Schwab Charles Corp Q1 FY2026 Earnings Call

Good morning, everyone. Thank you for joining us for Schwab's 2026 Spring business update. This is Jeff Edwards, Head of Investor Relations, and I'm joined in Westlake this morning by our President and CEO, Rick Wurster as well as our CFO, Mike Verdeschi. Let's jump on in today, and hopefully, everyone had a chance to review our earnings release that crossed the wires earlier this morning and per the usual, slides for today's business update will be posted to the IR website at the conclusion of today's prepared remarks. Please adhere to our one-question policy during Q&A. And as always, the IR team is available to assist with any questions following today's update. And finally, the forward-looking statements page, which reminds us that outcomes may differ from expectations, so please stay up-to-date with our disclosures. And with that, I'll turn it over to Rick.

Thank you, Jeff, and good morning. Thank you for joining us for our spring business update. I hope you walk away from the call this morning with three overarching messages. One, our Through Clients' Eyes strategy drove record client growth and financial results in the first quarter. Two, Schwab is delivering for clients and is uniquely capable of meeting client needs across investor types and investment environments. And three, we are innovating at a rapid pace with tangible progress in AI, digital assets and client capabilities and experiences. Our Through Clients' Eyes strategy continues to drive results with strong growth across all fronts in the first quarter. Clients remain highly engaged, and they continue to turn to Schwab through volatile and uncertain markets. Clients opened 1.3 million brokerage accounts up 10% over last year. Excluding a one-time mutual fund clearing outflow, we attracted $158 billion in core net new assets, a first quarter record that brings total client assets to $11.8 trillion. March was our second highest month of NNA ever behind only December of 2021. Clients continue to turn to us for more of their financial lives with strong engagement in our wealth and lending solutions. Managed investing net flows were up 46%, reaching an all-time record. Bank lending was up 29% year-over-year with bank product balances and pledged asset line balances reaching all-time records. We supported a record 9.9 million daily average trades. This engagement led to record financial results with revenues up 16% to $1.43, up nearly 40% over last year. Behind those numbers are people of all life stages who are turning to Schwab to invest and trade through a period of heightened market volatility. In the first quarter, we continued to execute across our key strategic focus areas and deliver innovations at a fast pace to help clients grow and protect their wealth. I'll highlight just a few, starting with growth. We're continuing to hire financial consultants and wealth advisers while expanding our branch footprint with about a dozen new branches planned for 2026. When clients have a direct relationship with a financial consultant, their Client Promoter Scores increase 10 points and they trust Schwab with 2.4 times more net new assets. We launched the Schwab Team Investor account, giving young people ages 13 to 17 an engaging way to get started on their lifelong investing journey. Our differentiated joint account structure allows parents to monitor and engage as needed as their teens trade and invest. We are still in the early days, but have seen great interest and enthusiasm so far. We believe it is important for teenagers to learn the benefits of saving and investing. The merits of compounding over messaging from the more gambling-oriented messaging from some competitors. We completed the acquisition of Forge, which will allow us to provide clients with direct and indirect access to shares of pre-IPO companies through direct private share purchases, single company funds and multicompany funds. We'll roll these capabilities out to clients over time and look forward to sharing more details in the months ahead. We are building a healthy pipeline in our recently launched private issuer equity services which offers capital people management solutions for pre-IPO companies that combine the expertise and capabilities of our workplace business with Qapita's flexible technology and offers a seamless transition to our public stock plan services capability. With the Forge transaction now closed, we continue to see upside in engaging the private market ecosystem with a solution that offers them pre-IPO stock plan services, liquidity solutions for their employees and equity holders and lending solutions for their employees. This win-win opportunity creates value for the issuer while creating a pipeline of stock plan services clients and greater access to private company shares to grow Forge. We also increased our strategic investment in Wealth.com which we are already using to bring AI-powered estate planning tools to our clients. We're also working to launch their AI-powered tax planning capability in the near future. We successfully began the rollout of our structured asset line offer to adviser clients, expanding the type of securities they can use as collateral, including alternative investments. We'll talk more about our AI progress in a moment, which is helping us drive both growth in scale and efficiency. When it comes to brilliant basics, we were there for our clients in the first quarter. We supported over 600 million trades, more than 7.8 million calls to our service centers and about 570 million digital log-ins, up about 12% from the first quarter of last year. Clients reaching out to our service centers had their calls answered in less than 30 seconds on average. We're also making it easier for our clients to do business at Schwab. In Advisory Services, we're continuing to enhance our digital experiences across RIA workflows like moving money, opening accounts and account maintenance while also modernizing tools on our adviser platform. Taken together, these enhancements help RIAs get routine work done faster and with fewer errors. We're also continuing to enhance our digital experience across the retail and workplace ecosystem, including expanding our digital experiences and bringing workplace on to Schwab Mobile. Most importantly, we continue to delight our clients. Client Promoter Scores are up 9 points over last year in Investor Services nearing all-time highs. Our ASCG score also remains near an all-time high. Our capabilities are differentiated and aligned to support clients in all markets, including the more volatile environment that we experienced in Q1. Our formula for driving earnings growth over the long term is straightforward, and you see it here on the screen. I want to spend a few minutes highlighting just a few of the ways we are accelerating our pace of innovation to deliver for clients and drive our strategy as we look ahead. We have a diverse set of opportunities to deepen relationships with our 47 million client accounts while also diversifying our revenue streams. I'll spotlight two areas where we are helping clients conduct more of their financial lives at Schwab, wealth and digital assets. Flows into our managed investing solutions reached all-time highs. This was driven by strong engagement with our flagship Wealth offer Schwab Wealth Advisory where net flows reached a record $10 billion, up 90% over last year. Approximately 30% of the flows into our managed investing solutions came from legacy Ameritrade clients. Clients in our managed investing solutions have the highest client promoter scores at the firm and bring in approximately twice the revenue on client assets, and we still have runway to grow this business as our clients' financial lives become more complex, and we continue to add to our capabilities to help clients grow, protect, and pass along their wealth. Another way we will deepen relationships with clients is with Schwab Crypto, our new spot crypto offer. I'm excited to share that the employee pilot is underway, and we expect the phased client rollout will begin in the coming weeks. We are starting with the two most popular coins, bitcoin and ether which together represent approximately three-quarters of the crypto market. Pricing will be competitive at 75 basis points on the dollar value of each trade. We plan to add additional cryptocurrencies to the platform over time as well as transfer capabilities for both deposits and withdrawals, allowing clients with existing digital assets to bring them to Schwab alongside their other investments. Most importantly, we are launching our spot crypto offer the Schwab way with a powerful combination of education, research, risk management and service all at great value. Finally, I want to spend a few minutes diving into how artificial intelligence is accelerating our strategy and the fast pace at which we are launching impactful AI capabilities. I want to start by highlighting three points. One, Schwab is already an AI-enabled company. We have been using machine learning and AI capabilities for years and have made recent progress launching new AI capabilities. Just as we have embraced and flourished during other periods of seismic technology change, we are doing the same now benefiting from our massive scale, data and technological prowess. Two, AI will accelerate our strategy. On the growth front, AI opens up new distribution channels and allows us to create personalized relationships with clients we have not been able to serve with a person-to-person relationship. AI is already having a significant impact in driving scale and efficiency, both in our technology and operations and in the way we serve clients. Three, we are harnessing the power of AI in the Schwab way, bringing the best of people to engage the way they prefer. AI is accelerating our strategy in several ways. First, AI will help fuel our ability to serve more clients. As prospects and clients increasingly use consumer AI tools for research, we are making sure Schwab will be there providing the trusted education and expertise that we already bring to clients on other digital channels today. We're already reaching a growing number of clients through the answer engine optimization work that our marketing team is doing to ensure we show up on the AI platforms where investors are turning. We are working with these platforms now, and you'll see us do even more. AI will help us with our second growth lever, deepening existing client relationships. AI can help us create personalized and deeper relationships with the clients we can't currently serve at scale with one-to-one relationships. We know investors are using AI today, 77% of U.S. investors use AI today, though more than 90% still prefer human involvement in addition to AI. Next month, we will begin the rollout of portfolio insights and AI-enabled experience that will deliver tailored insights to our clients about their investment portfolios, how they are performing relative to indices, the news about their holdings and the relevant proprietary research from Schwab. We have already tested this capability with employees. We will expand these capabilities throughout 2026, providing clients with insights on topics like concentration risk, asset allocation, and technical indicators. We will also be launching a generative search capability for clients looking for information on schwab.com. The first iteration will launch this year. Starting over the summer, we will introduce the first of several AI assistants that will enable our clients to interact with chat and voice to address their most frequent service and support needs. Our first iteration of the investor AI assistant will launch in June. This capability will be able to answer general questions and we will start to test a set of actions the agent can take on behalf of clients. For example, clients will be able to interact with the voice agent to set beneficiaries. We are ensuring clear handoffs to human agents and strict guardrails. This agent and others like it will get smarter with each release as we introduce new skills. We are working with a leading AI agent firm on this build-out and look forward to sharing more details soon. We are also now able to meet our clients' trust needs with an AI-powered capability from wealth.com. We will do the same with tax. Over time, these efforts will create opportunities for enhanced experiences and new fee-based offers that will create value, we believe our clients will be willing to pay for. According to research, more than half of our clients are willing to pay for AI financial tools. AI is already driving scale and efficiency in two ways. First, it is helping us drive productivity across the firm. Every one of our sales, service and advice professionals is using AI every day to elevate every interaction they have with clients. A few examples. Schwab Knowledge Assistant gives our phone professionals answers to complex client questions in seconds. And Schwab Research Assistant synthesizes market insights from the Schwab Center for Financial Research. Schwab AI Service Assistant, which we've rolled out in retail and will follow in Advisor Services instantly transcribes approximately 60,000 live interactions a day, captures notes and assists client-facing professionals with next steps. Within Advisor Services, we've introduced large language learning models to analyze millions of calls to provide better coaching to our service professionals. In our branches, we are launching a relationship management assistant. If a financial consultant has a client meeting coming up, this capability quickly summarizes past client interactions using AI, shares a view on actions that would help the client, records the client meeting and prepares an action-based summary of the meeting for the client. We believe this tool will make our financial consultants more productive and able to serve more clients more deeply and more effectively. Second, AI is helping us transform how employees work. We have equipped every one of our 33,000 employees with AI tools and are seeing tremendous creativity as they are developing fluency in AI and embracing the ways it can transform how we work. We are accelerating the pace at which our Schwab engineers build technology. More than 8,000 of our technologists are using AI to design, code, test and fix bugs, all of which increases our speed. And we are streamlining back-office processes and operations, risk and across the firm to save time and resources. We are confident that we are incredibly well positioned to continue unlocking the benefits AI can bring to our clients and our business, including, one, enhancing the client experience by bringing personalized insights to more clients at scale and serving more clients more efficiently; two, increasing productivity and efficiency which will lower our cost to serve while enabling us to continue to reinvest in our growth; and three, create future monetization opportunities with AI-powered capabilities that clients value. The outcome is AI is accelerating our Through Clients' Eyes strategy to help us drive profitable growth through the cycle. I look forward to sharing more detail with all of you at our Institutional Investor Day on May 14, including demos of some of the AI capabilities that we'll launch soon. To summarize, we have strong momentum as we head into the second quarter, and we're well positioned to deliver earnings growth through the cycle. With that, I'll turn it to Mike to speak more in detail on our financial picture.

Thank you, Rick, and good morning, everyone. During today's call, I will discuss our strong start to 2026, where our sustained business momentum drove record financial results for the first quarter. In addition, I'll cover our disciplined approach to managing the balance sheet, which allows us to support the evolving needs of our clients across different environments. And lastly, highlight how by doing more for our clients across our platform, including the continued deployment of AI, enables Schwab's model to become even stronger and more diversified allowing us to provide individual investors and RIAs with an industry-leading value proposition. Starting with Q1. Revenue increased 16% year-over-year to a record $6.5 billion for Q1, including another quarter of double-digit year-over-year growth across all major line items. The reduction of higher cost borrowings at the banks, increased utilization of our lending solutions by clients, and interest in long-short strategies helped drive a 16% increase in net interest revenue versus Q1 '25. While equity markets were increasingly volatile over the course of the quarter, strong asset gathering and client interest in Schwab's wealth and asset management offerings drove 15% year-over-year growth in asset management and administration fees to a record $1.8 billion. Trading revenue for the quarter was up 20% versus Q1 '25, as our best-in-class retail trading platform supported record levels of engagement, including 9.9 million daily average trades. Bank deposit account fees also increased 20% year-over-year due to an improved net yield as lower-yielding fixed-rate obligations continue to mature and convert into higher yields across both the floating and fixed rate buckets. Moving on to expenses. Adjusted expenses for Q1 grew 5% year-over-year reflecting first quarter seasonality and strong client engagement across our trading, wealth and banking solutions. We also continue to invest to support our key strategic initiatives, including organic growth, new products, AI opportunities and ongoing scale and efficiency efforts. Record quarterly revenue combined with balanced expense management, resulted in an adjusted pretax profit margin of 51.4%, and first quarter adjusted earnings per share reached a record $1.43, a year-over-year increase of 38%. Transitioning to the balance sheet. We continue to support our clients' evolving needs as they navigated a challenging environment in Q1 '26. Demand for our bank lending solutions remained strong as total bank loan balances grew to $61 billion, up 29% from Q1 '25 and 5% versus the prior year-end. Client margin loan balances ended the quarter at nearly $127 billion, up 13% from year-end 2025 levels, reflecting continued interest in certain long-short strategies as well as increased trading-related margin balances despite a pullback in activity during the month of March. We also continue to utilize the combination of our interest rate hedge programs and investment portfolio to match off our assets and liabilities enabling us to efficiently maintain a more modest asset-sensitive position. Client cash followed typical seasonal trends to begin the year. However, as volatility increased during the back half of the quarter, clients took a slightly more defensive posture, which in conjunction with the cash build from organic growth and the long-short strategies contributed to $25 billion of cash inflows during the month of March resulting in an $8 billion sequential quarter increase in client transactional sweep cash. For the second quarter, we still anticipate the typical drawdown in client cash due to tax payments in April. And similar to past years, we expect this activity to impact both transactional sweep cash as well as other liquid cash alternatives such as money market funds. Beyond seasonal considerations, continued market volatility could influence client cash allocations. And lastly, in line with our stated principles, we continue to prioritize flexibility in managing the balance sheet to remain well positioned to navigate a wide range of environments. Capital levels remained strong with our adjusted Tier 1 leverage ratio finishing the quarter within our 6.75% to 7% objective range. Our adjusted ratio of 6.8% reflects a 19% increase in our common stock dividend, the repurchase of common shares for $2.4 billion during the first quarter and sequential growth in the balance sheet. Q1 '26 represented a strong start to the year with growth on all fronts, including healthy organic growth, record client trading activity, as well as robust engagement across our broader suite of modern wealth solutions, which we converted into record revenue and earnings. Given our strong performance in Q1 and based on what we see today in terms of the expected path of rates and strong client engagement, we are tracking higher than the $5.70 to $5.80 EPS range implied by the scenario we shared back at the winter business update in January, which excluded the impact of buybacks and Forge. We'll provide a more comprehensive update on our full 2026 financial scenario at the next business update in July. Finally, before we move on to Q&A, I wanted to take a moment to build on Rick's AI comments, specifically the conversation relating to cash. There are three key points to remember. One, Schwab provides an industry-leading value proposition to individual investors and RIAs. Two, with help from Schwab, our clients are actively managing their cash allocations. And three, Schwab's ability to help clients with more of their financial lives enhances the flexibility of our client-driven model.

So first, the overall value of Schwab's platform. We have created an exceptional offering in the marketplace that is highly trusted and valued by individual investors and RIAs, which has led to approximately 47 million total accounts and investors entrusting us with approximately $12 trillion in total client assets. Clients value our firm's focus on helping them build and manage their wealth while providing all of these services at highly attractive all-in costs for them. Second, we provide a broad suite of cash management solutions that offer clients a range of products with different features to help meet their diverse needs. We also proactively seek to raise awareness around the cash options available on the platform and efficiently enable them to move between the various options with as little as one click of a button. At the same time, independent RIAs continue to help their end clients manage their portfolio allocations, including cash to help meet their individual financial goals. Today, this has resulted in total cash levels running around 10% of client assets with transactional cash allocated at about a 4% level or approximately $10,000 per account. And as we see demand for new products or capabilities for cash, you would expect us to deliver those to our clients. Importantly, given how easy we have made it for clients to move their cash between different solutions and based on the trends observed over the past few years, client cash is actively allocated today. To the extent additional efficiencies are enabled down the line, the broader evolution of the platform enables continued flexibility in managing our economics. Finally, as Rick noted, we view the emergence of artificial intelligence as a tailwind to Schwab's strategy. So by continuing to put clients first, Schwab's platform has built up immense flexibility. Our motto is informed by investors' preferences for lower explicit fees without sacrificing product access, convenience or service. To the extent those preferences change at some point in the future, Schwab has a lot of flexibility to continue supporting investors and RIAs in the way they have come to expect from us while still delivering strong returns for stockholders. And with that, Jeff, let's move on to Q&A.

Our first question comes from Steven Chubak with Wolfe Research.

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

Steven, thank you for the question. Certainly, it's been a favorable environment in terms of that client engagement in the first quarter. And as you highlighted during the winter business update, when we laid out our financial scenario, that included two rate cuts. I think there was a June and September rate cut there. And looking at the forward curve now, perhaps the market is anticipating no cuts. So that is more favorable for us. And at the same time, when you look at cash, we had a good first quarter for cash and typically, over the course of the year, you will see that seasonality play a factor certainly in Q2. But stepping back, we're expecting the continued upward trajectory of cash being driven by organic growth. So we think over the course of the year, certainly favorable, where the lack of rate cuts perhaps as well as the strong client engagement, both bringing us new assets in cash with that but also on the asset side as lending has remained robust, that will provide continued upward momentum. And I feel good about the NIM growth, both what we had laid out in that scenario, but also perhaps some upside to that when we come back in July with a refresh of our financial scenario, we'll provide more details. Thanks for the question, Steven.

Our next question comes from Ken Worthington with JPMorgan.

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

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

Our next question comes from Bill Katz with TD Cowen.

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

Bill, thank you for the question. So as we look out on the horizon, we feel good about the client engagement and as we said this morning, we've seen that across the board. As it pertains to some of that lending activity, we've seen good continued momentum in both that bank lending product, certainly driven by the pledged asset line. And that, of course, comes at a very healthy spread over what we could earn on just leaving it in cash or allocating it to securities. So that's been a good boost as well as margin lending. And so I think with the continued volatility in markets, we're seeing engagement across the board, but we feel good about that lending space as well. And of course, as clients bring us more cash and as they keep cash on the sidelines, that is used to fund those lending activities very efficiently. So we see that expansion of the balance sheet. It was modest in the quarter but continues to be fueled by that client activity, which has certainly been accretive to the firm in terms of earnings and certainly accretive relative to capital. Now with that, we continue to look at capital, and we prioritize capital for the growth of the franchise, and it's going to be there to support our clients and their evolving needs. But with strong earnings growth, it's given us flexibility as well to return capital across our framework. We increased the dividend in the first quarter. Of course, over the course of the year, we'll have a look at those preferred securities that will become redeemable. And if we decide we wish to keep that form of capital in our capital stack, we'll evaluate the economics around leaving those preferreds outstanding or perhaps redeeming them and replacing them or some portion. And then, of course, that leaves you then with buybacks. And again, given the ability to continue to have capital to support the growth of the franchise as well as the strong earnings, we've had a lot of flexibility on capital. So we feel good about how the client growth has been evolving and how we've been able to support that in quite an accretive way.

Our next question comes from Brennan Hawken with BMO Capital.

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

Thanks for the question. We've always aimed to make it easy for clients to manage their cash effectively. We provide various support options, including our financial consultants who regularly check in with clients about their cash balances and share available options. When clients log in, they typically see the opportunity to earn more on their cash at Schwab. Our advisers also carefully manage cash as part of their fiduciary duties. We believe we've implemented all the necessary measures to help clients optimize their cash allocation, and we're confident about that. Clients often choose our sweep cash program for several reasons. Firstly, they need flexibility to move money to cover their expenses; we handle a significant amount of cash flow monthly. They also need cash for trading, as we transact approximately $300 billion in equities over two days. Thus, there are numerous reasons why clients intentionally allocate their cash, much of which remains on our balance sheet. We're also set to launch an enhanced capability this summer, starting with basic functions and some testing. Over time, we envision that any action clients perform on the Schwab platform will eventually be achievable through this new interface. The one-click cash movement we have today will evolve into this enhanced experience. Moreover, if clients prefer their cash to be part of a broader asset allocation strategy, we plan to offer that as a fee-based solution. Finally, it's worth noting that while we believe clients are effectively managing their cash, we also have several avenues to charge for the value we deliver. Our Client Promoter Scores are at their highest levels, indicating that clients appreciate our services. While we’ve transitioned away from a heavy reliance on commission-based revenue due to changes in the market, we have adapted well. To summarize, we believe clients are intentionally managing their cash, we are launching user-friendly capabilities, and we possess multiple monetization strategies for the value we provide. We are on solid ground and are genuinely excited about the potential of AI to enhance our strategy rather than hinder it.

Our next question comes from Brian Bedell with Deutsche Bank.

Could you provide more details about March? We've seen strong metrics in new net assets and cash build. Regarding new net assets, the adviser side has been growing faster than the retail side has declined for some time. Was there any impact from RIA conversions or new RIAs from wirehouses contributing to this growth in March? Additionally, do you think the deposit build is primarily driven by a shift to risk-off strategies or is it more about accumulating cash in anticipation of the tax payment season?

March was a remarkable month for net new assets, marking our second highest month ever, just behind December, which is typically a strong season. Aside from December, this was our best month for growth in net new assets, which is encouraging. You pointed out the consistent strength in adviser services, and what's particularly exciting about March is that investor services achieved an all-time monthly high in net new assets, surpassing those in adviser services. We observed robust performance across both investor services and advisory services, reflecting our strong value proposition. In advisory services, we maintain a leading custodial offering and continue to enhance our service for advisers. We've expanded our offerings by adding more lending capabilities that advisers requested. Recently, we launched a structured asset lending program, allowing advisers' clients to borrow against alternative and private investments. This development is well-received by advisers, who previously relied on large banks for such lending, as now they can manage these relationships through us. Our value to advisers has never been stronger, and they continue to thrive in the marketplace, demonstrating the effectiveness of the fiduciary model. There is a strong demand for advice and convenience, benefiting independent advisers. As they succeed and we support their growth, we also benefit. On the retail or investor services front, our growth stems from our compelling value proposition, an engaging market that attracts clients to Schwab, and our distinct edge over industry competitors. During this period of increased market volatility, our approach and perspective resonate with clients, contributing positively to our net new assets. Mike, would you like to discuss cash?

Yes. Thanks, Rick. In terms of the cash, yes, Brian, we did see that good pickup in the month of March, and there were a few factors that caused that. As you highlighted, if you look at the quarter, it was really March where you began to see that decline in equity markets and that shift in sentiment. So that certainly was a contribution to that pickup in cash that we saw late in the quarter. But then in addition, other activities such as that long-short strategy brought in some cash as well but also with the strong net new assets over the course of the quarter and in particular, in the month of March, that also served to bring us cash as well. Now I don't know how much that may have been related to the tax. I think the drivers that I described were more of the primary drivers, but it may mean that that cash was not put back into the market too quickly. If clients were selling then that cash may have just remained on the sidelines, and we'll go out for tax reasons in the month of April. And as I said, in April, where we're expecting and everything we're seeing so far is that normal tax season or it's the combination of that transactional cash as well as money market funds contributing to those tax statements. But thank you for the question.

Our next question comes from Michael Cyprys with Morgan Stanley.

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

Thank you for your question, Michael. I want to clarify that we do not currently see a significant risk regarding how we would change our economics. We believe that our clients have purposefully allocated their cash, and we strive to ensure that they have easy access to the right cash solutions. Many clients select sweep cash in both our advisory and Investor Services businesses. Additionally, we have multiple avenues to explore as we evolve. We generate revenue in various ways, whether through trading, wealth management, lending, or potentially fee-based solutions that utilize our agentic AI capabilities. If clients desire us to move cash on their behalf without their involvement, that would likely fall under an advisory offer, for which we charge a fee, including for an Agentic advisory offer. We have a strong conviction about our capacity to grow our revenue in any market environment, supported by our 47 million clients who value our services. We have developed long-term, meaningful relationships with these clients. Just as we adapted when commissions decreased, we will also find solutions if our economic situation changes. We have made considerable efforts to ensure that our clients' cash is intentionally allocated, and we are committed to supporting them in every aspect of their business. Importantly, the cash they hold represents only about 4% of their overall relationships with us. We are engaged with them across all areas of their financial lives, and we have numerous ways to monetize these relationships should the situation change.

Our next question comes from Mike Brown with UBS.

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

Thank you for the question. The reason for launching crypto is that we have always been committed to offering client choice. Many of our clients want to invest in crypto, and they're currently doing so through Schwab, whether it's through an ETP, futures, or closed-end funds. They have expressed a desire for exposure to spot crypto, and we are excited to finally provide that. We are approaching this in the Schwab way, ensuring great value and offering extensive research and education on the topic. In terms of encouraging clients to transfer their crypto from their current providers to us, they have been asking us to launch this opportunity. I believe they will take the initiative to move their crypto assets to Schwab. Our financial consultants will actively engage with clients to encourage them to consolidate their financial activities with us, something they've been seeking. Clients trust us as a secure institution, and they recognize that consolidating their financial life with Schwab allows us to better guide them and provide the resources they need for financial success. They know we offer unmatched service, pricing, and capabilities, so they are keen to make the move. Regarding the strategic significance of this initiative, we are establishing our own records and custody capabilities, which is essential for providing clients with choices about how they want to hold their equity in the future, including the possibility of tokenizing certain securities. Through this launch, we are creating options that will enable us to support the future of tokenization if that aligns with our clients' interests.

Our next question comes from Dan Fannon with Jefferies.

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

Absolutely. Let me start with trading and then digital pricing. Our traders are feeling more uncertain about geopolitics and the economy. Recently, I spoke with a group of traders who shared that they are taking smaller positions and holding them for shorter durations due to their lower conviction. Consequently, they are trading more frequently, but since these are smaller trades, they are generating less revenue per trade. This correlates with the daily average trades we're seeing along with the revenue per trade we're experiencing. Regarding crypto pricing, I believe we will have the lowest price among the major players for the first dollar traded. We want to be competitive, but we also recognize that launching crypto is costly and comes with risks. Therefore, we aimed for a healthy fee structure and believe we've achieved a very competitive fee while still ensuring attractive economics.

Our next question comes from Devin Ryan with Citizens.

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

Devin, I think you hit the nail on the head in terms of how we think about it, which is we do differentiate between financial related events and sports, pop culture. Where even the power of ownership and the power of compounding over time and owning equities, owning fixed-income assets, being an investor over time and having that ownership leads to higher levels of wealth. And our goal as a company is to help our clients live their best financial lives. And so prediction markets that are not aligned to that are not something that we want to pursue. And if you look at the stats on the success of gamblers, they're not strong and people generally lose money. And so as a company that is in business to help people live the best financial lives, we have kept sports and other things off to the side. In terms of a time line, I think this quarter was a quarter in which we accelerated our innovation at one of the fastest paces that I've ever seen with the company in terms of we launched crypto to employees. We made significant progress in AI. We opened up a new lending capability that our advisers love, we launched accounts sending a really strong message to parents and teenagers about what we stand for and the way we think clients should engage in markets. We closed the deal on Forge to be able to provide private shares to our clients. So we had a significant number of launches. And when we ask clients what they're looking for, prediction markets is very low on the list. I spent time with a large group of clients a few weeks ago, and I asked every one of them, 'Hey, what do you think of prediction markets', and it wasn't a tremendous interest to our clients. That said, I think at some point, we likely will have production markets. And I also think that there will be intermediaries that bring these to market. And so if you look at some of the announcements by folks like CBOE and others, they're coming up, I believe Nasdaq might be also doing something. They're coming up with binary options on different financial events and contracts that I think will act and behave very much like prediction markets, and that's something certainly we will take a hard look at and then will be quite straightforward for us to offer. So more to follow on production markets. It's not at the top of our clients' list. We're ready to move when and if needed and when we do, we'll stay away from gambling.

Our next question comes from Alexander Blostein with Goldman Sachs.

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

I'll start with alternatives and then Mike will discuss the balance sheet. Regarding alternatives, you asked about the advisers specifically. The portion of alternatives in the advisers' overall asset allocation is relatively small. I anticipate that over a 5- to 10-year horizon, this will increase. Looking at our platform today, we believe we can do more to support advisers in selecting the right alternative investments for their clients and create a platform that provides significant assistance. As we develop this, we see opportunities to generate revenue from offering these alternatives to our advisers. It's also essential to simplify the process of investing in alternative investments for our advisers, and we have focused heavily on this this year, planning to make significant progress by year-end. There are many opportunities ahead. Now, Mike, would you like to discuss the long-short program?

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

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

Our last question comes from Ben Budish with Barclays.

Could you provide more details about the trading activity? Rick mentioned that traders are taking smaller positions and holding them for a shorter period. I'm interested in any additional insights you can share regarding the breadth of engagement. I understand that the trading mix can affect revenue per trade, and it would be helpful to consider how we might evaluate some of those key performance indicators as we move into April and the rest of the year.

Ben, it's Mike. Thanks for the question. So yes, in the quarter, we did see strong engagement from clients. We did see that spike in daily average trades to a record 9.9 million. It's those types of environments where you see that volatility and high engagement. You tend to see that more weighted towards equities as opposed to derivatives. And that's what we did see. I think Rick brought in those other important factors, while weighted towards more equities, you did see smaller trade size, less shares per trade, less option contracts per trade. And I think that is an indication of the environment that we were operating in, highly volatile, but also less conviction. So we'll have to see how the macro backdrop evolves over the course of the year, but you see this dynamic where you see these spikes in daily average trades quite accretive, of course, to earnings but having that pressure on that revenue per trade if you perhaps see a more moderate set of volatility impacting the market, if you saw that reduction in volume of trades you could see a little bit of a lift in that revenue per trade. But again, it's really going to be dependent on how the environment evolves. Overall, we're very happy to support the client engagement. It's been a highly accretive activity.

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