No Better Partner Than Schwab

March 16, 2023

It has been a wild last week in the financial sector. As you know from our Silicon Valley Bank blog earlier this week, there have been questions surrounding the confidence amongst the banking system and any financial institutions holding clients’ money. Our beloved custodian, Charles Schwab and Co., was not immune to the reaction, as its stock price fell in sympathy with the rest of the sector.  

The baby doesn’t get thrown out with the bath water!  We want to assure you that we have the utmost confidence in the strength of Schwab and its protection of your money. You should too. For Schwab (and us), the safety and security of your assets is their (our) number one priority.  

Since the company was founded several decades ago, it has always taken a conservative approach to the way it conducts its business, with unrelenting discipline and risk management of every kind. The firm is in great shape with a conservative balance sheet, strong liquidity position, and a diversified client base! 

Here are some excerpts from a Schwab Industry Perspective put out this week by Charles Schwab & Co.’s CEO Walt Bettinger and Charles Schwab, himself.  

  • Schwab investments held at the Broker Dealer are not commingled with assets at Schwab Bank. 
  • Schwab has a broad base of high-quality customers across multiple lines of business, capital well in excess of regulatory requirements, a high-quality and relatively small loan book, and a conservative investment portfolio that is 80% comprised of securities backed by the U.S. Treasury and various government agencies.  
  • We believe one of the best indicators of the strength and stability of the firm is our client activity. Our February results show that clients entrusted Schwab with more than $41.7 billion in net new assets – our second-strongest February ever following our strongest January ever. Our growth and momentum have continued in March, with daily net new assets of over $2 billion per trading day month-to-date, including Thursday and Friday of last week.  
  • Following the recent events in the banking industry, we are pleased to see the U.S. Treasury Department, Federal Reserve, and FDIC step in with decisive action to support depositors during this critical time. We think the steps announced today provide an additional layer of protection for individuals and will help boost confidence in the American banking system.   
  • Collectively, more than 80% of client cash held at Schwab Bank is insured dollar-for-dollar by the FDIC. According to S&P Global Market Intelligence, that percentage is among the highest of the top 100 U.S. banks. As a comparison, the banks in the news the last few days have between 2% and 20% of their deposits insured. 
  • As a further safeguard, Schwab has access to over $80 billion in borrowing capacity with the Federal Home Loan Bank (FHLB), which is an amount greater than all our uninsured deposits. That helps provide the firm significant access to liquidity, so money is there when clients need it.  
  • Schwab does not have any direct business relationship with Silicon Valley Bank or Signature Bank, so we do not have exposure to any direct credit risk from either. 

In conclusion, you should feel quite comfortable with your assets at Schwab. Frankly, it may be one of the best institutions in the world to have your assets held at present time. We are proud to partner with Schwab and 100% confident that your assets could not be in better hands. BTW, for more info, please see this CNBC / CEO Walt Bettinger interview 

Lastly, as I mentioned in our earlier blog, expect the volatility to continue but don’t let that push you to make poor knee-jerk emotional-based decisions. We’ve already seen how central banks are determined to not let the banking system fail – that’s simply not going to happen. There have been a few casualties and there could be a few more before the ripple effects smooth out, but don’t let that take you off course. It’s times like these we need to remind people that many of the best days in the market come amongst the most challenging times. Moreover, that it is not about timing the market, but time in the market. Stay disciplined, stay invested, and you will be rewarded.  

As always, we’re here for you. Don’t hesitate to contact us with any questions. 

Detterbeck Wealth Management is a fee-only financial planning / wealth management company with offices located in Palatine, IL (Chicago area) and Charleston, SC areas serving clients locally and across the country. To contact us about setting up an appointment, please see our contact us page