Charles Schwab has profited primarily by riding the wave of financial innovation in the aftermath of the demise of traditional pensions. In a world where most workers need to save and invest independently in order to prepare for their retirement, Charles Schwab offers small investors the tools that just a few years ago were only available to the insiders.
The modern investing framework emphasizes independent financial advisers that provide objective advice that is then executed through an outside party in order to ensure that objectivity. While the emergence of the hedge fund industry has offered sophisticated investors an opportunity to trade aggressively, Charles Schwab provides all the tools that the average investor will ever need. Charles Schwab is the logical outside party to execute the average investor's trades and the company has seen impressive growth.
The discount broker business is at its heart a commodity business that aims to charge a low price for timely trades, yet many investors are willing to upgrade their services as they grow progressively more wealthy. Because of Charles Schwab's advertising presence, the company is particularly well placed to upgrade the accounts of its more than 7 million clients.
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