers and an incredible events team working to bring you those 9 speakers from 9 different locations. So hold on to your hats, and we will just deal with any hiccups that might arise. So let's take a look at that extended lineup. Walt will start us off, of course, followed by Joe, with an update on our scale story and, of course, integration progress; and then our Chief Digital Officer, Neesha Hathi, will spend some time on our digital transformation; followed by Rick Wurster, our Head of Asset Management Solutions; and then Jonathan Craig, Catherine Golladay and Stacy Hammond will discuss various aspects of life across investor services; Bernie Clark will speak to adviser services; and then Peter will wrap us up with the financial picture. Moving on to the agenda laid out in specific form. Please note that we'll be combining the Q&A sessions in a couple of places and more on Q&A in a second. You can also see that we have several breaks planned, and I'll be the one restarting the session. So when you see my ugly mug reappear on the screen, you'll know that's the signal that we're going to get going again. Let's see. We expect to finish around 12:30 Pacific as promised. So let's see, let's go to Q&A. Let's talk about Q&A for a second. As you can see on the screen, good, we'll need to take questions solely via the webcast console today. You can submit them during each speaker's prepared remarks or obviously, during the Q&A session itself. Jeff Edwards from IR will organize questions and basically act as the moderator for those sessions. As always, we have to spend a minute on the lovely wall of words. So just remember, please, we're talking about the future here during the course of the day. Expectations can and will change and outcomes can and will differ. So please just stay in touch with our disclosures as we go forward. A couple of last thoughts. The Schwabs will be -- the slides will be posted on the IR site at the beginning of Peter's session, so about 11:45 Pacific. A replay will be available as soon as possible. Just bear with us. It's a big session. So it may take a little while to get it all pulled together, but later or late today, I think, would be the aiming point for that posted at schwabevents.com. We're really excited to share this expanded view of the company with you today, and we hope you'll find it worthwhile in deepening your understanding of our strategy and performance. We'll certainly welcome your feedback as we think about learnings for the structure and content of future updates. And with that, I think we're ready. Walt, would you please start us off?

Well, thank you, Rich, and hello, everyone. I'm not at home, I'm in my corporate office here in Ohio. So there's no risk that either of a remaining 2 teenage daughters wander through the background. But with the nor'easter, there is a risk that you're going to hear snowplow scraping in the parking lot out back. But hopefully, we'll do our best here with the sound and the technology. So last October, I mentioned that we were in extraordinary times. And looking back, I don't think I knew what extraordinary even meant when compared to the environment that we're operating in today. In times like this, it's easy to lose sight of the importance of a focused, consistent long-term strategy. But I guess I'd suggest that in times like these, a focused, consistent long-term strategy is more important than ever. Our Through Clients' Eye strategy has never worked more effectively than it did last year in 2020 as new clients joined Schwab in record numbers and existing clients brought their assets to Schwab in record numbers. Despite another extraordinary round of interest rate cuts and asset purchases by the Federal Reserve, our strong financial model delivered quality earnings and that acquisitions we closed last year set us up for even stronger performance in the future. Schwab is healthy and strong. We have a solid balance sheet and a winning strategy. Now just to be clear, that's not to say that in 2020, everything was ideal. With client engagement volumes at multiples of prior peak levels, it has clearly been a challenge to serve our clients in the manner and timeliness that we aspire to and that they've grown accustomed to expect from us. But we'll continue to make investments in scale, in system stability and in client service. And I do remain confident in our strategies and commitment to delivering outstanding client experiences. Although it might seem maybe even quaint relative to the volatility that we're seeing here in 2021, let's start by taking a quick look back at last year. The environment in 2020 was highly volatile with VIX levels soaring to 83 in the spring and receding to the low 20s by year-end. The equity markets fell hard as we know, and then they recovered those losses and then some by year-end. Investor sentiment, not surprising, it vacillated between bull and bear views. And of course, the IPO volume was the highest that we've seen since the Internet bubble. Now amidst all this volatility, our clients continue to entrust us with assets and open new accounts at record levels throughout the year. While our brokerage accounts approached 30 million, core net new assets exceeded $280 billion for the year, capped by really an extraordinarily strong December where we had in excess of $60 billion in net core asset flows. So the result was yet another year in which our organic growth rate for new assets was approximately 7%. I think, again, demonstrating our ability to continue driving strong growth even as client assets exceeded $4 trillion, $5 trillion, and of course, now even $6 trillion. Now addition to the record levels of core net new assets, clients were highly engaged across our service platform last year. As you can see on the slide, and of course, you're well aware, trading activity was particularly strong as was activity in bank lending as well as our retail investment advisory offerings. Last year proved the critical nature of offering an omnichannel platform for clients. We saw that with some of the challenges that occurred across our industry where omnichannel service wasn't provided. And yet, even then, our service delivery to clients was uneven at best and disappointing to us as well as our clients at times. Frankly, the volumes overwhelmed, even our most aggressive projections. In March, call and chat volume reached 4 million for the month. And after a modest respite in the fall, grew back to approximately 3.5 million in December. From a metric standpoint, our average speed to answer a phone call, which averaged around 30 seconds in 2019, grew to about 2 minutes in 2020. And of course, was well beyond that in times of high stress and volatility. In addition, interestingly, our average handle time, in other words, the time that we spend on the phone with each client also expanded. So at Schwab, we went from about 8 minutes for a typical phone call to closer to 10.5 minutes. And of course, this was due to the complexity of issues that clients were engaging with us on in 2021. And of course, those challenges are continuing into this year. We are carefully reviewing some of the decisions around the TD Ameritrade integration because we want to ensure that we don't take steps that would risk any further degradation in our service quality. So as part of that, we're examining locations that we might have previously thought we wouldn't maintain. But in order to retain the trained and licensed staff that are at those locations, we're looking to maintain a -- I want to be clear that this is -- this statement is not us moving off our committed savings from the integration. We remain as committed as ever to saving the $1.8 billion to $2 billion of expenses that would otherwise come from our combined run rates. You can see that on the right side of the page, there's been a dramatic increase in engagement in the mobile and web platforms across both Schwab and TD Ameritrade. Some pundits have spoken of the impact of the pandemic on digital engagement. And I guess no statistics illustrate probably that more clearly than mobile usage up by about 50% of Schwab and over 70% at legacy TD Ameritrade. Against this backdrop, our financial results were quite strong. They're certainly considering the actions taken by the Federal Reserve to reduce the Fed Funds rate to near 0 and to push long-term rates down via the $100 billion plus of purchases of treasuries and mortgage-backed securities each month. Of course, these are the very type of securities that we typically purchase. Now despite that, we were able to maintain pretax margins in the low 40s, in the 42% range, of course, that's adjusted for our onetime acquisition-related expenses as well as amortization of acquired intangibles, and we're able to deliver a return on tangible common equity of about 15%. Now despite the demands on our systems and despite approximately 95% of our employees working from home, I guess, despite the volatility that we all had to navigate, throughout 2020, we maintained our intense focus on advancing our 3 strategic initiatives. And those are scale and efficiency; win-win monetization, and by that, we mean monetization that benefits our clients along with Schwab; and then client segmentation. Each of the acquisitions or project investments or product introductions or enhanced capabilities that we announced in 2020 fit very clearly into one or more of these 3 strategic initiatives. As we transition into 2021, these same 3 strategic initiatives are guiding our efforts. Under scale and efficiency, we will continue our progress on the TD Ameritrade integration. We'll continue our efforts around the digital evolution of our firm overall. And of course, we will continue hiring and training professionals to be there to serve our clients. Under win-win monetization, we'll advance our efforts around personalized investing, including both thematic investing as well as direct indexing. We recently introduced over 20 fixed income strategies from Wasmer Schroeder, and we're in the process of making some changes to our third-party approach to relationships with asset managers. That's both financially as well as some of the partnering that we do together. In terms of client segmentation, we've seen solid responses to our efforts around it, particularly better serving some high net worth and ultra-high net worth clients. And of course, in the retail world, they're largely self-directed. We've made measurable progress in our lending capabilities, and we continue to invest in enhancing trader education and trader platforms with a recognition that the thinkorswim platform will be our premier trading platform once we have integration complete. Our strategic priorities are always informed by an objective assessment of the longer term trends that we believe will evolve and shape our industry. And then we implement strategies and focus on initiatives intended to capitalize on these trends. So every few years, we have shared with you our views on these trends, and we wanted to go ahead and take this opportunity to do so today with a few updated perspectives with respect to these trends. So let me start first with broad trends. Our view is that client relationships and trust are what is most important in our business. Ultimately, we are in the trust business. We think from a broad perspective that although active asset management will continue to have success in some classes, certainly, various forms of low-cost indexing appear likely to continue capturing the majority of flows. Our view is that pandemic level trading volumes are not sustainable over the long run, but we do believe that trading volumes will remain at higher levels than they were in years past, in particular, because of the removal of much of the friction, via both better technology as well as the elimination of most forms of web and mobile equity commissions. And then lastly, from a broad trend, we believe that brand is very important. But brand alone is not success -- will not be successful in and of itself to encourage new clients to try a firm or to consider consolidating, that it actually is an overall combination of a series of factors that will win when combined with a strong brand. So let's go ahead and move on to client views. And here, we've identified a handful of views that we think are important through the lens of the client. The first, of course, is that clients no longer accept trade-offs or compromises. They expect the best of everything in a firm that they choose to invest with. Second is that client service expectations are really not being formed by the experiences within our industry, but rather they're being informed by experiences that clients have outside the investment world. Third, the idea of investment performance definitely matters, but more so in terms of setting a plan, designing goals, investing in an efficient manner from a tax standpoint and keeping costs as low as possible. The next one, I often say that personalized investing is coming at us like a freight train. And our view is that personalized investing really will define much of the coming years that investors who want to invest in manners that reflect their personal situation. And with the combination of technology and direct indexing and thematic investing interest in ESG, fractional share capability, all of this will contribute to rapid growth in personalized investing. Active trading is an important investment strategy for many investors. And those investors expect world-class platforms, value-added insights, pricing, risk management tools, and we are committed to providing that for the investors who consider trading a key part of their strategy. And then lastly, we just spoke a bit about the corporate fiduciary world as lawsuits continue in that space, plant sponsors are more focused than ever on ensuring that the employees in their plants are given access to low cost, quality investments as well as the opportunity for investment advice that can help them both in their plant as well with overall financial wellness. Lastly, I want to spend a few minutes on the competitive landscape. Our view is that scale is exceptionally important in determining the winners, the costs, the expectations from a balance sheet standpoint are so significant that scale will play a major role in determining winners in our industry going forward. Next, we think, breadth of offering and capabilities is very important as consumers look for convenience with the providers that they choose to do business with. A relatively new factor in the competitive landscape is the moves by large global banks into the space in a much more aggressive and aligned manner. And of course, often they lead their way in with lending. So a new pathway into the space has been occurring in recent years, and we think will accelerate. Relationships are key and not just digital relationships, but a combination of digital as well as in person. We continue to believe that independent investment advisers will gain market share. The combination of their ability to deliver a fiduciary experience, offer great value, personalization and local presence is very, very difficult to beat. And then those same trends are likely to continue in our mind to encourage corner office advisers at wire houses and other investment professionals to choose to pursue the RIA industry. What's important about these trends is that owners of our stock or analysts who cover our stock, you can certainly understand our views that we provide great transparency. And therefore, you can evaluate the actions that you see us taking, both near term as well as long term and be able to see how it all fits together. In addition, it gives you the opportunity to hold us accountable for the decisions we make and the consistency of them with our view of long-term trends and opportunities. We estimate today that we're honored to serve about 13% of the U.S. retail investment market. And of course, that leaves us with substantial opportunity to grow in the future, subject, of course, to serving our existing clients well and attracting new clients with the overall quality of our offering. So to go ahead and summarize, we believe our positioning is strong and our focused consistent long-term strategy and approach to serving clients is on target. It's on target for the trends that we see evolving within our industry. We are continuing to invest and prepare to continue capitalizing on those evolving trends and opportunities. Now before I turn it over to Jeff for our Q&A, I wanted to make just a few brief comments about the trading in the highly volatile stocks in recent days. I'd like to provide some facts and also address a series of what we have seen as inaccurate statements in the press as well as inaccuracies floating around the social media world. Once I address these issues in my comments here this morning, we've made the decision that we're not going to take additional questions on them for the balance of the day. So unlike some other brokerage firms, neither Charles Schwab & Co. nor TD Ameritrade holded buying any stocks or clients selling any stocks that they own. In addition, neither firm restricted clients from executing any basic options strategies. I'm going to go ahead and repeat that just to make sure that everyone in the press and those on social media, who have been posting inaccurate statement can understand what we are saying, neither Charles Schwab & Co. or TD Ameritrade holded buying any stocks or selling or client selling any stocks that they own, and neither firm restricted executing any basic options strategies. Both firms did restrict certain advanced option strategies. Why? Because some of those advanced option strategies create the risk of loss levels that would be so large that the investor client may not be able to cover the losses that they incurred from their actions. Effectively, that leaves the risk of those losses with us. Actions like this are normal course of business, we take them on a regular basis. And as you would expect, our owners, our regulators and others expect, and they actually require that we manage the firm prudently. It is imprudent to allow positions that have the potential to leave our brokerage firm with the losses that the investor client may not be able to cover. So Jeff, let me go ahead and turn it over to you for our Q&A session.

Great. Thank you so much, Walt. We appreciate those thoughts, and we're getting a few questions coming across the line now. I think we actually got a number of questions with some interest to get some perspective on those relationships with third-party managers. I know that's something that Rick might touch on a bit further in the presentation, but perhaps some initial thoughts from you.

Yes. I think that what we are doing is we are trying to better understand clients and clients' desires, clients' objectives from an investment standpoint. And maybe an analogy I might use to better illustrate it is that, in many ways, when an investor would come to Schwab in years passed and to some extent, even today, I guess, they would walk in, and we were a bit like a -- like maybe a Costco. There was a lot of opportunities, a lot of products on the shelf, a lot of aisles to go down, a lot of sorting to try to come up with. And moving forward, I think that we want to provide more guidance and assistant to -- assistance to help clients identify what their objectives are, help them identify alternatives that might be more effective from them. I suppose you could, following along my analogy, you might say it's more of a stitch-fix type of model than a Costco model. None of that is to say that all those options on all those shelves won't be available for clients, but we want to maybe do a more effective job of serving our clients in helping them identify what might be great solutions for them. And so naturally, as part of that, you could see some evolution in some of the relationships with some of the asset management firms.

Great. Thank you for that. Another question along those lines. This one is from Dennis Blyly from Timucuan Asset Management, apologies, if I put that pronunciation. He wanted to see if you could expand a bit more on what you described as other low-hanging fruit in the monetization area?

Well, it's just a matter of looking at places where we can better serve clients. And at the same time, we're better serving clients often with higher quality solutions and maybe even a lower cost for the client, but we might capture a bit more of that value stream. So there's a series of those initiatives underway. I don't, at this point, plan to go into more details on what those might be. But I think you see them unfolding before you with some of the decisions that we've made, some of the acquisitions that we've made. You'll see more of it as we introduce thematic investing. You can see an example of it with the comments I made on the solutions we've introduced in the fixed income space from Wasmer Schroeder. So you'll see that unfolding over time, but we'll probably let those communications come out as the solutions are introduced as opposed to maybe front-running them too much.

Understood. Thank you, Walt. Next question is from Brennan Hawken at UBS. Given the large banks are leading with lending to enhance their competitive position in the space, do you have any updates on Schwab's plans to continue to ramp lending within our own client base?

Well, we certainly are. And I believe the metrics illustrate that to be the case that we want to make sure that we can be competitive directly from our retail side, but also the RIAs who choose to custody with Schwab can be competitive, competing with these same large banks by having lending capabilities that they can access through our Schwab banks. So it is an important part of our strategy. I guess the one thing I would want to emphasize, though, is that as has always been our approach to lending, we like to lend money to people who pay us back. And so that criteria will not be changing and hasn't been changing. But we are pursuing more from a lending standpoint to our clients that helps meet their needs. That's what it has to come first, meeting their needs, but then ultimately helps build a deeper relationship with them and wish Schwab and/or the RIA that serves them.

Excellent. Thank you, Walt. Another question, this is, again, probably something that will be expanded on a bit further in the presentation by some of your colleagues and peers. But maybe getting a question here from Bill Katz at Citi. Just kind of give in an update or an expanded view on the opportunity with direct indexing. And how you see that unfolding? And how that will impact the marketplace?

Well, I think what you're going to see is you're going to see it unfold in a couple of stages. So I would expect things like thematic indexing to come first. And of course, what thematic indexing will do will be allow people the opportunity to identify a theme that they want to invest in. For example, it might be companies with a particular emphasis on artificial intelligence or robotics or in the health care companies with a particular effort to, say, cure cancer. And people will be able to say, I'd like to look at companies in that theme and then be able to click and buy dollar amounts of all of those stocks in that theme, while also adding or subtracting companies within that theme that they would like to add or subtract to personalize. I think that's the first step. And so there, you start with a theme rather than maybe a broadly recognized index. But I then think what will follow-on in the direct indexing world is where people will have the opportunity to begin with themes, but potentially also begin with a broader index or multiple index -- indices at some point and then customize from there while still taking advantage of tax loss harvesting and other benefits inherent in owning the individual security. So it's really one of those win-win opportunities that we can be there for investors and help them personalize their investing strategies more effectively. And at the same time, be compensated from our side for the work that we do in designing, building and administering these teams over the direct index model. So it's really a classic win-win and, again as I mentioned earlier in the trends, we think that personalized investing is going to play a major role in the future years and likely even decades of investing, not that packaged products will go away. They won't go away. We're not saying that these kind of solutions are going to eliminate packaged products, but the opportunity for personalization is going to have an impact in our industry we think in a meaningful way.

Great. Thank you very much. And we are getting, as you might expect, given the recent events, a ton of questions come in around market structure, payment for order flow et cetera. We're going to probably hold those just notify the group until Mr. Martinetto section here and provide any additional comments that are appropriate at that time. Maybe one last question here for you, Walt. And this is from Ari Sass at M.D. Sass. Now that we're a few months passed the closing, what have been maybe the biggest positive and may be perhaps the biggest negative that you viewed from the TD transaction now that you've had some time to have it under the Schwab umbrella?

Sure. I think probably the biggest positive that I have seen is just the commitment of what is really an extraordinarily talented group of people, a commitment to their clients and a commitment to ensuring that our integration is successful. Now that's not to step away from the recognition that we all have that there are going to be people whether they are Schwab employees or legacy TD Ameritrade employees whose positions will be eliminated and they won't be able to be part of the combined companies. Everyone recognizes that, that is inevitable. But there is great talent, highly dedicated people in locations all over the country that we are really, really excited about. Much of the views we had on technology have been validated. There are some areas that behind the scenes need some additional work that's probably not a surprise. But I think, overall, we've been just very, very pleased. So I think I made a comment in a recent town hall at the firm that I have been so pleased with what I have learned since really November of 2019, when we made the announcement of validating our decision on the acquisition and just so encouraged about what our combined firms can do for clients for so many years into the future.

Great. Well, thank you so much for taking the time this morning, Walt. We really appreciate it. It's been great, and we look forward to the rest of the presentation. I'd like to invite Joe Martinetto, our COO, to come on stage and talk a little bit about scale and the TD Ameritrade integration effort.

Thanks, Joe. Thanks, Jeff.

Thanks, Jeff. Thanks, Walt. Good morning, everyone. So like Walt, I'm also in my office, not so much for fear of teenage daughters interrupting me, but more for trees falling down and knocking me completely off the grid. So I think the infrastructure here maybe is a little bit more robust than that in my house. So figured I'd come into the office and take advantage of that. As Rich highlighted, this format that we're using today gives us an opportunity to showcase many more of the great leaders that we have at Schwab. So as a result, I'm going to focus my comments on 2 key areas. One, on the acquisitions of the past year and the progress that we're making on integration. And then also on some of the other initiatives that are underway that continue to help us drive scale and efficiency into the business. And I'll leave some of the more detailed product and platform commentary to my colleagues, who are the true experts in this area. So let's jump into the acquisition update first. I think it probably goes without saying we had a very busy year last year. Starting back in May, we acquired the assets of the USAA brokerage business, and we also entered into an ongoing referral agreement to provide brokerage and wealth management services to USAA members. The business was integrated smoothly. And while we didn't bring over any systems as we transitioned to the accounts directly onto the Schwab platform, we did bring over some great talent in the wealth management space in that transaction. And we're still on the early stages of introducing these clients to all of the great capabilities at Schwab. And we also have that referral relationship that we expect will continue to introduce us to more USAA members over time. In June, we completed the acquisition of the intellectual property of Motif, and we expect to be launching products in both the thematic investing and the direct indexing areas later this year. And in July, we closed on the acquisition of Wasmer Schroeder, a nearly $11 billion fixed income asset manager with deep expertise in the muni market. And last month, we launched 20 SMA strategies, including 2 ultra-short duration, 6 core strategies and 12 bond ladders. And then we took a couple of months off. In October, we closed on the TD Ameritrade acquisition. This was clearly a much larger transaction than the prior 3 with expected benefits ranging across scale efficiencies to platform enhancements to talent acquisition. So let's move on to the next slide and I'll provide a little more detailed update on the integration progress. We're now a few months into execution, and we continue to validate the estimates that we made around the expense synergies. The total expected reduction in expenses is still $1.8 billion to $2 billion, and we still expect to get the broker-dealer conversion in 18 to 36 months. I would have liked to have been able to tighten up this conversion window at this point, but the enormous volumes of activity that we're seeing on both platforms has forced us to relook at some of the capacity planning assumptions that we made early on in our planning. And we're going to have to make some adjustments to our early plans as we contemplate being able to handle these kinds of extraordinary volumes on 1 consolidated platform. So we will be back in the future with some updates on the timing on those windows. But for now, we're still sticking to the 18 to 36 months. Now that said, we do still expect to achieve 25% to 35% of the total cost synergies in the first year, with continued progress over time until we get to the conversion, it can significantly reduce the technology and other operating platform expenses. And as Walt indicated, in this environment, we're protecting service staff, but we still feel confident that we'll be able to achieve the projected cost reductions from the baseline level of expenses while allowing for more expense growth that's tied to the volume changes that we've experienced. And Peter is going to have more details on this in his section. So of course, we'll keep you updated on both revenue and expense synergy projections as we get further into integration. And on the revenue side, we have a couple of updates here as well. So we had originally listed order routing revenue as a potential dis-synergy, and we've gotten to look at more of the details and updated our analysis, and we now believe that the impact could be flat to modestly positive, absent any changes in market structures. We're working toward our transition in Q2 to a harmonized routing model, and we'll have more details as we make this switch. And of course, as we work through this, we'll continue to focus on execution quality for our clients throughout the transition. With respect to the IDA balances, we see an opportunity to move more balances sooner than our base case assumed. So if balances stay flat to where they are today, we could move at least $20 billion from the IDA to our balance sheet in the first year, which is higher than the $10 billion we previously communicated. This results from a combination of factors, including growth in overall balances as well as an increase in uninsured balances. And even in this environment, we pick up about 65 basis points when money moves from the IDA to our balance sheet. And again, Peter will have more to say about all things balance sheet in his presentation. So let's move on to some of the other initiatives that we have underway beyond acquisitions and integration because that's not the only thing that we're focused on. We've been working on what we've called application modernization for a few years now, and that's really a rapid for work in 3 key areas: updating software, modernizing hosting and enhancing data centers. So with respect to updating the software, newer programming languages on distributed systems not only run more efficiently, but they also allow us to build complex capabilities in a simpler and quicker manner using fewer total lines of code than older languages. And so just as an example, over the course of this effort, we expect to retire just under half of the 64 million active lines of code in our existing books and record system, retiring or rewriting well over 400 applications. We expect to complete this work concurrent with the end of integration, which is still consistent with our original time line, but we've had to make some sequencing adjustments as we've had to accommodate the integration work. With respect to modernization of hosting, today, all our new business services are deployed to private cloud, and about half of our business service traffic from channels is handled by PaaS or IaaS related deployments. Our technology stack positions us to leverage public cloud where a best service need and will allow for hybrid deployments or full portability to the public cloud, again, where this makes appropriate business sense. On the enhanced data centers, we're improving resiliency across company data centers at distance in multiple public cloud deployments, and these deployments are the manifestation of Schwab's most current standards for physical security and technology capabilities. Now financially, all of this work will show up in a couple of different ways. Much of it's going to bleed into the run rate over time as new services are delivered into production, helping us bend the cost curve down as we absorb new volumes. Unit cost scenarios like account opening and trading have already seen meaningful improvement. And there will also be a significant ramp down in resources as we get to the end of integration, given the magnitude of the resources we're applying to this work over such a limited time frame. So this effort not only helps drive scale efficiency, but it also adds greater systems resiliency, along with significant reductions in time to market from a deployment standpoint, a true win-win-win. Now part of the efficiency and resiliency benefits will come with a continued focus on a cloud-first approach to hosting. As we've talked about before, we've been building out our private cloud for a few years as well as actively utilizing SaaS and PaaS solutions. We've also been testing and learning in the public cloud for some time, and we're preparing for some bigger deployments this year. There are some benefits that public cloud provides that we're looking to take full advantage of. So examples here include advanced capabilities that require substantial processing power, like artificial intelligence and machine learning, robust capacity that makes the most of the pay for use pricing model or things like storage or very large data sets that are handled efficiently in the cloud. That said, there are some applications that we expect will run on-premise for a number of years. So we're aiming for a hybrid cloud environment as our target operating state at the end of all of this work. Finally, we're leveraging the digital transformation work to help us ramp to the volume levels necessary to absorb the TDA volume in a cost-effective manner. We continue to make inroads on digital self-service, helping clients do more of what they want simply and elegantly online. So paper will still be available for the clients who want to use it, but we're continuing to drive more paperless adoption by removing friction in the process. We strive to make the digital process the easy path, so clients never even look for the paper alternative, and this is equally true in both the retail and adviser space. And more and more, clients try to interact digitally first, so enabling them with tools like online status, both meets them in their channel of choice and takes calls off of our service lines. We look to automate process wherever it makes sense. And as volumes increase either organically or through acquisition, the business cases get stronger for more investment in this area. And we've now automated enough of our processes that optimizing the exception processes has become an important scale lever for us. Getting work that really needs a human touch to the right place to be dealt with, quickly and efficiently, enhances the client experience and maximizes the use of our labor talent. So while this transition has been a focus of ours for a few years, the increases in volume that we've seen and contemplate post-conversion makes this work even more critical to building scale in the future. So that was it for the prepared comments. I'd like to open the floor to questions at this time. Jeff, would you like to get us started?

Hi, Joe, thank you so much. I think before we get started, just given the volume of the inbound around, again, as mentioned during the Walt's section, market structure and payment for order flow maybe just wanted to see if you had any additional comments that you wanted to mention at this time about that topic?

Sure. So I'd highlight again that the comments that I made around the look we took on the differences in the order writing revenues that we had in the synergy case versus what we expect now. And so we've -- in the current market structure assessed that rather than being a negative that could be flat to slightly positive potentially for us. But that did have a caveat in the current market structure. With regard to market structure at this point, I don't think, we know more than anybody else on this call does, and so we're just not going to engage in speculation at this point around changes that may come to market. I will say that I've been in the industry now 24 years and I think we've seen several evolutions in the past, and the industry has continued to adapt and change around how it handles order flow. And to the extent that there are changes, I would expect that, that will be the case going forward as well. But we have no insights on what those changes might be, and we're going to remain focused on making sure our clients get great execution, regardless of what happens there.

Understood. Thanks for taking the time. Maybe can you talk a little bit more, Joe, about Schwab systems and how they've been performing given the sustained record high activity levels and how you feel you're positioned from a capacity perspective going forward?

Yes. So I would say, thank goodness, we started some of the application modernization work when we did. And I wish we had started potentially about 6 months earlier. So we've taken a tremendous load off of the mainframe at this point in time. And so the distributed platforms have been remarkably stable and available over the course of the increases that we've seen in volume. I'd just remind everybody that if you kind of look back to where we were at the time we were talking about the acquisition, we've now surpassed actual levels that exceed the capacity plans that we had talked about for what we thought we might need to grow into the future so. And about a year's time, we've gone from what we thought was 4x capacity to using that 4x plus already in having to rethink what new capacity levels need to look like. We have seen some stress on some our systems, particularly in the communications between the distributed systems and the mainframe. We have a number of things in the works to continue to make progress on that front very quickly, which should help us scale even more dramatically here in the next couple of weeks. But it's -- we've seen just dramatic increases in volume on both sides, both in legacy TDA and legacy Schwab. And I think we've learned a few things about where we want to go in terms of providing appropriate capacity for what consolidated firm is going to look like. But all things considered, given that the spike we've seen in the activity levels, I think we held up reasonably well. We would have like to bend 100% for our clients, and we realize any interruption is not good. But I think we've been able to get back up pretty quickly when we got issues and maintained availability largely for our clients throughout this big spike in traffic.

Great. I should have noted that question was credited to Chris Harris. Kind of a follow-up here from Steven Chubak at Wolfe Research. Given some of the rethink on capacity levels, how does this inform the longer term expense growth rate relative to what you've spoken to previously? And perhaps some of that could be you could start, and then Peter might layer on that later in the presentation.

Yes. I would say Peter is definitely going to have a presentation. There are real component of this in his presentation. We should leave the details to him. But I would say for now that it's probably best to think of this as a couple of -- in a couple of ways. So one is when we talked about synergies, we talked about cost reductions off of the base of the 2 companies going into the transaction, and we're still highly confident that we're going to be able to get those kinds of reductions off of that base level of spending. But any spending going forward is definitely going to be -- have to be adjusted for the growth that we have seen in volumes in activity that neither of the firms would have been able to absorb without some degree of expense growth and the consolidated firm won't be able to absorb it without some degree of expense growth as well. I'd like to say that the opportunities for us to continue to drive further scale into the business at the size that we're running at now means that maybe the expense growth and consolidation would be a little bit less than the 2 firms on a stand-alone basis would have experienced, but there is going to have to be some expense increase that's going to come along with these volume increases. And Peter has got much more of that, I think, detailed in his presentation.

Great. Thank you so much. Next question comes from Will Nance at Goldman Sachs. How would you characterize maybe the split of the cost savings that are tied to, we'll say, the specific broker-dealer integration effort versus the other pieces of the broader integration streams?

Yes. So we've already said that we're going to get 25% to 35% this year without getting to that integration piece. It's still a couple of years forward. So yes, I'd say it's probably fair to think of it as being sort of 1/3 broker-dealer systems, maybe a little bit more than that and 2/3 other non-bond systems related costs. So I mean it's -- that year 3 or even tailing into year 4 as we go through the process of retiring all those old systems, there's a pretty substantial savings that's going to come from getting to that integration point.

Great. Thank you. And maybe kind of on the same line, next question from Richard Repetto at Piper Sandler. How would you think about these first 12-month synergies, kind of the pace and cadence of that? Is that a little more, we'll say, pro rata across the 12 months? Or is it more specific or lumpy?

So it's probably a little lumpier. So as we think about the patterns here, I'd say we got off to a pretty good start quickly with that first wave of reductions. And now we're moving into a pretty steady state of reductions on, let's just call it, a quarterly basis. Obviously, we're not going to be able to repeat that big first wave consistently every quarter. I would expect that we will show consistent progress, although probably at a slower pace between here and when we start getting to the point where we can retire some of those systems and then a pickup towards the end as we get to an ability to start to actually turning off the systems and shutting down those platforms.

Great. Thank you, Joe. Next question from Brian Bedell at Deutsche Bank. Could you maybe provide some perspective on maybe your -- the team's kind of highest conviction, 2 or 3 revenue -- product service revenue related synergies after client day 1?

So I think some of the revenue pieces you may hear from other folks. But I think that there are a number of synergies that are directly related to the acquisition. I think as we started talking about order routing revenue, that was a bit of a surprise. Clearly, the top of the list is the IDA balance movements. That's definitely the big synergy that we identified in the transaction and still, by and large, remains the big synergy that we'd be focused on. Beyond that, I think we've identified that there is really a number of products and services that the legacy TDA clients haven't really had access to some of our great wealth management products, some of our lending products and even some of the maybe smaller or less physical things like access to Schwab Charitable, all of those, I think, are going to combine to probably produce a significant lift to us on the revenue side. Likewise, as we bring some of the enhanced trading capabilities onto the Schwab platform and make it available to the existing Schwab client set, I would expect that we will likely see some pickup in trading and things like advanced order types or some capabilities like futures that may not have been as available on the Schwab platform. So I think what we're going to see is the best of both firms getting distributed across the client base with uplift kind of across the board, depending on what products that the clients have been exposed to historically.

Got it. Understood. Maybe circling a little bit back to some of the clearing. Next question from Ken Worthington at JPMorgan. Given some of the stress levels that other smaller, let's say, less scale diversified clearing firms industry you have experienced of late, what are some of the advantages of Schwab's clearing platform relative to others?

Sure. So I mean, I think it's a variety of things. So it's the investments we've made in systems to be available and up and running and just the quality and breadth of the platform that we're able to provide. You couple that with the strength of the firm. I mean, clearly, we have a very strong balance sheet, a very strong capital level, access to liquidity and ability to meet our reserve requirements as well as our margin requirements, at places like OCC and NSCC. We've been doing this for a very long time and have rigorous controls in place to ensure that those executions are going to be met, get into the details of the clearing operation and the details that we monitor and the controls we have around. How we clear trades, how we process trades, how we deal with fails, and then finally, get into looking at some of the things like execution quality. We just provide really great fills for our clients on the transactions that they undertake. And it's -- from soup to nuts, it's hard to find something that we don't do as well or better than most in the industry. So again, if you're looking for a safe and solid place to trade with great capabilities, hard to imagine how we don't come up pretty high on that list on pretty much any measure.

Got it. Thank you for that. Next question from Andrew Hollingworth at Holland Advisors. Could you talk a little bit about the underlying assumptions of the, we'll say, the dis-synergy around the TDA transaction from client attrition to competitors or losses due to lower trading at 0? Has anything changed to that assumption based on evolution since signing and recent events?

Yes. So I mean, I'd say at this point, we don't have any formal updates. But with all the volume that we're seeing, it's hard to see how we like many others in the industry haven't been pleasantly surprised by client acquisition. So on a net basis, I'd say we're ahead of where we expected to be at this point, but I don't really have an update on just the gross attrition numbers.

Okay. Makes sense. Next question is from Michael Carrier at Bank of America. When the industry experiences the type of volatility that we've seen of late, how coordinated are the platforms in the clearing houses and with the regulators to ensure overall system safety?

Yes. And so, I mean, I may not be the best one to address this question across the industry. I just again say that I do see really good coordination, not so much across firms, but throughout the industry. So I do see things like margin requirements adjust automatically as volatility levels start to increase to ensure that everybody's margin posting is going up some to make sure that the exchanges don't get holding the bag in short capital. So everybody's trades are going to clear. I think those mechanisms have been well practiced. I think the various utilities have, over the years, become better capitalized, have more liquidity, have more core strength on their own. And when you combine that with the activities that they've undertaken, I just think clients should feel pretty confident that the industry as a whole is providing a safe place for people to transact. As Walt said, there are certain transactions that have a propensity to leave individual firms at risk. And so we took certain actions to protect our firm and our clients from that kind of a risk. That's more of an individual choice as opposed to something that's coordinated across the industry. But overall, I think this week is probably a pretty good example. We've seen a lot of volatility, and yet the vast majority of the industry is in pretty good shape.

Great. Thank you. Probably a bit of a follow-on here from Michael Cyprys at Morgan Stanley. I suspect you don't want to go too deep in the weeds, but perhaps some high-level perspectives on how Schwab's clearing and margin requirements have evolved over, let's say, the past month or so?

Sure. So that's kind of an interesting question in the context of integration that most of our practices and the legacy TDA practices, we're really well-developed and thoughtful. We have really good models in place, really great monitoring that's built. And so -- and I would say, really on either side, you didn't see much change as a result of what's happened in the marketplace. We are going through a process of aligning some of our models and assumptions and just kind of the underlying math to get to a place where we pick the best of both and monitor these kinds of levels consistently so that when we add the numbers up, we are getting to a firm-wide view as opposed to 2 company points of view. But even there, I'd say it's really fine-tuning what has been some great thought on both sides and some remodeling on both sides. Just to bring alignment as opposed to, I don't think we've identified any substantial shortcomings in either firm's approach. It's just with all of these things, there's always a little bit of art that gets applied to science here. And we're just trying to align the art a bit as we're looking to bring the 2 firms together.

Great. Thank you so much. And maybe a quick follow-on from Mr. Cyprys at Morgan Stanley. How -- maybe do you expect any further evolution or changes to the approach to risk management at the firm?

So I -- as I said, I think there's going to be some modest changes that are going to come from getting to a unified perspective. I would say that the legacy TDA approach largely because of the size of their trader base might have indicated that they were allowing a slightly bigger in consolidation risk bucket than maybe the Schwab side was, and we're going to have to reconcile those points of view. I don't think that we're going to see a dramatic change in philosophy or risk appetite. There may be some fine-tuning that continues to happen as we look at the nature of the trader base that operates in that legacy TDA business and make sure that the practices that we're adopting across the firm work for the broader set of clients and the kinds of activities that they've been able to undertake. We are definitely not looking at straining the traders out in the community because we've tightened down on risk parameters dramatically. We do understand that we need to continue to be smart about how we manage risk and make sure that we're protecting the firm for the benefit of our clients for the long run, but applying the most sophisticated approaches that we can to do that and allowing the clients to take smart and informed risk on their own part as well.

Great. Thank you, Joe. And maybe we'll just -- we'll wrap up here with one final question. And I know you touched on this a bit in your remarks. And maybe just to -- given the area of focus, just to tie a bow on it. Could you maybe provide a little more color around what changed between, let's say, signing, closing and then today in terms of how we're viewing order flow revenue as going from a potential dis-synergy to maybe less so today?

Yes. So one of the challenges that we had because of the nature of the antitrust review was there was a lot of data that we weren't able to exchange prior to close and some of the details on how order routing was working at each firm and in nature and detailed type of the various trades was not available to us. So as we've been able to get that information, process it and do a much more detailed review of what's coming in, where it's going, what are the opportunities, we find a much better picture of what that revenue opportunity looks like. And so I'd say the changes that we're making in the forecast here have more to do with just getting better information than changes in approach to how we think about managing order routing going forward.

Great. Well, thank you so much, Joe. Great session. We appreciate you taking the time this morning.

Okay. Thanks, everybody.

Great. Well, now I'd like to invite Neesha Hathi, our Chief Digital Officer, to join us on stage to talk about Schwab's accelerating digital transformation.

Great. Thanks, Jeff. Hopefully, I'm coming in okay. And this new technology experience we're all going through here. It's great to be here. As Jeff said, I'm Schwab's Chief Digital Officer, Neesha Hathi, and I lead an enterprise called Digital Services. And I think the last time I joined you, we were so pretty early in our digital transformation efforts. And so I'm glad to be here today to share a little bit of the progress that we've made as well as talk a little bit about 2020 and the type of digital engagement we saw in 2020, how it's affecting investors and advisers. And then give you a little bit of a glimpse into some of the exciting work that we have underway around growth and innovation side of digital, which is really a focus on thematic investing. So -- and I know Walt touched on that already. So we'll go a little bit deeper. So as you might remember, our digital transformation efforts at Schwab have been focused on key -- 3 key objectives. First of all, it's all about the client experience. So how do we make a seamless multichannel experience, frictionless, make it easy to do business with Schwab. The second is around reducing the cost of serving clients, and this is particularly important given the level of organic and inorganic growth that we're seeing, really important to continue to think about both the front-end interface as well as the back-end processing and thinking about how we drive down costs of serving clients. And then finally, driving growth and innovation. And this really is about leveraging digital to improve our competitive position as well as advance our scale advantage. And lucky -- fortunately, we did not wait for the pandemic to get started on our digital transformation efforts. And over the past few years, we've made a lot of progress. If you look at the next slide, you'll see that the progress that we've made, we've literally introduced hundreds of new client experience enhancements. And the progress that we've made kind of goes on a spectrum, efforts that are more focused on efficiency and scale as well as client experience as all the way to efforts that are more focused on innovation and growth. And I won't go through all of them on the page here, and this is just a small sampling of those hundreds of enhancements, but I will focus on a couple of them just to give you a sense of the type of work in progress. And I'll start with the retail onboarding example on the top left-hand side. Retail onboarding, as you can imagine, is a key experience for a new investor. They're -- coming to Schwab for the first time and they're really important aspect of that relationship. It's a great opportunity to build trust, to grow share of wallet. And it's also a time when investors are highly engaged. What we saw in 2020 is about 92% of our accounts were opened online in digital, and that's actually up from 84% in the prior year. Now that has a real -- that creates a real advantage for consumers and the investor who's going through that onboarding process because it's seamless, it's easy to do in the comfort of their home or on their mobile device. But it also drives efficiency. And one of the key metrics we look at around efficiency when it comes to onboarding, is how often there's a client call in during that onboarding process. So for example, in 2019, we saw that we used something called a call ratio. We saw that 53% over the time, a little more than half the time, an investor who is going through the onboarding process would call into our contact center and talk to somebody for help kind of completing that process. What we saw in 2020 is we were able to reduce that to 42%. You can imagine that has a significant impact on the client experience. Now clients can get through that process more easily, but also has a tremendous impact on our client-facing staff and our contact centers because now that capacity can be reused for higher value conversations with clients. Another aspect of that efficiency is actually not in the contact center, but in our back-end processing. And I'll use the example here of digital account open for advisers to give you a sense of that. So digital account open is a capability we introduced a couple of years ago, which allows an adviser to open an account completely electronically, digitally for our client. And last year, in 2020, we saw over 40,000 accounts opened digitally. Now when a client adviser opens an account digitally, what that allows them to do is actually fill out the information about the client, all on a digital interface and really make sure that all that information is accurate. And what that does is it reduces our not in good order rates. So not in good order is the amount of time that you can imagine an adviser, their client and our back office have to go back and forth, trying to make sure that we have all the information about the client. And when an account is opened digitally through digital account open, we see a dramatically lower NIGO, not in good order rate, and that really creates a lot of operating leverage and scale for our back office as well as, of course, that enhanced experience for the adviser and the investor. And that 4%, just to give you a sense, compares to about 35% or so when an adviser uses paper -- a paper-based account open process. So really a significant advantage. And you can see how it's a significant advantage from a client experience perspective as well as for operating efficiency. If we move towards the right of the spectrum, you see some of the enhancements that we've made around innovation and growth with digital. And I'll just spotlight a couple here. Our digital planning efforts, Schwab Plan on schwab.com is really a -- a really compelling experience where an investor can get a full pledged financial plan on their own in their own time. And since we've launched that, over 18,000 clients have joined and decided to create their own financial plan online. We also, many of you know, launched Schwab Stock Slices, which leverages our fractional share capabilities and allows an investor to buy fractions of a share or gift fractions of a share to a loved one. And while this slide is 100,000, we're actually approaching 200,000 households now that have leveraged Schwab Stock Slices. And what we see here is the average investor is actually a little bit younger. Our average retail client is in the early 50s or so. The clients who are using Schwab Stock Slices are a little bit younger. We've also had the opportunity to innovate on the adviser side as well. And one key highlight here is our third-party integration platform. I'll talk a little bit more about this later, but we've spent quite a bit of time as we've welcomed our TDA colleagues looking at the integration platforms that they have in Dale as well as what we have in Schwab data center. And it's been great to see the amount of work that's going on both sides and the opportunity to serve investors and advisers better through this platform. In 2020, we saw a 40% increase in volume when you look at that Schwab third-party integration universe. And we saw almost 800 new advisers join and start using the APIs that had never used them before. So a real testament to the power of those capabilities as it helps an adviser drive their -- drive more efficiency in their office. If we look at 2020 a little bit more deeply, you'll get a sense of some of what we're seeing around digital engagement. And this slide shows you -- and if you read our earnings release, you heard a little bit -- you read a little bit about the level of interactions we've seen digitally. Walt touched on this as well. Just on schwab.com alone, we saw over 1 billion interactions, log-ins on schwab.com alone. And you can see how much of a ramp that is over the prior couple of years. The move to mobile is also something that's really quite astounding, when we look at just the volume of our clients that are now using mobile. And by the way, in any given month, around between 38% and 42% of our clients are only using a mobile device in our retail business. So it's a tremendous platform for clients to kind of get the easy work done, the things that they want to read about or early easy transactions. But one of the things that we saw in 2020 was just how much more they were using the mobile app, not just for to read or to check a balance, but actually to engage with us, whether it was through an account open, you can see 3x more account opens or 4x more trades. So the move to mobile is certainly a significant one. And we're making investments to ensure that the mobile app has all the functionality that clients want. It's already well received, but there's more that we can do to ensure that, that's a channel that really is robust and serves our clients' needs into the future. What I also mentioned our -- the trading volume that we're seeing on mobile. We saw that on the TD Ameritrade platforms as well as on the Schwab platform. We're now over a 25% -- between 25% and 35% of trades are actually happening on mobile. So it's really a tremendous growth channel from a trading perspective as well. So it wasn't just a retail business where we saw the move to digital, we saw that on the RIA side as well. And here, you see the Schwab platform as well as the TDA platform. So we saw a significant increase in account opens digitally. So about 40% or so on both sides, Schwab and TD Ameritrade, of accounts are opened digitally today. And that's up 74% on the Schwab side, 62% on the TD Ameritrade side. And advisers tend to use more paper than our retail clients, which is a real opportunity. But what we saw in 2020 is that they really started taking advantage of more of the digital capabilities that we offer. Some of those capabilities, for example, we launched new digital actions, which allows an adviser to actually have a completely digital interface on common transactions that they might have otherwise filled out a form to complete. And what we saw is right from the start, we launched this during 2020, and we saw right from the start, quite a strong adoption of those new digital actions. And it's going to be a continued area of investment given the opportunity that we have to drive scale for those advisory firms as well as scale for our back office. On the TD Ameritrade side, we also completed a big milestone, which was a migration to the Veo One platform. And this is an important milestone as we think about getting closer to client conversion and migrating our clients to a single platform into the future. So if we take a look forward, 2020 was really a special year, an impactful year when it came to digital engagement. Many of us engaged digitally for the first time. Many of our clients engaged digitally for the first time in interactions and transactions that they wouldn't have otherwise completed digitally. And we believe that, that digital adoption trend is definitely here to stay. You can see here on the slide, many consumers plan to continue to use that -- those digital tools into the future even after the pandemic. And I think the longer the pandemic goes on, the more likely we're going to see that continued use. The other trend that we think is really important here is the demand for financial advice. And we talked about this earlier today, is that, that's not just digital, but it's both digital and human advice. We know that satisfaction for clients is much stronger when both digital and human interactions are mixed. And we see this in offers, for example, as our Schwab Intelligent portfolios premium offer, where an investor can get access to our digital advice capabilities and access to a certified financial planner. And during times of volatility, especially in 2020, we saw a strong uptick in the appointments that investors were making with those certified financial planners, where they have a mostly digital relationship, but they -- when they really want to talk to someone, they have access to that CFP. The final trend here that we think is really important is this focus on personalized experiences. And this is going to be something that really will kind of set the tone for the next topic I'm going to talk about, which is thematic investing. When we look at personalized experiences, we know that investors are more engaged and asking more than ever to ensure that the investments that they're making, the services that they're using are aligned with their values and beliefs. And this is a real opportunity when we think about serving our self-directed client base. So let's talk a little bit about thematic investing. So as I mentioned, self-directed clients are a huge population for Schwab. Actually, in our retail business, about 93% of our clients actually self-identify as either fully or partially self-directed. And if you add to that, the highly self-directed population at TD Ameritrade and the large population of newer younger investors entering the industry, it's really a very large and growing population. Actually, it's really excited that this is the fastest-growing segment. It's the fastest-growing segment that I've seen this year with a 21% year-over-year growth in self-directed investors. Given our history in this space as well as the recognition that we've gotten over the years, such as J.D. Power and #1 in self-directed, we know that we can serve these clients well. But we continue to evolve the capabilities and digital completely part of that. So what is thematic investing? So as Walt mentioned, thematic investing is really an opportunity for an investor to basically invest in something that they believe in, an area of interest, i.e., a theme that they have strong beliefs about. It enables the client to act on the investing ideas that are important to them. So it could be a tech or a consumer trend, think about artificial intelligence or the mighty millennial or digital dollars or it could be a social or environmental trend like climate change or LGBTQ friendly or curing cancer. There are lots of themes that are interesting to investors. And up till now, investors would have to go out and do the research on their own to try to identify what are the companies that have the biggest exposure to that particular theme. With this offer, we're going to be offering clients an inventory of curated themes. And they'll be based on that sophisticated research platform that we actually purchased last year, you may remember from Motif Investing. Motif Investing developed a really robust strategy and platform that mines terabytes of data, both structured and unstructured data in order to identify stocks that have the most exposure to a particular theme. And each theme is basically a weighted basket of stocks that are -- that have that most exposure to that particular trend or topic. Clients are going to be able to research the theme, purchase it as is or they can customize it, it is a self-directed offer after all. And they'll be able to regularly update that theme based on the updates that we provide through our proprietary research engine. They'll also be able to track performance and, of course, update and personalize whenever they want to buy or sell more at any time. We'll leverage a fractional share trading capability that I mentioned earlier, and that will allow us to be able to offer this at a really low minimum. Even an investor with just a few hundred dollars will be able to purchase a theme. And we're planning to charge an asset-based fee for this offering that will be aligned with our heritage of offering great solutions to clients at a great value. We're working on this offer right now, and we plan to launch it in the second half of this year. So we're excited about this new take in digital and how we can drive both win-win monetization and a new great experience for all those self-directed clients. So I hope this gives you a sense of the progress that we're making around digital transformation. We have a lot more to look forward to. But I'm going to actually hand it off now to my colleague, Rick Wurster, who heads up our Schwab Asset Management Solutions team. And then I'll be back again with Rick for the Q&A session. So Rick, over to you.

Thank you, Neesha, and hello, everyone. I'm thrilled to be here today to share how Schwab Asset Management Solutions, or SAMS, is helping Schwab deliver on the objectives Walt has put forward, which is to build scale, deliver on client friendly monetization and support our client segments. A couple of months ago, my teenage daughter asked me to take her shopping. We went to a department store, and she was thrilled to go through the racks and racks of clothing to pick out exactly what she wanted. And while I thoroughly enjoyed my time with her, I found the shopping experience to be a bit overwhelming. I contrast that with the way my wife likes to shop and the experience Walt referenced earlier. She uses Stitch Fix where a stylist who understands her goals and preferences, works to build a wardrobe that meets her needs. A box of clothing appears on our doorstep once a month. She keeps what she likes and sends back what she doesn't. It's simple and it's personalized. Those are 2 very different ways to shop with different levels of choice, help and guidance, and the different approaches work well for different people. Just like individuals have different preferences when it comes to clothes shopping, we know that individuals have different preferences when it comes to how they invest and how they manage their wealth. My goal and our time today is to discuss a few things. First, to demonstrate how SAMS is well positioned to meet the spectrum of clients investing in wealth management needs in the way that works best for them, driving both great client outcomes and growing our business in the future. I'll share a little background on how we strategically aligned our asset management capabilities and expertise within Schwab. And I'll speak to some of the financial dynamics that are impacting our business. I'll also highlight some of our accomplishments in 2020 and our high priority initiatives for 2021. Over the last 18 months, we've strategically aligned our asset management capabilities and our wealth management expertise from across the firm to maximize the impact we can have on our business and on our clients. We brought together our research groups, our third-party platforms, our investment groups, all under one umbrella with a unified vision to help enhance the financial lives of our clients. We've also welcomed several acquisitions. Together, we have an incredible opportunity to use our scale and expertise to drive great client outcomes and to grow our asset management business. So what does this look like for our clients? To go back to the shopping experience analogy, we strive to meet the needs of individuals with a wide range of preferences and objectives. Taking a look at the left-hand side of the slide, you'll see someone reading a fashion magazine. Just like fashion experts share commentary on trends, our investment experts share perspectives on the market and wealth management topics like taxes and financial planning. Clients engaged in our research at record levels in 2020 with over 20 million views of our content. Providing guidance to self-directed clients is important to us to deliver on our commitment to improve the financial lives of our clients, and we think that's particularly true in environments like this. Moving to the center of the slide, you see the racks of clothing that my daughter found so thrilling in offering her incredible choice. We also offer flexibility and choice via platform that supports $2.3 trillion of assets and 22,000 products from hundreds of asset managers. And like many department stores, we have our own house brand. And the products we manage ourselves stand for high quality at great value. We now manage $600 billion in assets as of the end of 2020. And finally, if you take a look at the right-hand side of the slide, you'll see the type of personalized fashion solutions that my wife prefers. Within SAMS, we know many investors want the help and guidance of an expert to manage a solution for them, and we offer clients a variety of advised offers, including Schwab Private Client, which had $148 billion under advisement as of 12/31. Meeting the varied needs of our clients is at the heart of everything we do at Schwab and within SAMS. And we are well positioned to help clients with a broad spectrum of investing preferences to meet their financial goals. I'd now like to discuss the financial dynamics of our business. Our goal is to deliver for clients and in doing so, to contribute in a bigger way to Schwab's economics. Our asset management business has experienced 60% asset growth over the past 5 years. Revenue over that same time period has grown at about 2% annually and now stands at $3.5 billion, benefiting from a return to solid growth in 2020. There are a couple of factors that have compressed revenue growth. First, there's tremendous fee compression in our industry, and we have been a purposeful leader ourselves in driving down the cost of investing. We've also experienced headwinds in our mutual fund OneSource business as clients have sought investment opportunities beyond active mutual funds. And we're also waiving hundreds of millions of dollars of revenue in our money funds given the interest rate environment. Now while there have been some headwinds, there have also been some tailwinds, notably in advice. If you take a look at the yellow bars on the left, you'll see we've experienced 11% annualized growth in our advice business. If you pivot over to the right-hand side of the chart, you'll see the revenue on client assets or ROCA of our advice business is the highest of all of our asset management businesses. And what's interesting about that is that our advice clients also have the highest client promoter scores, meaning they are our happiest clients. This represents the power of the opportunity. We can monetize our business by growing our advice offering while increasing the satisfaction of our clients at the same time. We also spent 2020 pivoting towards opportunities to drive client friendly monetization across a large client base to enable stronger growth, and I'm going to describe some of those opportunities in a few minutes. 2020 was a year of foundational growth for SAMS that lay the groundwork for opportunities going forward. And I'd like to hit on a few of the highlights, starting with acquisitions and integrations. First, the acquisition of Motif helps position us to deliver for clients in the personalized investing space, a space I expect to grow and one in which we should be a leader. Second, the acquisition of the Wasmer Schroeder strategies evolves our fixed income offering. As Joe highlighted earlier, just last month, we launched 20 fixed income SMAs and bond ladders to Schwab's retail clients. And finally, USAA and TDA bring us scale as well as opportunity in the case of TDA, and I'll expand on that in a minute. Moving on to product distribution. We continue to differentiate between third-party asset managers -- partners, something we will continue to accelerate. We've built our semi-transparent ETF or active ETF platform, we advanced our alternatives offering for adviser services clients, and we began the work to make alternatives available to retail clients to meet the needs of our higher net worth clients. We doubled annuity sales, and we made important investments in our SMA operational capabilities, which will allow us to expand our wealth management business in the future. On the regulatory front, we've had to respond to a lot of new rules and guidance from our regulators, and we have successfully positioned the organization for new developments like the ETF rule, new semi-transparent active ETFs and regulation best interest. Finally, on personalized outcomes, we made progress on 2 important topics: retirement income and ESG. Okay. As Neesha mentioned earlier, we know ESG is a growing importance to many investors. And we created a new landing page with a point of view. We also created a new role and identified a leader to head our ESG strategy and to accelerate our actions in the space. With those 2020 accomplishments behind us, I'd like to focus on the 6 areas of highest priority for us in 2021 that will help support Schwab's objectives of building scale, driving client-friendly monetization and supporting client segments. I'll start with TDA Ameritrade, which provides us with some attractive potential revenue synergies. And I'm going to highlight three. The first is advice. At TDA, roughly 8% of retail clients use advice. At Schwab, that number is over 18%. We believe there's hundreds of millions in annual revenue potential if we can increase the use of advice in a meaningful way. And in addition, we know this may result in more satisfied clients based on the Client Promoter Scores we discussed earlier. Second, we have an opportunity to take our proprietary ETFs and money funds to TDA, and that is already underway. We have a 2% share of index assets at TDA and a 23% share of Schwab index assets. Competitors have often as high as 60% to 90% share in proprietary assets. Growing our share at TDA and gaining more share at Schwab represents potential revenue upside. Third, we have an opportunity to take the best of each firm's third-party asset manager contracts and believe there are potential revenue synergies there as well. Second high-priority area is personalized investing, which I believe is the next frontier of asset management and that we are well positioned to be a market leader. Personalized investing will allow us to optimize taxes for clients, manage concentrated positions and align investments to client values, all things that I believe are increasing in importance. Neesha spoke to this topic as well. And from a firm-wide perspective, Schwab can help empower personalized investing by delivering the resources, guidance and investment choices that clients need to meet their unique needs and objectives. I want to briefly cover 3 areas within personalized investing that we're focused on in 2021. The first is direct indexing. While the market today is $300 billion to $400 billion, we expect it to grow to over $1 trillion in assets. Leading in this space requires the ability to deliver great tax outcomes, and we've never had to distribute a capital gain in the history of our equity ETFs. It also requires great SMA capabilities, and we're the #3 provider in the country. It also requires the ability to be a great indexer, and our investment management group is 1 of the top 5 ETF competitors and 1 of the top 3 index fund companies in the industry. We also created and manage the Schwab 1000 Index, which has been a great index and will be an important part of our strategy in the future. Second, there's an opportunity in thematic investing that Neesha covered earlier. And third, I want to call out ESG. We know this is an area of increasing importance for investors, and we have and will continue to take a number of steps to help clients. While I can't share specifics, I can say that we will be increasing our presence in the ESG space within the next year beyond the thematic and direct indexing initiatives that Neesha and I have discussed. Now let's turn to our third high-priority item for 2021, fixed income expansion. When we look at Schwab retail clients today, we estimate their assets at Schwab are split roughly 80% equity, 20% fixed income. However, we believe their overall asset allocation is closer to a 60-40 split. That means our clients do a lot of their equity business here, but some of their fixed income holdings may be elsewhere. It's also true in Advisor Services where currently only about 10% of client assets at Schwab are in fixed income. That is hundreds of billions of fixed income assets that may be held away, and that's a huge opportunity for us. In 2021, we're focused on leveraging the acquisition of the Wasmer Schroeder strategies to deliver more personalized fixed income SMAs at a lower price and competitive products on our platform and with greater profits for the firm. That is a win for clients and a win for our business. We will also collaborate with the digital team to make building your own fixed income portfolio easier. While fixed income experts can build a portfolio of bonds today, we want to create a more guided experience for investors to allow any investor to build a fixed income portfolio. Moving on to Priority 4, I'll briefly discuss operating platform modernization. When the SAMS organization came together, we needed to bring several asset management groups under 1 operating platform. We started this important work in 2020, and it will continue in 2021. In addition to the efficiencies and scale, we expect this to bring to our business, it will also bring unified managed account investing capabilities to the firm, something that will be critical to the future success of our wealth management business. Speaking of wealth management, let's move to our fifth area of high priority, and that's wealth management. We see a bull market for advice. Many clients want that expert next to them to help guide them to the place they want to get to financially. We see great opportunity to accelerate growth and increase capacity in our wealth management business to add a discretionary wealth management offering to our lineup and, over time, to create an enriched wealth management experience. This is an area where we delight clients and monetize our business. It's also a tremendous additional growth opportunity for us. Finally, I'll wrap up with our sixth priority, third-party platform enhancements. We have several opportunities here. First, as Walt mentioned earlier, we are pursuing creative partnerships with our third-party asset managers to create better outcomes for clients and better economics for us while preserving our open architecture approach to maintain the choice we know our clients desire. This may be based on more curated search experiences, which make it easier to find great products while showcasing some of our best partners. Second, we'll continue to differentiate between third-party asset managers based on how they treat our clients and how they treat us. Third, we are using our platforms to enhance the segmentation we deliver to clients by exploring additional opportunities to meet the unique needs of our higher net worth clients. Specifically, we've launched new liquidity solutions for these clients and are currently building out an alternatives offering. And with that, I'd like to wrap up. Unlike the fashion world where shoppers must go to a department store or find a subscription delivery service to meet different needs, investors can find solutions to meet a spectrum of investing in wealth management needs all here at Charles Schwab. If you take 1 thing away from this discussion, I hope it is this. SAMS is a leading asset manager. We are well positioned to solve the breadth of clients' needs, scale our business and to be an even bigger contributor to Schwab's growth. Thank you for joining. And with that, we have the chance to answer some questions, and I'll turn it over to Jeff, who can help with that.

Great. Thank you so much, Rick, and I see Neesha coming back on. I think we have everybody here. Apologies in advance to both of you as we may ping pong back and forth, a lot of interest coming in from the group on both of your respective worlds. So well done on the presentations. Let's take our first question be for you, Neesha, and this comes from Rich Repetto at Piper Sandler. Can you talk a bit about how you differentiate Schwab's efforts on the digital mobile app area with -- as compared to competitors and -- who we have tended to target, perhaps, what we describe as a younger, newer investor base? How do you think about that? And are these customers not in Schwab's focus? Or what's the design target?

Yes. I mean -- well, it's a great question. Mobile is certainly a hot topic. And I would say that our mobile app has a lot of clients to serve. So one of our strategies is we chose to have a single mobile app. And actually, we used to have a Schwab Intelligent Portfolio separate mobile app that we actually are now migrating right into the Schwab mobile app. And what that means is that a single mobile app has to serve a lot of different constituencies. So we do strive to kind of create customized experiences for different segments of clients, and that's actually something that we're going to do more of. But the mobile app tends to serve even younger investors well. I wouldn't say that they are not in stope for the mobile app. And we -- if we look at our data, over 50% of our new-to-firm clients are under the age of 40. And so we see strong adoption -- a strong interest in Schwab and then strong adoption from -- on that mobile app. I would say the areas that we're focused on in the mobile app often are areas that we haven't invested in as heavily. And actually, part of our work with TD Ameritrade is actually making some enhancements in the Schwab mobile app that bring some of those capabilities that TD Ameritrade had in their mobile app into the Schwab mobile app. So some examples of that would be things around trading experiences. So TD Ameritrade has had such a prowess in the trading area, and our Schwab mobile app hasn't always had some of those capabilities. So I think those are capabilities that we're focused on. We're also going to add more help and guidance content to help those younger, newer investors. Because that's also an area where we focused a little bit more on the web when it comes to help and guidance and not as much on mobile. So those are 2 areas that I think are enhancements that will really kind of serve that younger population that, at this point, tends to be much more active.

Great. Thank you, Neesha. And maybe one adjacent follow-up here from [ Alvin Lokey ] at GIC. Looking at the digital retail onboarding experience, how would you rate Schwab's experience today versus some of the other more, we'll say, technology-first competitors? And how -- what measures you use to assess any gaps or how you're performing on that experience front?

Yes. I think this is an area we've made a lot of progress. And actually, over the last couple of years, one of the things we've done is to institute a lot more user experience testing. We do a lot of A/B testing to try to help an investor get through that experience. And so now with 92% of accounts being opened online, we do have to serve a broader swathe of investors and account types when you think about opening an account at Schwab versus some of those tech-first, tech-led companies that are more the start-ups out there, especially. And so we are focused on trying to make sure that we create the scale, so we don't want to have multiple onboarding experiences doing things in the user interface, doing client testing, we can kind of experiment and try to figure out how do we optimize the experience for any given segment of clients. And that's really a lot of the work. And that's how we've made such progress around, for example, that call-in ratio that I mentioned. So it's having a lot more investors successfully complete that without feeling like they need to call in. Although I'll tell you, when an investor is engaging with us for the first time, sometimes they do want that extra validation, and it's great that we have the contact center to be able to support them, which I think is also a difference from some of those tech-led firms where sometimes someone gets stuck in that process, and they don't really have someone to call and to get the support.

Great. Thank you so much. Rick, maybe one for you. A handful of questions coming in from the analysts regarding maybe having you expand a bit on the alternatives offering that you alluded to in your remarks around your recent evolution of the arrangement with iCapital. And just what your vision is for where we are today and where you see that alternatives offering going over the near term?

Yes. I'd tie it back into the broader strategy that Walt has laid out around segmentation. We want to meet the unique needs that our higher net worth clients have. And we know that's a group of clients that are highly sought out by a lot of our competitors. And some of the things that our competitors bring are really differentiated and personalized liquidity solutions for those clients as well as compelling alternative options for retail clients. We need to be able to deliver both of those from a product standpoint, if we're going to be able to compete for those higher net worth clients and keep them engaged and happy clients here at Charles Schwab. So over the next 12 to 18 months, we're building out a platform that we expect our higher net worth clients can engage on and access leading alternative options, so they can benefit from the diversification in their portfolios here at Charles Schwab and not have to go elsewhere. We've also, on the liquidity side, added 2 liquidity options for our higher net worth clients that came via the acquisition of Wasmer Schroeder. And we've already been engaged with some of our highest net worth clients that were evaluating going to other places, and we've been able to keep them here. And this dovetails some of the work that we've done to build out our well strategists group to help provide advice to this higher net worth group of individuals. So it's all tied into an effort to segment our client base, deliver on the unique needs of our higher net worth clients and make sure that people come to Schwab for all the things we stand for, great value and delivering great products, service and advice, and we need to do that in all client segments and in particular, for our higher net worth clients.

Excellent. Thank you so much, Rick. And this one, we'll start again with you, Rick. This may be an opportunity for both of you to weigh in. As you both think about opportunities across, we'll say, this broad bucket of personalized investing, do we -- do you believe that Schwab currently has all the capabilities or building blocks necessary to deliver? Or do you see maybe additional supplementation through M&A or other means?

Well, I think we've got a great starting point. I wouldn't trade our starting point for anyone else's in the industry. We've got incredible distribution. We've got millions of clients and trillions of assets. And we've got an investing capability that I think for -- given what we need to do is the best in the industry. And we've got, I think, the best digital capabilities in the industry. So if you put together distribution, our investment capabilities and our digital platform, I think we're going to have a really competitive offering in the personalized investing space.

Great. And apologies, that question was from Dan Fannon at Jefferies. Let's take a look here, sorry. So much interest. And maybe too early to comment. But Neesha, maybe a follow-on here around specifically your comments on thematic investing. Maybe just your level of optimism about client -- near-term to medium-term client uptake as well as would we -- would folks anticipate this being available on both Schwab and TD pre-client day 1.

Yes. Well, our -- it is a new experience. I mean we'll keep investing. We're the leader in thematic investing, but thematic investing is a newer experience. And so it's a little bit hard to predict what uptick is going to be. But I would say that given what we are seeing from other experiences that we introduced, we see a pretty strong uptick from that self-directed client base, which is comprised of so many [indiscernible] high percentage of our overall client base. And we know that a lot of those newer investors are highly engaged. And so I think it's hard to be more specific about what that uptick is going to be. But I do think that we feel pretty bullish that we're going to have a strong reception. And especially, if you, again, tie it back to what investors are interested in these days with regards to ESG and some of the kind of lease values-driven investing, it really is a much simpler, more automated-type experience to kind of express that in your portfolio without having to do all that research yourself. So we think that the value proposition is pretty compelling. The plan is to introduce this on the Schwab properties, so both schwab.com and the Schwab mobile app, and not introduce them on the legacy TD properties. So it will -- there will be a period of time where it will be available on the Schwab properties. And of course, those TDA clients can open Schwab accounts and engage with thematic investing.

Jeff, maybe I could just add one anecdote, which is I would say in the ETF space, the thematic ETFs have been one of the hottest and most quickly growing areas. I think this year, the firm with the second amount -- second highest amount of inflows is a thematic-oriented firm. So I think it's something that's clearly resonating with clients and is potentially well-timed for us, I believe.

That's perfect. Thank you so much. Next question from Devin Ryan, JMP Securities. Probably for both, maybe I'll ask Neesha to start. As the firm scales and continues to make technology enhancements and has access to more customer data and which to utilize, which can be powerful to help evolve and improve the experience, how do you balance that evolution with privacy and security mandates?

Yes. It's such an important topic. So that's actually one of the areas in digital services is our data team. So our data analytics and insights team fit in this -- in my enterprise. And actually, one of the big areas of focus is how do you -- I call it the line between cool and creepy. So how do you make sure that you use the data that our clients entrust with us and use it in a way to create compelling experiences because they are demanding that. They are expecting a certain level of personalization in digital and in human interaction but not crossover where it feels inappropriate. And then add on top of that, how do we keep all this data secure and ensure that we are meeting their expectations and, of course, regulatory expectations with regards to privacy. So it's a complicated series of decisions, but I would say that we'll touch on our focus on trust and client relationships. At the end of the day, that is paramount. And so we are never going to use client data in a way that feels inappropriate to them. And generally, the way we use client data today is actually just to power the experiences that they've asked us to power for them. So it's helping us understand, for example, that onboarding question, the [ account open ] question, it helps us understand when they were in the digital channel, they fell out of the digital channel, they called the contact center and how do we serve them better so that they don't have to call in if they don't want to. So we use the data in those ways but really are very thoughtful to ensure that we kind of continue to focus on client trust first and foremost.

Great. Thanks for that, Neesha. Rick, maybe one for you here. This is from Michael Cyprys at Morgan Stanley. Can you talk a bit more about the strategy around distributing Schwab proprietary asset management products off-platform and how the distribution team is resourced and perhaps any additional high-level stats or trends you would be willing to share?

Hey, Michael, thanks for the question. Off-platform has been an area of strength for us. We had, I think, our strongest-year ever last year. Off-platform are 1 of our top 2, certainly, and we're off to a really strong start this year. We have a well-resourced team, and we've got a great product that we stand behind. Our products are among the lowest cost in the industry in the biggest areas that are most core to clients' asset allocation. So our platform is a priority for us, something that we're well resourced to go after. I would say, though, we view ourselves as having a tremendous opportunity on-platform, and we never lose sight of that. I mean we've got nearly $7 trillion of client assets that have respect for an appreciation for the Schwab brand. And so our first place to start is clearly on-platform. But given the strength of the products and the scale we're shooting for, off-platform is an important distribution area for us, and it's been an area of strength. Last year, we found that off-platform clients, given the price action in March, clients were rotating out of some of the long-held ETFs that they held from some of our competitors. And they rotated into ours at very low cost and great products for them. On-platform, though, that created some headwinds at times because on-platform, we do have a strong share. And I'd say, we're tax-loss harvesting and moving out of our ETFs. They went into others, but I expect that to come back at some point. So all in all, off-platform has been an area of strength. We expect it to be an area we continue to focus on. But on-platform, we have such a strong opportunity. We'll continue to make that our high focus of our efforts.

Got it. Thanks, Rick. And a question from Bill Katz at Citigroup. During one of your prepared remarks, you talked a little bit about ROCA trends within the industry. What are you seeing particularly with then, we'll say, the advisory solutions sleeve that any types of longer-term trends around fee pressure or change in mix across different types of advice solutions that are being utilized by clients?

I'd say a couple of things. I would say ROCA in the advice business has held up reasonably strongly. It's an area where there is a bull market where clients want help. They want someone to own their outcome and to help guide them towards the outcome they're aspiring towards. And I think increasingly, people don't want to stress and worry of having to manage their portfolio. Or at least some portion of our clients don't want that stress and worry. They want someone to do that for them. As a result, we've seen high demand for advice solutions. We haven't seen a lot of ROCA pressure. Now our ROCA has come down. If you go back to that page from earlier in the presentation, you'll see that our ROCA and advice has come down. That's been a mix shift as our intelligent portfolios have grown, which have a lower ROCA. Our overall ROCA and advice has come down, but that's been purely driven by mix. Our fees have stayed relatively steady across all of our advice programs. I'd say an area where we have tried to be disruptive is in the fixed income SMA space, where with lower yields, we think price matters maybe more than ever in the SMA space. And with our launch of the Wasmer strategies, we've launched underneath where the competition is on platform. And that allows our clients to get a better deal, lower fees in a low-yield environment, but still is a win for us as we actually go from -- we actually will increase our profits at the same time we're bringing lower fees to our clients. So that's where we see a little bit of pressure, but we've proactively addressed it.

Great. Thank you so much for that, Rick. Neesha, maybe back to your question from Michael Carrier, Bank of America. On the digital side, you did provide some very nice year-over-year growth metrics that are helpful. But would you be able to share any additional color around the percentage of overall clients that are engaging in digital? And is there a difference in the demographics of clients that are utilizing digital channels more than those that aren't?

Look, it's interesting. It really is across the board. I think for years, there was maybe a missed nip out there that our older clients were not engaged in digital, and we see engagement across the board. So when we look at the -- whether it's the move to mobile, whether it's just increased interactions, even things like use of our live chat or our new -- our natural language process machine learning-based intelligent assistant on our mobile app, all of those have pretty diverse representation across the different client segments in different demographics. So there's not 1 population that's driving the growth in digital. It really is pretty diverse. And actually, some of the investments we've made, for example, around the -- we call them retirement journey. So some of our clients were nearing retirement or in retirement, things like being able to do your R&D online. And we've actually seen lots of strong digital adoption and even those experiences, which I think, traditionally, we might have thought would require more of a human interaction. And so I do think it's pretty across the board, not driven by, for example, younger investors.

Great. Thank you for that. Next question from Craig Siegenthaler at Crédit Suisse. Rick, maybe just looking to understand maybe the dynamics of the -- of any potential overlap between Schwab's proprietary advice solutions and those offered by the RIAs that cause [indiscernible]. Maybe taking a moment to remind folks of our thoughtful approach to balancing the relationship between the retail and the AS side of the businesses.

Yes. I mean the first thing I'd say is I go back to a chart Walt showed earlier in the presentation, where we have 13% share of client assets in the industry. There's 87% that we don't have. And so I think collectively, there's plenty of opportunity for us all to help clients. So from our perspective, I think it's a win-win relationship us and the RIAs. I think we want our clients to be helped in a way that makes sense for them, so that they can get to the best place that they want to -- want and need to get to. I think where we find the -- some of our RIA advisers to be particularly distinctive is in some of the more tricky situations that are tougher for our business at the scale we manage out to potentially manage. But we think a couple of things. One, you can get great advice with our advisers. You can get great advice here at Charles Schwab. There's plenty of clients in the industry who would benefit from working with both of us. And there's many clients that don't work with us today. The other 87% that we both collectively can go hopefully address, and we'll both have very growing businesses if we can do that.

Great. Thank you for that. And maybe time for one last question here. Rick we'll probably start with you, and Neesha, if you'd like to weigh in, please feel free. There's talk about, since the announcement of the TD Ameritrade transaction, the potential opportunity of increasing advice penetration with that client base, particularly relative to the 18% to 20-ish percent at Schwab today. What do you all believe is an achievable targets or framework to think about that advice penetration offering? And that question comes from Steven Chubak at Wolf.

Steven, thanks for the question. It's an interesting question. I think intuitively, people think, well, TDA is all about trading, so clients aren't going to be very receptive to advice. But I believe they used to say the same thing when we had about -- around 8% penetration of retail clients here at Charles Schwab. And over the course of 5, 10 years through a lot of effort and building out great programs, we've been able to grow that share. My expectation is the same at TDA, that is if we have great programs that can benefit clients, they can help them get to the place they need to get to financially, that they will be embraced. The other thing I would say is we know that many TDA clients will do their trading business at TDA and then go somewhere else for advice. And if we have great offers, we can have them do their trading here at Schwab and keep their advice here at Schwab. And so that's our goal. If we can deliver a world-class experience, my -- I see no reason to believe we can't evolve on the same path that we have here at Schwab, which has been roughly from 8% to 18%. I think it's very doable at TDA. Now of course, we'll learn more over time. Perhaps there really are differences we're not aware of, but we used to have these same concerns at Schwab and have overcome them with great programs at great prices.

Yes. I would just add on to that, Rick. It's just we have some experience from Schwab Intelligent Portfolios, particularly. When you think about -- when we look at the trader population at Schwab, legacy Schwab, what you see is that we have very strong adoption with our Schwab Intelligent Portfolios with traders. And again, like Rick said, sometimes bifurcating their assets into the part that they sell direct and really do their research and place their trades to the part that they really want to as someone else serve them. So whether it's intelligent portfolios or another managed investing offer, we have experience and kind of seeing those traders engage with us in different ways. So I think we feel pretty confident that there will be at least some population of that TD Ameritrade population that will be pretty enthusiastic of the robustness of the advice offerings that we have relative to what they were able to experience at TD Ameritrade.

Well, excellent. Thank you very -- thank you both much for your time and thoughtful responses today. Great session. Everyone has now earned the first break of the day. So I think we have about maybe 10-plus minutes. We'll come back at 10 after the hour with Jonathan Craig to kick off the Retail portion of the program. So when Mr. Fowler reappears in your screen, you know it's time to retake your seats. So thank you all both again, and see you all in a few minutes.

Thanks, everyone.

Thank you. [Break]

[Audio Gap] As I mentioned before, Jonathan, Catherine and Stacey will go in a string, and then we'll do Q&A with the group. So you can put your questions in at any time during their presentations or then during the live session. So with that, I'm going to turn it over to Jonathan.

Great. Thank you, Rich. So I thought I'd use the next 15 minutes or so to provide an update on some of the major accomplishments in the Retail business in 2020 and then share some of the priorities for 2021 and beyond. But I thought I'd start by acknowledging it's already been done, but acknowledging what an incredibly unique year 2020 really was for all of us. I think the same was unprecedented is truly an understatement. In the external environment, we had to deal with a global pandemic, the likes of which I don't think any of us have ever seen. We had to deal with significant social unrest. We saw a highly charged political environment. And of course, that was just externally. Internally, we had to figure out how to get all of our employees home and not just home but working productively at home. And of course, we had to deal with record client volumes. A truly a remarkable year by any account, and of course, this year so far has been anything but a return to normalcy. I think one of the hallmarks of a great company is that they stay on offense even when they are winning and even in the face of significant change. And I think that's what we saw in 2020 and continue to see. I think that defines Charles Schwab, and I think it very much defines the Retail business at Schwab. So with that, let me touch on some of our accomplishments from 2020. In 2020, we continue to innovate across the client spectrum with many new products and solutions. A couple of examples come to mind. We launched Schwab Intelligent Income, a real breakthrough way for clients to decumulate their portfolios in a tax-smart way across multiple accounts. We launched fractional trading with Schwab Stock Slices. And not only did we launch that capability, but we combined it with a unique gifting capability that many of our clients were asking for. Many of them wanted to gift fractional shares to their loved ones, their children, their grandchildren, really powerful capability, both for today and for future generations. We also continued our investment in planning. I know Neesha talked about this, but it was so important. We launched a free digital planning capability to complement our already significant investments in live planning. We expanded our commitment to deepening client relationships, including adding more dedicated relationships for more of our clients. And we expanded our branch network by opening independent branches in communities across the country. We made significant investments in our ultra-high net worth offering, including launching a new wealth adviser role in supporting roles around that wealth adviser, all aimed at serving that $10 million-plus client. Well, these clients at Schwab tend to be largely self-directed, but make no mistake, they have very unique needs, and we need to be there to serve those needs. And the investments we made here were all about that. And we continued our investment in what we call enterprise service transformation. I've talked about this in the past, but this is a critical multiyear, multimillion-dollar investment, all aimed at making Schwab even easier to do business with while, at the same time, creating scale for the organization. Critically important. And there are so many examples I can point to there, but the launch of virtual assistant, the scaling of virtual callback across the firm and so many digital enhancements, again, all aimed at making Schwab even easier to do business with. And of course, in addition to doing all that, we had 4 major integrations, our acquisitions and associated integrations. And we also had to adapt to significant regulatory change, not the least of which was Regulation Best Interest. So clearly, a busy year with many accomplishments and all done in a fairly challenged macro environment. In addition to those accomplishments, we also took some very meaningful steps to begin the integration of TD Ameritrade to our go-forward operating model. An important example of that work is the work we did combining the Schwab and TDA branch network into 1 common footprint. We had tremendous opportunity there because 90% of TD branches were within 10 miles of the Schwab branch. So to drive that work, we agreed on a set of principles very early on. Number one, and maybe most importantly, we agreed we would move fast because we wanted to remove uncertainty from the system. In fact, we want to take advantage of the fact that many branches, all TDA branches, had been closed since the pandemic. We agreed that we would select the best locations and be entirely agnostic as to whether they were Schwab or TDA locations. We agreed we would do everything possible to maintain or improve even in some cases, the proximity that we have to our clients. And finally, we agreed with leverage colocation between now and client conversion. Colocation offers lots of benefits, not just real estate benefits and cost benefits but also cultural benefits as Schwab and TDA employees start to work side-by-side even before client conversion. The result of all that work is we closed 216 branches across Schwab and TDA. We did that within less than 30 days past legal day 1. So moved very quickly, closed 216, that left us with -- or has left us with 417 physical branches, 140 of which are the ones that are colocated. Again, that's where a Schwab employee is now going into a TDA branch or a TDA employee is working in a Schwab branch. Still 2 separate broker-dealers but colocated in 1 physical presence. And maybe most important, with this remaining footprint that we have as of today, 90% of our combined clients are within 25 miles of the branch, a physical branch. And we were also able to assign nearly all million-plus TDA clients to a relationship. It's a very significant progress with more to come, but very significant progress on combining the branch networks. With all that work, the accomplishments, the integration work, I think it's fair to say we entered 2021 with a very healthy combined retail franchise. A lot of that health comes from the strong results that both firms put up, both firm-wide but certainly on the Retail side. Both Schwab and TD Ameritrade collectively delivered net asset growth of -- net new asset growth of over 90% year-over-year. Household growth is over 175%, and DAT growth of nearly 250%. What that yields is a franchise that is now $3 trillion in combined retail assets, $22 million-plus retail accounts and over 5 million-plus daily average trades. So certainly, a Retail business of size and scale, but also a Retail business that has been well recognized across the industry. On the Schwab side, J.D. Power's named Schwab #1 in self-directed brokerage and direct banking and in the large plan 401(k) space. And of course, TDA has been rated a top broker by StockBrokers.com and Investor's Business Daily. These are just a few examples of what could be a much broader trophy shelf we could share. But suffice to say, really strong results and setting strong industry recognition that positions us well going into 2021. So with that backdrop, let me talk about how we'll operate our Retail business in 2021 and priorities for each of the businesses. Structurally, between now and client conversion, we will maintain 2 brands in the marketplace, but we will act as 1 firm. Acting as 1 firm means, among other things, that we'll align our operating models and business practices. It means we will not directly compete with each other in the marketplace. It will mean -- and it means we will make it as easy as possible for our dual clients to interact across both firms. And certainly, to the extent that a client wants to convert early, we will make that easiest as well, of course. But we still will have 2 Retail businesses in the marketplace. On the TDA side, we're going to go to market with the existing value proposition. Said another way, we will not be making meaningful enhancements on the TDA side. Where there are gaps, we will be introducing our clients to Schwab product where we can. And we will also be marketing the TDA brand in the marketplace heavily, as you'd expect, but a lot of it will be trader-centric. On the Schwab side, it will be business as usual. We will continue to go to market with our no trade-offs value proposition across the client spectrum. And you'll continue to see our marketing across that spectrum as well. Let me touch just a little bit more detail on the differences between each. I'll start with TDA. Between now and conversion, we fully expect a lot of ramped-up competition going after those TDA assets. To be clear, we don't expect much success, but we certainly expect the activity. Given that, not surprisingly, a lot of our focus is going to be on solidifying and building upon the already strong relationships that TDA has built with those clients and really creating confidence in and really excitement around the eventual conversion. To do that, we'll do lots and lots of initiatives. And I'm not going to go through them all, but let me just highlight a couple today. We launched a TDA Satisfaction Guarantee that mimics the Schwab Satisfaction Guarantee that's been so successful in the marketplace. We stood up a dedicated client conversion concierge team for anyone who wants to convert early. We've begun to reopen the branches, consistent with the Schwab approach, which, of course, is to put our employees' health and safety first but also be there for our clients where we can. What that means is we're opening branches in a phased approach across the country that very much take into account the local conditions because the local conditions are very different everywhere, as you all know. We've begun -- we did assign all the million-plus TDA clients to a dedicated relationship, and we've begun to introduce some of the 10 million-plus clients to a Schwab wealth adviser where it makes sense. And finally, of course, we're equipping the TD FCs with what they need to continue their win in the marketplace, including the ability to introduce Schwab product where it makes sense. So these are just a couple of examples. There are many more. I think the important point is just to say that we -- our priority between now and conversion with TD is very much to build upon and solidify the very strong relationships that TD has built over the years in the face of what we think will be certainly some activity trying to go after those assets. On the Schwab side, we'll continue to invest in the no trade-offs value proposition. What that means at the highest levels for emerging affluent and affluent clients, we'll continue to go to market with great service with leading app and web experiences with a broad set of advisory solutions and planning solutions and much more. It means for high net worth and ultra-high net worth, we'll, of course, offer all of that. But we will also expand our relationship models and service commitments for these clients, and we'll also sharpen the value that we give to these clients, both in pricing and product access. And for trader, critically important segment, we will continue to build out our trader capabilities with an enhanced focus on bringing over the TDA trader ecosystem of content, of education and platforms as soon as we can. And of course, I could not be more excited about a lot of the work that Rick and Neesha talked about, in particular, around thematic investing and direct indexing. I think both of those are going to have broad, broad appeal across this entire client spectrum. So those are the high-level priorities for each of the Retail businesses in 2021. But longer term, to be sure, what I am most energized about with the integration of TDA and Schwab is I feel like we are truly building a retail powerhouse that brings together the best of retail advice and trading and relationships, all under 1 roof, all under 1 brand. Very specifically, what that means is we're going to combine Schwab's depth of capability and retail advice and our proven ability to engage clients with that advice with TDA's clear leadership in serving active traders. We're going to combine Schwab's commitment to great service and great relationships with TDA's incredible ability to use content and education to build relationships. We're going to combined Schwab's history of disruption on behalf of getting clients better outcomes, often by using our scale to deliver clients incredible value, with TDA's rich history of disruption as well but often focused on digital and product innovations. And finally, we're going to combine a Retail business at Schwab that tends to be more levered to asset levels and interest rates with the TDA business that tends to be a little bit more levered to volatility. So overall, certainly, to me, it feels like it is setup for it to be an incredible combination for clients, which is most important and, of course, for stockholders and, of course, employees as well. So I'd just close by saying 2020 was a unique and unprecedented year, but the teams, I think, delivered and delivered incredibly well. We are very well positioned going into 2021 and beyond with strong momentum and strong industry recognition. Between now and client conversion, we will go to market as 2 Retail businesses, but we will act as 1 firm. And ultimately, what we are building is a true retail leader that brings together the best of advice, trading and relationships all under 1 roof. So with that, I think I'm going to introduce Catherine Golladay. Catherine leads our Workplace Financial Services organization, which is a critical part of the Investor Services team. And I think I will be back up for Q&A with Catherine and Stacy in a few minutes. So Catherine, it's all yours.

Thanks, Jonathan. Good morning or afternoon to folks. I'm Catherine Golladay, and I lead Workplace Financial Services. I thought today, we would talk about how we serve employers and their employees in the role of workplace within Schwab and then also just take a high-level look at our focus in 2021. So I know that some of you may not be as familiar with our workplace business, and so I thought it was appropriate to spend a few minutes and provide an overview. So we serve employers and their employees across 3 different areas: retirement, stock plan and Compliance Solutions. And these businesses help to drive growth for the firm and connect Schwab to millions of employees. You'll often hear us call them participants who become investors through their workplace. So a quick recap, and let me start with Schwab's overall strategy in the retirement space. So our focus here is really on defined contribution plans and largely 401(k), but we serve other types of plans as well. We provide trust and custody services and a self-directed brokerage product, PCRA. And then finally, we work with plans that range from the very small end of the market all the way up through plans that are $1 billion-plus in size. And we do that through 2 businesses: Retirement Plan Services, that's the top left-hand corner of your slide, and -- Retirement Plan Services; and Retirement Business Services. So Retirement Plan Services, that's the bundled 401(k) business at Schwab. We focus on the mid- to large market plan, very often with professional services firms. You see really strong retention of assets through 401(k) rollovers and just a great pipeline of new investors who first experience Schwab through their retirement plan. So Retirement Business Services, again, top right, they work with intermediaries. These may be independent record keepers and advisers who offer retirement plans to employers. Typically, this is where we show up in the smaller end of the market. They report to adviser services. But retirement overall, the 2 businesses combined, it contributes to Schwab's overall retirement plan, scale and presence in the market. All right. Let's shift gears to the other 2 businesses that round out workplace, Stock Plan Services. That provides a full range of solutions for an employer's equity compensation needs. Our focus here are companies that offer broad-based equity plans and generally in high-growth sectors. If you look at a participant in one of these plans, they tend to be affluent or emerging affluent, and that aligns well with Schwab. And then finally, Compliance Solutions business. We serve employers who have a responsibility to monitor their employees' trading activity. And then as the designated broker for those employees, we can provide them with the breadth of services that Schwab has to offer. All right. On the next slide, I wanted to give you just a snapshot of customer satisfaction. I mentioned that one of our primary roles is to service the front door to Schwab for millions of investors. And for most, we're the first impression. And so as you would expect, we focus a lot of our effort on providing a positive experience to drive satisfaction and ultimately, loyalty. So Jonathan just mentioned the J.D. Power recognition that the retirement business has received in the last 4 years, and Schwab's own CPS scores also shows strong and steady improvement across both retirement and stock plan participants. But our focus on client satisfaction, that extends to the employer as well because they're really the true buyer of our services within Workplace, of course, on behalf of their employees. So past 4 years, more best-in-class awards than any other rated retirement plan provider. This was PLANSPONSOR Magazine. It's one of the key industry trade publications in that space. And then Stock Plan Services rated very highly in the 2020 Group Five Satisfaction and Loyalty survey, very highly across key elements of full administration service. And for those of you that aren't familiar with Group Five, they really do the preeminent satisfaction survey in that space. All right. With that as a backdrop, let's look at 2020 accomplishments. And heading into 2020, we had tailwinds, I think that helped us to capitalize on our strategy of grow, retain, extend. That's grow our employer client base, while achieving a high level of planned retention and, of course, extend those participant relationships. And so let me just touch on a few of them. And first and foremost, I also wanted to mention, impressed with the way our teams stayed focused on serving clients during a really difficult time and through significant volumes. We introduced new capabilities, just to mention a couple in compliance solutions. We enhanced our employer managed trade rule capabilities, really making it easier for clients to do business with us. And in retirement plan services, we continue to build out our digital capabilities and introduce my financial guide, right? Like other parts of Schwab, we believe in the best of -- combining the best of technology and people and so also made investments into our client relationship service model. Like other parts of Schwab, team focus on the TDA integration. And then I'll point out something that impacted the retirement space, regulatory changes, the CARES Act in particular, which was essentially effective when it was signed into law. And quite proud of the way the team has shifted focus to the CARES Act implications for our clients, so that our clients could focus on what they needed to, which was the evolving pandemic situation and running their business and taking care of employees. All right. Let's shift now on the next slide and talk about how -- Workplace, how we win in the marketplace. It's really based on 3 things. And the first is, we show up really well when it comes to service and brand and flexibility. We -- with employers and sponsors, we have high satisfaction rates and strong client retention, 97-plus percent there. And in both stock plan and retirement have had some strong sales results over the years. So first, we went on brand service flexibility. And we also take a holistic approach to helping participants. Because we know that many employers and more and more employers over time, they're so interested in their employees' financial wellness, and they want to work with a partner that can help them with their needs, but also help their employees reach their goals. And so we always have a keen focus on client engagement. 80% engagement now across the businesses and the various channels. And we found that the more that they engage, how they want to engage, phone, chat, online, mobile, the higher the satisfaction, so an evolving cycle. And then the last thing I would point out, and this is retirement in particular, but we stay really focused on supporting the planned consultant or adviser. So the majority of employers that we work with also have a planned consultant, often a fiduciary, as their trusted partner. This is commonplace for any plan outside the small market, and so supporting them and helping them succeed and thrive is quite important. All right. Let's take a look at 2021 at a high level. Our strategy remains the same, and we'll continue on the path that we've been on. And that's a focus to grow the Workplace business here at Schwab and the initiatives we have in place, several of which are on the slide, will support that strategy. This is one of the initiatives in particular that I would like to touch on, and that's our focus on the new participant experience, say, first 6 to 18 months. This might be someone who's changing jobs and coming to a company that we serve or maybe it's new plan that we've won, but this is a really important time when someone's changing jobs, right? They're evaluating their entire financial situation, and it's a moment of real engagement. And so we continue to look to make investments here in an omnichannel fashion. And I see that as a win-win, right? Good for our clients, both our employers and their employees who they want to help, and good for Schwab as we really strive to make it easy for those interested participants to access all that Schwab has to offer. And so our focus winning new business that allows us to increase the participant base and increase our scale, building trust and retaining clients and serving participants well to build long-term Schwab clients. That's the continued focus for Workplace. And so in summary, I just wanted to share my enthusiasm as well. My excitement for 2021 and where we're going. I think the strategy we have in place is a winning strategy for Workplace at Schwab, and we've got a really strong team committed to serving clients. And so with that, I would like to introduce my colleague, Stacy Hammond. Thanks so much for your time today. I'll be back during Q&A. Stacy?

Thanks, Catherine. Hi, everyone. I'm Stacy Hammond, and I'm joining you from the office in San Francisco, like many folks on the call today, hedging against a teen, a tween and a dog that likes to announce the arrival of any UPS delivery, of which there are many. So this is not my home view. Today, we're going to talk a little bit about how retail is acquiring new clients. Let me first orient us on the map of where we are in terms of Schwab. So anything I talk about today is about Schwab new retail growth. I'll make a couple of references to TDA, but the details are all about Schwab. And finally, we're talking about retail specifically. Retail represents about 2/3 of our annual household growth at Schwab. With the other percentages being made up by investors who are served by our independent advisers through Advisor Services and the population that Catherine just talked about, the participants in our 401(k) plan through retirement plan services. Today, we're going to focus on the 2/3 that are new to retail. We have seen absolutely tremendous growth in our retail households over the past 5 years, with the most pronounced growth, of course, happening between 2019 heading into 2020. 2020 alone was about 3x the number of new clients we acquired to Schwab over 2016. I was struck this morning as I was driving into San Francisco, that 866,000 new households at Schwab is almost as if we acquired the entire population of San Francisco in a single year. This is investors who are trusting Schwab to help them build and manage their wealth. Let's talk a little bit about the profile of those investors. With the tremendous growth that we've seen, we've also been able to maintain an incredibly attractive profile of new clients, starting with a data point that Neesha talked about a couple of presentations ago. About half of our new clients are under the age of 41, demonstrating our ability to grow the pipeline of folks who are coming to Schwab as they start to grow their wealth. In addition to about half of the new clients being less than 41, about 1/3 of our new clients are affluent. So they have investable assets of more than $250,000. And finally, about 4% of them, within the first 3 months of becoming a new client, are taking us up on some of our advised capabilities, whether those are digital or live capabilities. And what's remarkable is despite this incredible growth that we've seen, the profile between 2016 and 2020 has remained remarkably stable. And I think that's due to the strength of our value proposition and the resiliency of that value proposition despite the market environment. In 2020, we did start to see some changes in the behavior, so not the profile, but the behavior of our new clients, with more clients initially funding with cash. We think this is an indication that it's either new investors getting started investing or its investors bringing new money to market. So we saw about 60% more of our new clients fund with cash rather than with existing invested securities. They're also initially funding slightly lower. So it's about a 44% lower funding average than we saw over the prior year. And finally, we're seeing more and more of our new clients indicate that they're interested in being self-directed. Neesha also referenced this earlier. So just over half are indicating to us that they are interested in trading and managing their own portfolio. Again, these are changes in behaviors that we saw in 2020 that are still consistent with the profile of the types of clients that we're attracting. And finally, these households that we're talking about are also representing an increasing share of our total NNA, representing that we're attracting not both the quantity that we want, so that tremendous growth in households, but also the quality and the assets that we're driving. So let's talk a little bit about what we're doing to acquire those new clients. We have a well-diversified approach, meaning that we're not dependent on any 1 channel, which is a real advantage. We see clients come because of referrals, and we know that trusted recommendations continue to be a primary reason why people join Schwab. Of course, our sales channel. Catherine just talked about the pipeline from Workplace Financial Services to retail. And finally, marketing. Marketing continues to be an incredibly efficient engine for us. So in the context of that 3x growth that we've seen over the past years, we've seen a very, very modest increase in our total marketing spend, which means that not only are we optimizing across the portfolio, but we're also driving increasing efficiency. Finally, we like to understand the impact of each of the levers on acquisition and this represents, I think, how well diversified we truly are. So this is all indexed to referral, which referral and sales have about a 1x impact in terms of households, Catherine's Workplace Financial Services 2x and marketing 3x. I think what I would say about sales as well is a 1x impact in terms of households and clients that we're acquiring. Again, that's quantity. They make an outsized impact in terms of quality, which would be the assets that they drive. So let's talk a little bit more about each of these levers, starting with referral. Jonathan referenced the trophy shelves. And I think that we all know that referrals start with delivering an exceptional client experience. And it is proof of that exceptional client experience, when somebody trusts Schwab enough to refer a friend to us. I know that's how I got started as an investor at Schwab, well before I was an employee and well before I was 40 actually, but it was through a referral. And of course, we also have our USAA referral program, which is a partnership that is grounded in a tremendous set of shared values and a commitment to serving those who serve. We're only beginning to unlock the potential of that program, and we see lots of opportunity ahead of us. Our sales channel, whether physically in the branch or on the phone is another lever that we have in acquiring new clients. The branches have done a tremendous job pivoting this last year as we all have to building relationships virtually rather than in person. That's been a pivot that we've done with many of our events, like the one we're doing today. We're able to host these for clients as well. And we've been really pleased with the ability to continue the momentum of the sales channel despite having gone virtual. Of course, our independent branch network is in our environment where we are underpenetrated and does a great job at bringing new clients into the franchise. And finally, we stood up a prospect conversion phone team. So a phone team that is dedicated to talking to prospects and new clients this year designed to nurture and unlock the leads that we get from the digital channels. This actually works really well in concert with the new client experience that Neesha referenced earlier as well. Finally, within WFS, within Workplace Financial Services, we are focused not only on a course capturing the 401(k) and the assets associated with stock plan, but we are wanting those employees to take an action with Schwab beyond why their employer chose us. So not just the 401(k) and not just the stock plan, but to entrust Schwab to manage and grow their wealth. Within retirement plan services, a big focus this year is ensuring that we're introducing more participants to retail earlier in their tenure with the 401(k). Neesha also referenced that we find that investors tend to be very engaged at the moment of transition. And so when somebody is opening their 401(k) with Schwab, it's a great moment to talk about all the other capabilities that Schwab has as well that can help them grow and manage their wealth. And of course, within stock plan, we're focused on ensuring that we hold on to the assets of the vested equity awards, but also ensuring there are people in that population. Some are really new to investing. This may be their first experience as their equity awards come due. And for some, they're incredibly experienced and with high net worth. And so we want to make sure that we're delivering solutions to all of those participants in that plan, again, to get them to take an action beyond why their employer chose us. And finally, marketing drives tremendous value for Schwab in terms of new clients, and we achieved this through focus. And it's really a focus on 3 things. So the first is a design target. So we are laser-like focused on an affluent and trader target, which halos well beyond those 2 targets, as you saw in the profile of the clients that we looked at earlier. We have to deliver best-in-class creative. We are in an incredibly noisy environment, and it is important that we are grounded in deep client insight. And finally, we have to rigorously measure because that's the only way that we can drive more efficiency into the system. It's the only way we can realize this growth with a flat marketing budget. And next year, we're excited -- I'm sorry, this year, we're also excited to start leveraging the strengths of TDA and Schwab combined, which will give us yet another lever. So in addition to the steady growth that we've demonstrated at Schwab and our evergreen no trade-offs value proposition, we bring, as Jonathan referenced, TDA's outsized growth during periods of market volatility. These are really nice complements for one another. And finally, we're really excited to leverage their brand with active traders, knowing that, that is a source of growth over time through both their content, their education and their platforms. So the acquisition of TDA gives us an even more diversified growth engine in addition to what Schwab has demonstrated. In summary, we are really efficiently delivering strong growth and maintaining a very attractive client profile with that growth. That is because of a mosaic of levers that we use to acquire clients. We are not dependent on any one channel to drive growth. We are diversified across board. And finally, with the TDA integration, there is even further growth potential ahead as we lean into the moments of volatility, as we're seeing now and their ability to attract traders. So with that, Jeff, I will turn it over to you for questions.

Great. Thank you, so much, Stacy. And thank you, Jonathan and Catherine. Great presentations by all of you, and we're definitely starting to get a nice queue of questions here. So let's go ahead and dive in. First question is probably directed to you, Jonathan, from Brian Bedell at Deutsche Bank. Could you share some more perspective on overall investor services client asset NNA growth, and how perhaps it might be enhanced by Schwab's improved competitive positioning and viewed as potentially more stable versus smaller, less-scaled online competitors?

Sure. Great question. I think in terms of NNA growth, I mean, if you look at the 2020 numbers, obviously, really impressive NNA. And I think our model has proven over the years that it really isn't an all-weather model where that NNA appears to come in, in up markets and down markets in sideways markets and in highly volatile markets. So I think that's one of the strengths, particularly of Schwab and particularly of Schwab Retail is the attractiveness to the no trade-offs value proposition that we talk a lot about. The best of people and technology seems to survive or thrive really in any market environment. I think 2020 was certainly an indication of that. So fully expect that to continue. And also I just highlighted, as Stacy said, not just NNA, but the new client profile has been very resilient as well. I think doubling the volume -- nearly doubling the volume, but maintaining the same profile is a really powerful indicator of the strength of the retail model.