We are all set and ready to go. Please welcome Jeff Edwards. All right. Good morning, everyone, and welcome to the 2023 Schwab Winter Business Update. I'm Jeff Edwards, Head of Investor Relations. For our long-time listeners that were expecting to see Mr. Fowler, I can confidently say that I did reach him on his bat phone this morning, somewhere in his bunker in Northern California. It is a top-down day now that we've finally gotten through that atmospheric river. We have a very exciting day for you today to talk about the Schwab story. We have, hopefully, to many of you are very familiar have interacted with over time in person, but maybe over the last couple of years here, we've been a part maybe you've only seen virtually. So we're looking forward to it. The agenda is very similar to years past. Walt will kick us off and as well followed by Mr. Rick Wurster, our President; Joe Martinetto, aka Professor Martinetto, will follow and talk a little bit about the Ameritrade conversion and some of the updates on technology. We'll then do a double-click into the business with Jonathan, Stacy and Bernie join us to talk a little bit about wealth and advice. And then finally, Mr. Peter Crawford, CFO, will finish the day and beyond. Now that we're back in person, it's important to kind of revisit our Q&A etiquette. We will still be taking questions over the web console for those of you that are joining us virtually today. For those here in the room, we will be doing our mic runners. Grayson down here you see coming down the aisle, so please raise your hands, we'd ask that you wait for them to bring you a mic before asking your question. Similar to the recent updates, we'll be doing the one question, no follow-up. However, we will be coming back around so that there is ample opportunity for everybody to ask hopefully multiple questions to make sure you get all those questions answered. For everybody, virtually, please go to the web console. Ms. Lauren Gaspar will be helping me collect those. So let's be nice as we send those across. And if anything comes up, please hesitate to reach out to the IR team with any questions or concerns. Finally, everyone's favorite slide of the day, the wall of words. It simply reminds us that our disclosures can change and evolve over time, so please stay in touch. With that, I would like to transition to our Co-Chairman and CEO, Mr. Walt Bettinger.

Good morning, everyone. It’s hard to believe it’s been three years since we last met in person, right before the pandemic. Today, I’m dealing with a non-COVID cold, so my voice might be a bit off. If I start to lose my voice, that might be a blessing for all of you since I tend to use a lot of words. It's great to be with you today, and I’m looking forward to an exciting day of interaction. At Schwab, we often speak about our all-weather business model and our ability to deliver strong results across various time frames. Looking back at 2021 and 2022 highlights this perfectly. In 2021, we had an extraordinary year in equity markets with near-record low interest rates, which led to record financial results. In contrast, 2022 was marked by significant challenges in equity markets and one of the fastest increases in interest rates we've seen. Yet, we still achieved record financial results. Throughout my time today, I hope to illustrate the long-term vision we have for managing and executing our business strategy to ensure we deliver results in all economic environments and cycles. We’ll cover our consistent growth in all economic climates and how we return capital during certain periods, including the current one. I’ll briefly discuss the Ameritrade conversion, with Joe Martinetto providing more details later. We know 2022 was a challenging year for our clients and investors, with difficulties in both equity and bond markets. Understandably, this led to a bear mentality among investors for most of the year. However, our clients remained highly engaged with us, resulting in $430 billion in net new assets. Interestingly, despite the general sentiment, our clients continued to buy, processing about 6 million trades last year and enrolling in our advisory services. This slide illustrates the long-term growth story tied to investing in Schwab, showcasing our ability to consistently generate net new assets in the 5% to 7% range regardless of equity market conditions. If we include Ameritrade pre-2020, the numbers would be even stronger. What's important here is the consistency with which we deliver for our clients. So why do we see this consistency? This slide depicts our Client Promoter Score, which reflects the satisfaction of various segments in our firm. Investor Services reported a score of 64, which is considered world-class in the Net Promoter Score realm. Although managed investing saw a slight dip in scores during the fourth quarter, clients who pay for our advice generally score higher than self-directed clients. These clients are very satisfied, with a score of 92, and 83% of our client interactions received the highest possible ratings. In addition, we’ve garnered plenty of industry accolades, which bolster consumer confidence. All this consistent organic growth and new asset flows position us to deliver strong financial results consistently.

Hello, everyone. Welcome to Westlake. It's great to see so many of you in person. A common question I receive from analysts is whether we can maintain the healthy levels of organic growth we've historically achieved now that we are a larger company. Today, I'll discuss this in two segments. First, I'll address what we can depend on from our virtuous cycle, which we believe will enable continued growth. Then, I'll discuss our strategic focus areas and how they can enhance both our organic growth and revenue. We are currently in a strong position, with over $7 trillion in client assets, making us the leading provider of investment and wealth management capabilities among publicly traded firms in the U.S. As Walt mentioned earlier, our growth is bolstered by our focus on the two fastest-growing segments of our market. Our growth is underpinned by a combination of value, service, and choice. In retail, clients benefit from the option to visit our branches, call our 24/7 support line, or utilize our excellent digital experiences, all while enjoying competitively priced products and services. In the RIA space, we offer unparalleled practice support and custodial experiences with advanced technology, along with a commitment to no custody fees for RIAs of any size. In the workplace sector, our robust platforms are backed by industry-leading service. Overall, we maintain a healthy TOA ratio of over 1.5. Those familiar with our company may recall that we used to report numbers closer to 2, but rest assured that our Schwab numbers remain at those levels. We will now report integrated Ameritrade and Schwab numbers, which still reflect a healthy ratio above 1.5. Historically, Ameritrade has shown a lower TOA due to the way clients engage with it. Clients often come to Ameritrade for trading and may later take their assets to a full-service firm when their needs change, leading to a lower TOA ratio. As we report TOA going forward, expect it to be closer to 1.5 rather than 2, as seen with Schwab historically. However, this situation also presents an opportunity. We intend to introduce clients who came to Ameritrade for trading to our comprehensive relationship model and broader wealth support, keeping as many of them as possible within the Schwab family, as they won't have to make trade-offs when they choose us. We currently hold a 12% market share, indicating significant room for growth in the years to come. Our virtuous cycle has been the driving force behind our growth. As Walt has stated for years, when we prioritize our clients' needs, they are likely to engage with us more. This approach has proven effective over time. Historically, we've consistently achieved 3% to 5% organic growth from our existing clients, who choose to engage with us further because we have treated them well. Additionally, we attract 2% to 3% organic growth from new clients. Together, these figures account for the 5% to 7% growth that Walt mentioned earlier, which we've reliably delivered. Looking ahead, we're confident in our ability to continue this growth thanks to our existing clients. Our client base is becoming increasingly younger, with the average age now under 50. Last year, 57% of new clients at Schwab were under 40, placing them in the asset accumulation phase of their lives, meaning they will increasingly contribute more to their savings for the future. Another factor driving future growth is dedicated relationships. We know that clients with dedicated relationships are more engaged, have higher satisfaction and retention rates, and bring in 2.5 times more net new assets than those without such relationships. We're committed to increasing the number of clients enjoying these dedicated relationships as a key driver of our future growth. Additionally, as RIAs custody with us and achieve success in expanding their businesses, that growth contributes to our organic growth as well. For new clients, our approach remains consistent: it’s about our brand and commitment to putting clients first, something we've demonstrated for the past 50 years. Our diversified acquisition model, including our sales teams, marketing efforts, and branch accessibility, attracts clients to Schwab. Our workplace pipeline continues to be an increasingly strategic business that should help us attract new clients. Additionally, as more advisors opt for independence, our leadership in custodial services will fuel our growth. We believe that despite becoming a much larger company, the virtuous cycle will persist in driving the 5% to 7% organic growth we have historically delivered well into the future. Now, I want to discuss our strategic focus areas and the acceleration they can provide for both organic growth and revenue. We've highlighted the advantages of the Ameritrade acquisition, including expense synergies and enhancements for our clients. Our clients will significantly benefit from integrating the strengths of Ameritrade and Schwab, enhancing both the advisor channel and our retail business. One exciting prospect is the growth potential that Ameritrade offers us. At Schwab, we manage just over 50% of our clients' assets—1.5 times the wallet share of Ameritrade. Many of my colleagues from Ameritrade describe themselves as "number one in being number two," meaning that their clients typically maintain a primary financial relationship elsewhere while holding trading assets with Ameritrade. By introducing our relationship model and broad capabilities at Schwab, we aim to transition into a client's primary financial relationship and expand our wallet share with Ameritrade clients. If successful, this could mean over $0.5 trillion in net new asset opportunities for us, benefiting both clients and Schwab. Shifting to wealth management, there's a clear market for advice, as more investors are willing to pay for it. Our wealth platform is strong, and Neesha will provide more details shortly about ongoing enhancements to make it even better for our clients. We see room for growth here, as only 19% of retail assets at Schwab are in an advice solution, contrasting with just 7% at Ameritrade. We aim to close this gap and grow both segments by offering our comprehensive advice capabilities to Ameritrade clients. Moving even 1% in either direction equates to helping more clients improve their financial situations, as well as generating an additional $125 million to $200 million in annual revenue. Now, let's discuss direct indexing, which we believe will gradually take market share from both mutual funds and ETFs. To achieve market leadership in this area, we see three key success criteria: being a leading indexer, having strong digital capabilities, and fostering relationships. Many clients are unaware of the benefits of personalized indexing, thus making one-on-one discussions critical in demonstrating its value. We are confident that no firm is better positioned than Schwab to lead the market. The long-term benefits for clients include better after-tax returns and personalized portfolios aligned with their individual needs and goals. Next, I want to address lending, an area where we have increased focus. Our preferred rate program, introduced in recent years, has been well-received, allowing clients who maintain assets with us to access industry-leading interest rates. We also invested in streamlining the process for clients looking to take out loans through Schwab. Currently, only 0.6% of client assets are in lending solutions, indicating significant room for improvement in how we assist clients with the liability side of their balance sheets. Closing this gap—since our peers average around 3.5%—could yield an additional $1.5 billion to $2 billion in annualized revenue for Schwab. Moreover, clients with both lending and investing relationships tend to be more satisfied and loyal. Lastly, I want to touch on client segmentation, particularly focusing on traders and higher-net-worth clients. The trading segment is crucial for us, which is why we continue investing in the strength of our combined trading platform and the thinkorswim platform from Ameritrade. We provide differentiated service for our trading clients and boast an excellent education group that supports traders at all levels. Concurrently, we're focusing on higher-net-worth clients, where we are competitively strong with a two-times TOA ratio compared to wirehouses. We will continue investing in tailored services and products to address the unique needs of these clients. In conclusion, the question I often receive is whether we can sustain our historical organic growth levels. We confidently affirm that we can. Our virtuous cycle drives 3% to 5% in organic growth from existing clients and 2% to 3% from new clients. We anticipate accelerating this growth through opportunities related to Ameritrade, as well as a $2 billion to $4 billion revenue potential across both wealth management and lending. By seeing through our clients’ perspectives and prioritizing their needs, we can enhance our growth and maintain the momentum we’ve built historically. Walt and I look forward to answering your questions.

I would like to begin with what you just mentioned. You outlined several growth opportunities and specified two of them. What timeframe do you anticipate for bridging the gap on the advisory side and pursuing the lending opportunity? More generally, where do you see the most significant impact that will drive growth in the next few years?

It's important to note that this process will take time and won't occur instantly. We currently have a robust wealth business that continues to expand. Neesha will discuss the long-term investments we're making later. We view this as a long-term opportunity. On the lending front, we've made significant enhancements to our capabilities in recent years. While we believe our lending capabilities are prepared for growth, we expect a different lending environment may be required. Once these two factors align, we anticipate a noticeable increase in our client lending activity.

Just a question on scale. You guys have mentioned in the past that scale is going to play a major role and determining the industry's winner. So I guess a two-part question here is, do you feel you have sufficient scale at this point? And if you look across your businesses, where would you say you have sufficient scale versus where might you have more work to do? And how do you ensure you continue to have sufficient scale in 5 years' time? And then the second part is, how do you think about the role of technology and software to potentially reduce or replicate the benefits of scale over time?

Yes. So certainly, I think in the retail side and the advisor side, we have a very, very powerful scale. We would probably be 1 or 2 on the retail side if you incorporate non-public companies. And of course, 1, if you look at public and from a purpose-built platform for RIA custodian, I think we would likely be considered a very strong #1. We have more opportunity in the workplace environment where we have a very strong approach in 401(k) with both a bundled and an unbundled approach and then in the equity comp side, but there's probably more opportunity there to expand scale. Those are often more corporate- or company-driven decisions as opposed to the investor side and the advisor side. I think technology is definitely going to play a role. But to me, if what you're really getting at, Michael, is the idea that someone could leverage technology to make a leap above others in scale, I don't envision that because we're all investing in technology to drive all of our costs down. So as we would evaluate our scale position, technology is going to help those who are less subscale to us, but it's also going to help us and is helping us. And so the relative efficiency of businesses is likely, I think, to continue to be there as we all make meaningful technology and digital investments. The other thing that I think is important in that is that our business model, although it has a significant part that relies on relationship, also has a very significant part that is less relationship-oriented. And so if we're competing against firms that have the majority of their revenue driven off interpersonal relationships, there's only so much scale that can be driven from that because of the compensation for those individuals. Good question. Good long-term perspective thinking. Thanks, Michael.

Rich Repetto from Piper Sandler. First, congratulations, Walt, on becoming co-Chairman since we last saw you; it's a great honor. It's nice to meet you and hear from you. When we last met, zero commissions were just being introduced, and now we have much higher interest rates and various other factors at play. With the Ameritrade integration approaching, I wonder if it seems to me that there are more variables affecting the retail investor outlook over the next year or two, especially considering this significant integration in the industry. I suspect you may have some insights on this.

Yes. I mean I think in the short run, you have more variables because we've had such a tremendous swing in interest rates, right, from a ZIRP world to the most rapid increases in rates that we've ever experienced. We went from an incredibly strong equity market in 2021 to 2022. But that's all short term. I think when we flip it around and look at the long-term perspective, I really don't think things have changed that much. Investors still need to plan for their future. They're still saving for retirement. They're still saving to put children through college, providing for other family members. All those factors remain the same. And I think what is important over the three years since we've been together in person is, the strength of our franchise has only grown as we've made investments, as we've leveraged our capabilities, as we are bringing together Schwab and Ameritrade, our offering to clients and prospective clients has never been stronger. So sure, short term, from a financial standpoint, there's more volatility. But from a long-term standpoint, clients are going to returning to Schwab for their needs, I think we're better positioned than ever to deal with them. And I think even long term, financially, we're in a better position, again, illustrated in 2021 and 2022. So 2021, the trading aspect of Ameritrade really helped lift our revenue and helped us, in a ZIRP world, deliver record results. And then it turned in 2022 where trading was a bit softer than in 2021, but as rates start to move up, the Schwab part of the economic model really kicked in and helped us deliver record results. So again, I agree, Rich, short term, we see volatility. Long term, we really like our positioning. And we think the combined Schwab-Ameritrade also delivers a lot of benefits financially for our stockholders.

There are clearly appealing total addressable markets and significant growth potential. One question that arises is how you'll address some of the challenges, particularly regarding direct indexing, such as providing tax efficiencies at a lower asset threshold. Ameritrade clients who are more active traders may not be as inclined towards a wealth product. Additionally, when considering Schwab, the self-directed RIA may not function as a lending platform. I would appreciate your insights on overcoming some of these obstacles to achieve your growth objectives.

Sure. Could you please go over the three points again? I want to ensure I cover all of them.

Direct indexing, advice, lending.

Let me start with direct indexing. The significant opportunity in the near term lies with higher-balance clients because the tax impact of direct indexing is most pronounced for them. We have implemented a $100,000 minimum, whereas major direct indexes typically had a $250,000 minimum. This is a disruptive move that allows us to attract many more clients who can take advantage of the tax benefits. As this field progresses, I believe the minimum thresholds will lower, primarily driven by the increasing demand for personalization, which appeals across all wealth levels. Wealthier clients may have concentrated positions, allowing us to create personalized index portfolios that address their specific needs. For example, if a client has substantial exposure to Schwab stock, we could design an index that excludes Schwab and is structured to be essentially opposite to Schwab, helping them achieve index-level performance holistically. There are numerous strategies we can implement for both affluent and less affluent clients. Therefore, I foresee the minimums decreasing over time, and we are enhancing our capabilities to support this through our fractional share offerings. While much work remains, I believe the industry will trend in this direction eventually. However, I don't think it's crucial to act immediately. Right now, we are focused on educating our initial group of adopters, which consists of higher-net-worth clients.

I recall you mentioned the lending side, but I can't remember the specific challenge you referred to. Could you please repeat the challenge you identified on the lending side?

Yes. That's where our opportunity lies, and we've enabled our relationship team to discuss the lending aspect of clients' balance sheets for the first time through Schwab Wealth Advisory. This is also a key focus for our branch network, which Jonathan will elaborate on. We have strong reasons to believe we can engage clients more regarding lending, an area that hasn't received much attention in the past, but we see potential moving forward. So far, the response to our efforts has been very positive. Client engagement with our interest rate program, which has reduced lending costs for clients keeping balances with us, has been encouraging. This is reflected in our Client Promoter Scores and retention statistics, indicating stronger, more lasting relationships.

One real quick thing on the lending side, I completely agree with what Rick said. I want to go back to being a low-cost provider. So in virtually every type of market environment maybe other than one where you have ultra-high interest rates, our cost of deposits is less than almost everyone. And so when you combine a most efficient operating model with the lowest cost of deposits, puts us in a position to be able to offer very disruptive lending rates to our clients in what is, for many ways, a commodity-oriented product, borrowing. And so we're in a position, I think, over time to be quite disruptive with the lending rates we can offer clients and yet still generate for us incremental revenue on a spread to securities basis. So we have a pricing opportunity there that I think you'll see us taking advantage of given our low cost of deposits and our low operating model.

Ben Budish from Barclays. I wanted to follow up on what you were discussing regarding Ameritrade and the opportunity to gain wallet share. Could you provide more details on that? You mentioned that many Ameritrade clients may use the platform for trading but have separate relationships for wealth management or advisory services. Is the goal to also capture the advisory aspect, or are there other assets like 401(k)s or IRAs that could be moved over as well? Please elaborate on this further.

Our plan for addressing this begins with establishing a strong relationship with the clients. The work we've accomplished with our financial consultants and the advice we've provided to our clients will serve as a model for how we engage with our Ameritrade clients. The relationship model at Ameritrade has traditionally focused more on service and trading, which is what attracted those clients to Ameritrade. Over the past 10 to 15 years, our approach at Schwab has evolved to prioritize wealth management, where we assist clients in all areas of their financial lives. As we implement this strategy with our Ameritrade clients, we believe we will discover numerous opportunities, including full-service wealth solutions and 401(k) accounts that clients may currently have elsewhere. Our initial focus is on understanding how we can help clients achieve their financial aspirations. We will assess their current situation, define their goals, and discuss the comprehensive resources we have at Schwab and Ameritrade that can support them in reaching those goals.

Christian Bolu, Autonomous. Regarding the competitive landscape, your organic growth of 5% to 7% over the last decade has been impressive given your size. However, during the same timeframe, many competitors, including wirehouses and independent brokers, have experienced faster growth, effectively doubling your organic growth rate. I'm interested in your perspective on the competitive landscape compared to your peers. Is Schwab losing market share relative to others? Are some of your longstanding competitive advantages starting to wane? I'm curious about your thoughts on this in light of those peers that have achieved much faster growth over the past decade.

I would disagree with the idea that someone else is growing faster. Are you measuring in percentages or actual dollars? I don’t see anyone in our industry generating the same level of real dollar growth that we are. I'm not convinced by that perspective. For example, if someone has one dollar and adds another, it appears as 100% growth. But if someone starts with $1,000 and adds $250, that’s only 25%, yet I would much rather be in the second position. I also question the TOA ratios; the theory behind them is flawed since we know our position compared to all our competitors. The numbers range from a worst-case scenario of around 1 to a best-case scenario in double digits. Some firms that boast about high growth rates, especially when measured in percentages, are ones from which we are taking assets at a rate of double-digit to 1 based on TOA. When it comes to competition, we respect everyone and pay close attention to their strategies and potential advantages compared to ours. However, in terms of organic growth, we believe no one in our two primary sectors, retail investor and RIA, is growing at rates similar to ours. That’s our perspective on it, Christian.

Could you talk about the role of alternatives in clients' portfolios and what you guys are doing on that front?

I'm going to take that. Yes, we currently have capabilities in the alternatives space, and our clients are using these, especially on the advisory side. Bernie can provide more details on that later. On the retail side, we are noticing increasing interest, and we are in the process of expanding our capabilities, as we've mentioned previously. This will take some time due to the legal complexities involved in offering alternatives to clients in a safe manner while upholding our fiduciary responsibility. So, we are in the process of enhancing our alternatives capability, and retail clients can expect to see this development over the next couple of years. This is part of our effort to cater to higher net worth and ultra-high-net-worth clients, for whom we have been developing product-specific capabilities. We have already made strides in liquidity and lending, and now we are focusing on alternatives. However, it will take time because of the complexities involved. We want to ensure that we implement it correctly in a way that benefits our clients.

Last question here from the web. In terms of growth, how do factors like additional inorganic opportunities or mergers and acquisitions, as well as international expansion, influence the future of the firm over time? This question is from Bill Katz at Credit Suisse.

Thank you, Bill, for your question. We assess numerous opportunities and often receive interest from firms looking to sell or divest portions of their business. We examine all possibilities thoroughly. Our perspective hasn't changed over the years: any transaction needs to benefit our clients; that’s our primary criterion. If it enhances our ability to serve clients, we then analyze whether it makes economic sense for our shareholders, including evaluating the return on investment and associated risks, both to our brand and our capacity to deliver results. We take these acquisitions very seriously because they involve your money or your clients' money. Therefore, we conduct a comprehensive evaluation of any potential acquisition. International expansion presents a significant opportunity for us, and Jonathan will provide some insights on that. Our dollar-denominated international business is experiencing rapid growth, and there is substantial potential in that area. So far, we haven't aggressively pursued multicurrency options, but the dollar-focused segment has considerable opportunity that Jonathan can discuss further. I think we're at the end of our Q&A time. So again, I just want to thank all of you for being here today in person, thank all of you who are participating remotely. It is wonderful to be together. I can't wait to do it again. I'm very confident it won't be three years. And Rick, thank you for giving me the chance to share the stage with Q&A. I'll step off, and I think you'll introduce Joe.

Yes. Joe, well, come up. Joe is going to talk about the Ameritrade integration and scale. So it should be good discussion and timely.

Thanks, Rick. Good morning, everyone. This morning, I came across an email titled "hot topics in accounting this week" and decided it wasn't worth my time. Reflecting on that, I realize this presentation might feel similar to that email for some of you. Joe will discuss technology infrastructure, so I want to frame it differently. My first goal today is to spark some excitement about the opportunities we have to enhance our business's scale and efficiency for the long term while still providing excellent client experiences. I think that's more engaging. The second goal is to update you on the integration process. If you have questions, I encourage you to hold them until after my remarks, and then we can discuss. We are currently in the third year of integrating the firms. We've made significant progress in preparing for the upcoming client conversion. A lot of work has gone into scaling the infrastructure on the Schwab Blue platform to accommodate all accounts, positions, and clients. We have also conducted extensive testing, and Walt mentioned the quality of our outcomes. We are seeing high success rates, which boosts our confidence that we can effectively migrate clients. On the client side, we've been expanding the range of products and services available on the Schwab platform. Those who are Schwab clients may have noticed updates in the trading platform as we incorporate best-in-class capabilities from the Ameritrade platform. Clients will experience a transition that closely resembles their prior experience. We are also focused on ensuring a smooth transition for clients, and I'll elaborate on that later in the presentation. We're striving to make it easy for clients to set up on the Schwab platform. This means addressing questions before conversion, so clients don't face a frustrating experience with service spikes once they are switched over. Rick mentioned that we've started introducing some products and services to clients, and we are thrilled about the potential to expand that. While we've met some demand, much of it has been manual. Once clients are on the Schwab Blue platform, the process will be streamlined. Walt pointed out that we anticipate some glitches during the client migration. We've invested heavily in enhancing client service experiences and have trained our staff to handle client needs effectively. We've also engaged third-party services to manage increased client service requests in a cost-effective manner, addressing temporary spikes without impacting our long-term cost structure. We're gearing up for the first group of clients to transition over President's Day weekend in February, just a couple of weeks away. We have divided clients into five different transition groups. We're moving around 18 to 20 million accounts throughout this integration, and this estimate may fluctuate as we continue to open and clean accounts. The initial group we are migrating in February consists of about 500,000 accounts as a test group—some clients who are not the most active users. This gives us a chance to test the service experience and ensure our technology is functioning as intended before larger groups transition later in the year. A significant group is scheduled for Memorial Day weekend, primarily consisting of non-advised retail clients. We also have another group set for Labor Day, which includes advised clients and their advisors, followed by a tranche in November targeting the bulk of active traders on the Toss platform. The last small group of highly active traders will be moved in the first half of 2024. It has been some time since we spoke in person, and the war in Ukraine did affect our resources for this conversion. Consequently, we've had to reorganize and find new resources while still planning to have most clients transitioned by the end of this year, with a small fraction in early 2024. We don't expect this to influence our ability to recognize synergies, and I'll summarize that shortly. We believe we are ready, having completed necessary testing to ensure we're prepared. We have started communicating with clients and have sent over 10 million notifications, with more to follow as clients approach their specific transition dates. We've set up a Welcome Center for clients to familiarize themselves with the Schwab platform and developed a client conversion hub so clients can create their login credentials in advance of the transition. This will facilitate a smoother process on the first day of the transition, preventing a flood of calls from clients wondering how to access their accounts. Creating these credentials provides clients with a "future view," allowing them to see their household accounts at Schwab, contrasting the account-based system they experienced at Ameritrade. We've designed this process to minimize friction and ease the transition for clients. Financially, we remain on track to achieve the expense synergies we've mentioned, having already removed about two-thirds of those costs. We anticipate recognizing the remaining costs by the end of 2024. While this year's cost savings may be modest, as we migrate clients onto the Schwab platform, we will see some efficiency on the operating side. The most significant cost savings will come from decommissioning duplicated platforms after all clients are transitioned, scheduled for 2024. Regarding revenue, we are optimistic about long-term projections. We have benefitted from account and asset acquisition that surpassed our initial expectations for the acquisition. In the near term, we face some pressure from interest rates impacting balances, but the core of our revenue synergies is tied to the BDA transition. We still have years to leverage that, maintaining confidence in recognizing the full scope of revenue synergies. Furthermore, while we have begun foundational work on banking products and managed investing services, the process remains somewhat cumbersome. Despite that, client feedback has been positive. Rick highlighted some growth opportunities we perceive that weren't factored into our synergy numbers, indicating potential upside. Outside of integration, we haven't been idle; we've continued advancing various important projects. This work has been intertwined with integration, evolving into a cohesive effort aimed at client transition and scalability. For instance, we are about 75% through modernizing applications by moving capabilities off older mainframe systems and into a scalable environment. We anticipate completing this phase in the first half of this year. Our new environment is cloud-hosted, and although integration has limited our migration to the cloud, we've identified significant workloads for future cloud deployment. These include account log-in capabilities and tools for cloud-based analytics and data, which outperform our current systems. Building a more resilient infrastructure has been achieved through this transition. Our private cloud structure enables effective scaling and better management during system challenges. This modernization allows us to retire outdated legacy systems that limited client capabilities during issues. Looking ahead, while we finish the integration, we still have ample opportunities to pursue. The Ameritrade integration remains our top focus. We made strategic choices to optimize our resources and synergies while ensuring a smooth integration. Public cloud migration is another significant opportunity as we aim to move more workloads to the cloud, streamlining our on-premise structures. Additionally, we plan to enhance efficiency and automation within our operations as we transition our focus toward integrating workflows. Lastly, we intend to modernize our broker-dealer systems by moving our core mainframe applications to a more advanced SaaS-based solution. This shift presents cost savings and broadens our ability to offer additional services to clients. Overall, we have a solid amount of work ahead, and we are strategizing how best to tackle these opportunities going forward. Now, I see hands raised, so let’s begin the Q&A.

It's a great presentation, Joe. You noted that you've been very acquisitive that certainly impacted the timing of the cloud migration. I know a few years ago, you talked about as you execute on that plan, modernizing technology, migrating fully to a public cloud that you'd be able to bend the cost curve, maybe slow the rate of expense growth somewhere in the range of 2% to 4%. Is that still the long-term ambition as you execute on this plan?

Sure. So I think we got to be a little careful here. So cloud doesn't come for free. There is investment that has to be made to be able to do the migration to the cloud. And we are not talking about moving everything that we do in terms of technology workloads on to the cloud. So that is not the goal. We are looking to take the things that make the most sense to run on the cloud and move them there. But we expect that we're going to be running on-site data centers for the foreseeable future. There's a certain amount of workload that's going to make sense for us to continue to manage on our own. So it's definitely an opportunity to use to continue to bend that cost curve. I think some of the bigger savings will actually come more on the physical side of data centers and data center infrastructure. Because of what we've done with the integration, we're running quite a number of data centers now, including some are owned and some are leased. But we've had to take on additional space just to be able to house all the hardware, get enough power and enough cooling to run everything that we see coming out of post-integration. And so rationalizing some of that workload will allow us to rationalize some of that footprint and continue to bend that cost curve. What I think probably important to think about is, like I talked about some of the integration work as being a single body of work. I think some of this optimization work is also going to be taken in the same kind of frame. On any given system, it may feel like a step-function change. But for a company as big as ours and given everything we spend in technology, it's probably not going to feel like a step-function reduction, it's going to feel more like a portfolio of work that's going to allow us to continue to drive some incremental scale consistently over time. So I think bending the cost curve is probably the right way to think about it. It will allow us to slow that pace of growth as we absorb new volumes and continue to drive efficiency into the processing that we're doing.

Joe, you're now the point person for special teams. My first question is about attrition, or potential attrition, which might be nil. How do you evaluate the integration's success? What metrics will be used? Will we get the account numbers in real-time or monthly updates? That's the first part. The second part relates to past integrations, which primarily involved simply moving accounts. This time, it's more complex. I understand you're aiming for more, particularly with wealthier clients, like documenting power of attorneys and similar tasks. So, how will you manage this? You didn't really address that. How complicated are the migrations, and when will they occur? Is it just a matter of transferring DLJ direct onto accounts, or is there more to it?

Yes. So starting with attrition. The business case embedded a pretty modest 2% kind of number. So we are not expecting a material amount of attrition. We're going to measure it as best we can through the process. The risk probably comes at the time of conversion that as those clients get those notifications, that is probably the point where if we're going to see attrition, it's probably going to be as we're moving those specific books of business. We're doing everything possible to make sure that we're communicating with those clients, following up with those clients, giving them a great experience, trying to make it easy. Right now, I would say we are way ahead of the game in terms of client acquisition versus any attrition numbers that we embedded in the model, but we are probably going into the window where if we're going to see attrition present.

You mentioned that you would have further reductions in integration. Is the impact of that something you can easily calculate, or how do you expect it to unfold?

Certainly, we continue to be cautious. We want to avoid the possibility of higher attrition, but we are closely examining that aspect as we look to the future. While we want to avoid being overly cautious, we are doing everything possible.

So I think we have time for one more question.

Following up on that, I think in your slide, there was the $100 million BDA breakage. Can you discuss some of the mechanics of that? What does that involve? Is that what you pay to essentially break the ladder, and what percentage of that BDA would transition into float? What are the underlying assumptions regarding the continued decline, to the extent that the rate was asking?

Yes. The breakage fee can be viewed as similar to the market, representing what we consider as our fixed rate investments. This fee is essentially comparable to the mark-to-market value of those fixed rate investments. So I think we're just about out of time. I'm sure there's no shortage of questions. Certainly, the IR team is always available to answer any follow-up questions for hanging in there. We really appreciate you taking the time to certainly understand this company. Hopefully, what came through is my colleagues and I spoke, is a combination of excitement and about the opportunities we have to continue driving strong organic growth, continue unlocking revenue opportunities, continue doing better for our clients and continue driving greater efficiency. And then the confidence, trusting that our strategy has worked through good times and bad times, and our track record speak for itself. That's certainly what makes us all feel very excited. We look forward to engaging with you again at our April Business Update. Thank you again for those of you who have traveled here to Westlake, thank you for those on the web for joining us for the last 4-plus hours, and we look forward to talking to you soon. Cheers.