So are you feeling any effects at all?
It’s been more of a positive than a negative for us. We are definitely seeing better client endorsement. We’re seeing slower client attrition. We’re seeing positive transfer-account trends…. We measure these developments constantly, although we don’t disclose the details. But since last summer, we’ve been seeing all of these trends.
What are the differences between Schwab’s approach to the market and those of other financial-services firms?
I don’t want to point fingers…[but] it was clear to us that risk wasn’t being appropriately priced, and that credit spreads on certain kinds of products had gotten way too tight. As a result, we pushed away from some of those products. We just weren’t buying. When the spreads tightened and the risk relationships appeared to be out of whack, that should have been a signal to the industry to ask questions.
Were there any other factors?
Some of the challenge here is that you have people working on the [risk] models who haven’t operated in an environment like this, or even in some of the less bad environments we’ve been through. So it’s possible to underplay what the ultimate risk question is.
Are we going to be dealing with the fallout for a long time?
Define a long time. I’m hopeful that what the Fed is doing will [encourage] people to invest in the economy. But I do think we will be dealing with the repercussions of this for quite some time to come. [Just consider] what’s involved with the real estate market. It takes a certain amount of time for houses to [become] foreclosures, then become workout properties, then find their way into being remarketed. So I think it is almost inevitable at this point that we will have four to six quarters of uncertainty.
You’ve been in the CFO role for almost a year now. Has it been what you expected?
This has been a very eventful year on a lot of fronts. We closed the sale of U.S. Trust [to Bank of America, for $3.3 billion] in July; we’ve had a major capital restructuring; we’ve had some management changes; and we’ve had to deal with new financial systems.
So, if you throw in the market environment on top of that, I haven’t really had time to step back and ask what I thought the job would look like in a normal environment. It hasn’t given me a chance.