Ladies and gentlemen, now Rich Fowler.
All right. We're live. Welcome everyone to the Schwab Winter 2021 Business Update. I'm Rich Fowler, Head of Investor Relations for the company. Thanks so much for joining us virtually today.
I'd like to be able to declare it a top down day, but that would be a bit of a stretch even out here. And I know that's certainly not the case for many of you. So hopefully, the weather is behaving or at least on its way to doing so where you are. And we certainly hope all webcast winner update, not only because being in person is so much better, but because my facility with all the technology involved is frankly pathetic. We have a terrific lineup for you today though involving 9 speakers and an incredible events team working to bring you those 9 speakers from 9 different locations.
So hold on to your hats and we will just deal with any hiccups that might arise. So let's take a look at that extended lineup. Walt will start us off, of course, followed by Joe with an update on our scale story and of course, integration progress. And then our Chief Digital Officer, Nisha Hafi, will spend some time on our digital transformation followed by Rick Wurster, our Head of Asset Management Solutions and then Jonathan Craig, Catherine Golladay and Stacy Hammond will discuss various aspects of life across Investor Services Bernie Clark will speak to Advisor Services, and then Peter will wrap us up with the financial picture. Moving on to the agenda laid out in specific form.
Please note that we'll be combining the Q and A sessions in a couple of places and more on Q and A in a second. You can also see that we have several breaks planned, and I'll be the one restarting the session. So when you see my ugly mug reappear on the screen, you'll know that's the signal that we're going to get going again. Let's see. We expect to finish around 12:30 Pacific as promised.
So let's see. Let's go to Q
and A. Let's talk about Q and
A for a second. As you can see on the screen, good, we'll need to take questions solely via the webcast console today. You can submit them during each speaker's prepared remarks or obviously during the Q and A session itself. Jeff Edwards from IR will organize questions and basically act as the moderator for those sessions. As always, we have to spend a minute on the lovely wall of words.
So just remember, please, we're talking about the future here during the course of the day. Expectations can and will change and outcomes can and will differ. So please just stay in touch with our disclosures as we go forward. Couple of last thoughts. The Schwab's will be the slides will be posted on the IR site at the beginning of Peter's session, so about 11:45 Pacific.
A replay will be available as soon as possible. Possible. Just bear with us. It's a big session, so it may take a little while to get it all pulled together. But later or late today, I think, would be the aiming point for that, posted at ashwabevents.com.
We're really excited to share this expanded view of the company with you today. And we hope you'll find it worthwhile in deepening your understanding of our strategy and performance. We'll certainly welcome your feedback as we think about learnings for the structure and content of future updates. And with that, I think we're ready. Walt, would you please start us off?
Well, thank you, Rich, and hello, everyone. I'm not at home. I'm in my corporate office here in Ohio. So there's no risk that either of remaining 2 teenage daughters wander through the background. But with the nor'easter, there is a risk that you're going to hear snowplows scraping in the parking lot out back.
But hopefully we'll do our best here with the sound and the technology. So last October, I mentioned that we were in extraordinary times. And looking back, I don't think I knew what extraordinary even meant when compared to the environment that we're operating in today. In times like this, it's easy to lose sight of the importance of a focused, consistent long term strategy. But I guess I'd suggest that in times like these, a focused, consistent long term strategy is more important than ever.
Our through client side strategy has never worked more effectively than it did last year in 2020 as new clients joined Schwab in record numbers and existing clients brought their assets to Schwab in record numbers. Despite another extraordinary round of interest rate cuts and asset purchases by the Federal Reserve, our strong financial model delivered quality earnings and the acquisitions we closed last year set us up for even stronger performance in the future. Schwab is healthy and strong. We have a solid balance sheet and a winning strategy. Now just to be clear, that's not to say that in 2020 everything was ideal.
With client engagement volumes at multiples of prior peak levels, it has clearly been a challenge to serve our clients in the manner and timeliness that we aspire to and that they've grown accustomed to expect from us. But we'll continue to make investments in scale and in system stability and in client service, And I do remain confident in our strategies and commitment to delivering outstanding client experiences. Although it might seem maybe even quaint relative to the volatility that we're seeing here in 2021, let's start by taking a quick look back at last year. The environment in 2020 was highly volatile with VIX levels soaring to 83 in the spring and receding to the low 20s by year end. The equity markets fell hard as we know and then they recovered those losses and then some by year end.
Investor sentiment, not surprising, it vacillated between bull and bear views. And of course, the IPO volume was the highest that we've seen since the Internet bubble. Amidst all this volatility, our clients continued to entrust us with assets and open new accounts at record levels throughout the year. While our brokerage accounts approached $30,000,000 core net new assets exceeded $280,000,000,000 for the year, capped by really an extraordinarily strong December where we had an excess of $60,000,000,000 in net core asset flows. So the result was yet another year in which our organic growth rate for new assets was approximately 7%.
I think again demonstrating our ability to continue driving strong growth even as client assets exceeded 4,000,000,000,000 dollars 5,000,000,000,000 and of course now even $6,000,000,000,000 Now, in addition to the record levels of core net new assets, clients were highly engaged across our service particularly strong as was activity in bank lending, as well as our retail investment advisory offerings. Last year proved the critical nature of offering an omnichannel platform for clients. We saw that with some of the challenges that occurred across our industry where omnichannel service wasn't provided. And yet even then, our service delivery to clients was uneven at best and disappointing to us as well as our clients at times. Frankly, the volumes overwhelmed even our most aggressive projections.
In March, call and chat volume reached $4,000,000 for the month and after a modest respite in the fall, grew back to approximately $3,500,000 in December. From a metric standpoint, our average speed to answer a phone call, which averaged around 30 seconds in 2019, grew to about 2 minutes in 2020. And of course, it was well beyond that in times of high stress and volatility. In addition, interestingly, our average handle time, in other words, the time that we spend on the phone with each client also expanded. So at Schwab, we went from about 8 minutes for a typical phone call to closer to 10.5 minutes.
And of course, this was due to the complexity of issues that clients were engaging with us on in 2021. And of course, those challenges are continuing into this year. We are carefully reviewing some of the decisions around the TD Ameritrade integration, because we want to ensure that we don't take steps that would risk any further degradation in our service quality. So as part of that, we're examining locations that we might have previously thought we wouldn't maintain. But in order to retain the trained and licensed staff that are at those locations, we're looking to maintain want to be clear that this is this statement is not us moving off our committed savings from the integration.
We remain as committed as ever to saving the $1,800,000,000 to $2,000,000,000 of expenses that would otherwise come from our combined run rates. You can see that on the right side of the page, there's been a dramatic increase in engagement in the mobile and web platforms across both Schwab and TD Ameritrade. Some pundits have spoken of the impact of the pandemic on digital engagement. And I guess, no statistics illustrate probably that more clearly than mobile usage up by about 50% at Schwab and over 70% at legacy TD Ameritrade. Against this backdrop, our financial results were quite strong.
They're certainly considering the actions taken by the Federal Reserve to reduce the Fed funds rate to near 0 and to push long term rates down via their $100,000,000,000 plus of purchases of treasuries and mortgage backed securities each month. Of course, these are the very type of securities that we typically purchase. Despite that, we were able to maintain pre tax margins in the low 40s and the 42% range. Of course, that's adjusted for our one time acquisition related expenses as well as amortization of acquired intangibles. And we are able to deliver a return on tangible common equity of about 15%.
Despite the demands on our systems and despite approximately 95% of our employees working from home, I guess despite the volatility that we all had to navigate, throughout 2020, we maintained our intense focus on advancing our 3 strategic initiatives. And those are scale and efficiency, win win monetization, and by that we mean monetization that benefits our clients along with Schwab, and then client segmentation. Each of the acquisitions or project investments or product introductions or enhanced capabilities that we announced in 2020 fit very clearly into 1 or more of these 3 strategic initiatives. Now, as we transition into 2021, these same three strategic initiatives are guiding our efforts. Under scale and efficiency, we will continue our progress on the TD Ameritrade integration.
We'll continue our efforts around the digital evolution of our firm overall. And of course, we will continue hiring and training professionals to be there to serve our clients. Under win win monetization, we'll advance our efforts around personalized investing, including both thematic investing as well as direct indexing. We recently introduced over 20 fixed income strategies from Wazmer Schroeder, and we're in the process of making some changes to our 3rd party approach to relationships with asset managers, that's both financially as well as some of the partnering that we do together. In terms of client segmentation, we've seen solid responses to our efforts around it, particularly better serving some high net worth and ultra high net worth clients.
Of course, in the retail world, they're largely self directed. We've made measurable progress in our lending capabilities and we continue to invest in enhancing trader education and trader platforms with a recognition that the thinkorswim platform will be our premier trading platform once we have integration complete. Our strategic priorities are always informed by an objective assessment of the longer term trends that we believe will evolve and shape our industry. And then we implement strategies and focus on initiatives intended to capitalize on these trends. So every few years we have shared with you our views on these trends and we wanted to go ahead and take this opportunity to do so today with a few updated perspectives with respect to these trends.
So let me start first with broad trends. Our view is that client relationships and trust are what is most important in our business. Ultimately, we are in the trust business. We think from a broad perspective that although active asset management will continue to have success in some classes, certainly various forms of low cost indexing appear likely to continue capturing the majority of flows. Our view is that pandemic level trading volumes are not sustainable over the long run, but we do believe that trading volumes will remain at higher levels than they were in years past, in particular because of the removal of much of the friction via both better technology as well as the elimination of most forms of web and mobile equity commissions.
And then lastly, from a broad trend, we believe that brand is very important, but brand alone is not success will not be successful in and of itself to encourage new clients to try a firm or to consider consolidating that it actually is an overall combination of a series of factors that will win when combined with a strong brand. So let's go ahead and move on to client views. And here we've identified a handful of views that we think are important through the lens of the client. The first, of course, is that clients no longer accept trade offs or compromises. They expect the best of everything in a firm that they choose to invest with.
2nd is that client service expectations are really not being formed by the experiences within our industry, but rather they're being informed by experiences that clients have outside the investment world. 3rd, the idea of an investment performance definitely matters, but more so in terms of setting a plan, designing goals, investing in an efficient manner from a tax standpoint and keeping costs as low as possible. The next one, I often say that personalized investing is coming at us like a freight train. And our view is that personalized investing really will define much of the coming years that investors will want to invest in manners that reflect their personal situation. And with a combination of technology and direct indexing and thematic investing interest in ESG, fractional share capability, all of this will contribute to rapid growth in personalized investing.
Active trading is an important investment strategy for many investors. And those investors expect world class platforms, value added insights, pricing, risk management tools, and we are committed to providing that for the investors who consider trading a key part of their strategy. And then lastly, we just spoke a bit about the corporate fiduciary world as lawsuits continue in that space, plan sponsors are more focused than ever on ensuring that the employees in their plans are given access to low cost, quality investments, as well as the opportunity for investment advice that can help them both in their plan as well with overall financial wellness. Lastly, I want to spend a few minutes on the competitive landscape. Our view is that scale is exceptionally important in determining the winners.
The costs, the expectations from a balance sheet standpoint are so significant that scale will play a major role in determining winners in our industry going forward. Next, we think breadth of offering and capabilities is very important as consumers look for convenience with the providers that they choose to do business with. A relatively new factor in the competitive landscape is the moves by large global banks into the space in a much more aggressive and aligned manner. And of course, often they lead their way in with lending. So a new pathway into the space has been occurring in recent years and we think will accelerate.
Relationships are key and not just digital relationships, but a combination of digital as well as in person. We continue to believe that independent investment advisors will gain market share. The combination of their ability to deliver a fiduciary experience offer great value, personalization and local presence is very, very difficult to beat. And then those same trends are likely to continue in our mind to encourage corner office advisors at wirehouses and other investment professionals to choose to pursue the RIA industry. What's important about these trends is that owners of our stock or analysts who cover our stock, you can certainly understand our views that we provide great transparency.
And therefore, you can evaluate the actions that you see us taking, both near term as well as long term and be able to see how it all fits together. In addition, it gives you the opportunity to hold us accountable for the decisions we make and the consistency of them with our view of long term trends and opportunities. We estimate today that we're honored to serve about 13% of the U. S. Retail investment market.
And of course, that leaves us with substantial opportunity to grow in the future, subject of course to serving our existing clients well and attracting new clients with the overall quality of our offering. So to go ahead and summarize, we believe our positioning is strong and our focused consistent long term strategy and approach to serving clients is on target. It's on target for the trends that we see evolving within our industry. We are continuing to invest and prepare to continue capitalizing on those evolving trends and opportunities. Now before I turn it over to Jeff for our Q and A, I want to make just a few brief comments about the trading in the highly volatile stocks in recent days.
I'd like to provide some facts and also address a series of what we have seen as inaccurate statements in the press as well as inaccuracies floating around the social media world. Once I address these issues in my comments here this morning, we've made the decision that we're not going to take additional questions on them for the balance of the day. So unlike some other brokerage firms, neither Charles Schwab and Company nor TD Ameritrade halted buying any stocks or clients selling any stocks that they own. In addition, neither firm restricted clients from executing any basic options strategies. I'm going to go ahead and repeat that just to make sure that everyone in the press and those on social media who have been posting inaccurate statements can understand what we are saying.
Neither Carol Schwab and Company or TD Ameritrade halted buying any stocks or selling or clients selling any stocks that they own, and neither firm restricted executing any basic options strategies. Both firms did restrict certain advanced option strategies. Why? Because some of those advanced option strategies create the risk of loss levels that would be so large that the investor client may not be able to cover the losses that they incurred from their actions. Effectively, that leaves the risk of those losses with us.
Actions like this are normal course of business. We take them on a regular basis. And as you would expect, our owners, our regulators and others expect and they actually require that we manage the firm prudently. It is imprudent to allow positions that have the potential to leave our brokerage firm with the losses that the investor client may not be able to cover. So, Jeff, let me go ahead and turn it over to you for our Q and A session.
Great. Thank you so much, Walt. We appreciate those thoughts and we're getting a few questions coming across the line now. I think we actually got a number of questions with some interest to get some perspective on those relationships with 3rd party managers. I know that's something that Rick might touch on a bit further in the presentation, but perhaps some initial thoughts from you.
Yes. I think that what we are doing is we are trying to better understand clients and clients' desires, clients' objectives from an investment standpoint. And maybe an analogy I might use to better illustrate it is that in many ways, when an investor would come to Schwab in years past and to some extent even today I guess, they would walk in and we were a bit like maybe a Costco. There was a lot of opportunities, a lot of products on the shelf, a lot of aisles to go down, a lot of sorting to try to come up with. And moving forward, I think that we want to provide more guidance and assistance to help clients identify what their objectives are, help them identify alternatives that might be more effective from them.
I suppose you could following along my analogy, you might say it's more of a stitch fix type of model than a Costco model. None of that is to say that all those options on all those shelves won't be available for clients, but we want to maybe do a more effective job of serving our clients in helping them identify what might be great solutions for them. And so naturally as part of that, you could see some evolution in some of the relationships with some of the asset management firms.
Great. Thank you for that. Another question along those lines, this one is from Dennis Blighley from Timucuan Asset Management. Apologies if I butchered that pronunciation. You wanted to see if you could expand a bit more on what you described as other low hanging fruit in the monetization area?
So, it's just a matter of looking at places where we can better serve clients. And at the same time we're better serving clients often with higher quality solutions and maybe even a lower cost for the client, but we might capture a bit more of that value stream. So there's a series of those initiatives underway. I don't at this point plan to go into more details on what those might be. But I think you see them unfolding before you with some of the decisions that we've made, some of the acquisitions that we've made.
You'll see more of it as we introduce thematic investing. You can see an example of it with the comments I made on the solutions we've introduced in the fixed income space from Wozmer Schroeder. So you'll see that unfolding over time, but we'll probably let those communications come out as the solutions are introduced as opposed to maybe me front running them too much.
Understood. Thank you, Walt. Next question is from Bren Hawkins at UBS. Given the large banks are leading the lending to enhance their competitive position in the space, do you have any updates on Schwab's plans to continue to ramp lending within our own client base?
Well, we certainly are. And I believe the metrics illustrate that to be the case that we want to make sure that we can be competitive directly from our retail side, but also that the RIAs who choose to custody with Schwab can be competitive competing with these same large banks by having lending capabilities that they can access through our Schwab banks. So it is an important part of our strategy. I guess the one thing I would want to emphasize though is that as has always been our approach to lending, we like to lend money to people who pay us back. And so that criteria will not be changing and hasn't been changing.
But we are pursuing more from a lending standpoint to our clients that helps meet their needs. That's what has to come first meeting their needs, but then ultimately helps build a deeper relationship with them and with Schwab and or the RIA that serves them.
Excellent. Thank you, Walt. Another question, this is again probably something that will be expounded on a bit further in the presentation by some of your colleagues and peers. But maybe getting a question here from Bill Katz at Citi. Just kind of giving an update or an expanded view on the opportunity with direct indexing and how you see that unfolding and how that will impact the marketplace?
Well, I think what you're going to see is you're going to see it unfold in a couple of stages. So, I would expect things like thematic indexing to come first. And of course, what thematic indexing will do will be allow people the opportunity to identify a theme that they want to invest in. For example, it might be companies with a particular emphasis on artificial intelligence or robotics or in the healthcare companies with a particular effort to say cure cancer. And people will be able to say, I'd like to look at companies in that theme and then be able to click and buy dollar amounts of all of those stocks in that theme, while also adding or subtracting companies within that theme that they would like to add or subtract to personalize.
I think that's the first step. And so there you start with a theme rather than maybe a broadly recognized index. But I then think what will follow on in the direct indexing world is where people will have the opportunity to begin with themes, but potentially also begin with a broader index or multiple indexes indices at some point and then customize from there, while still taking advantage of tax loss harvesting and other benefits inherent in owning the individual securities. So it's really one of those win win opportunities that we can be there for investors and help them personalize their investing strategies more effectively and at the same time be compensated from our side for the work that we do in designing, building and administering these themes or the direct index model. So it's really a classic win win.
And again, as I mentioned earlier in the trends, we think that personalized investing is going to play a major role in the future years and likely the decades of investing. Not that packaged products will go away. They won't go away. We're not saying that these kind of solutions are going to eliminate packaged products. But the opportunity for personalization is going to have an impact in our industry, we think in a meaningful way.
Great. Thank you very much. And we are getting, as you might expect, given the recent events, a ton of questions coming in around market structure, payment for order flow, etcetera. We are going to probably hold those just to notify the group until Mr. Martin Neto's section here and provide any additional comments that are appropriate at that time.
Maybe one last question here for you, Walt, and this is from Ari Sasse at MD Sasse. Now that we're a few months past the closing, what have been maybe the biggest positive and maybe perhaps the biggest negative that you viewed from the TD transaction now that you've had some time to have it under the Schwab umbrella?
Sure. I think probably the biggest positive that I have seen is just the commitment of what is really an extraordinarily talented group of people, a commitment to their clients and a commitment to ensuring that our integration is successful. Now that's not to step away from the recognition that we all have that there are going to be people whether they are Schwab employees or legacy TD Ameritrade employees whose positions will be eliminated and they won't be able to be part of the combined companies. Everyone recognizes that that is inevitable. But there is great talent, highly dedicated people in locations all over the country that we are really, really excited about.
Much of the views we had on technology have been validated. There are some areas that behind the scenes need some additional work that's probably not a surprise. But I think overall, we've been just very, very pleased. I think I made a comment in a recent town hall at the firm that I have been so pleased with what I have learned since really November of 2019 when we made the announcement of validating our decision on the acquisition and just so encouraged about what our combined firms can do for clients for so many years into the future.
Great. Well, thank you so much for taking the time this morning, Walt. We really appreciate it. It's been great and we look forward to the rest of the presentation. I'd like to invite Joe Marnetto, our COO, to come on stage and talk a little bit about scale and the TD Managed Integration effort.
Thanks, Jeff. Thanks,
Walt. Good morning, everyone. So like Walt, I'm also in my office, not so much for fear of teenage daughters interrupting me, but more for trees falling down and knocking me completely off the grid. So I think the infrastructure here maybe is a little bit more robust than that at my house. So figured I'd come into the office and take advantage of that.
As Rich highlighted, this format that we're using today gives us an opportunity to showcase many more of the great leaders that we have at Schwab. So as a result, I'm going to focus my comments on 2 key areas. 1, on the acquisitions of the past year and the progress that we're making on integration and then also on some of the other initiatives that are underway that continue to help us drive scale and efficiency into the business. And I'll leave some of the more detailed product and platform commentary to my colleagues who are the true experts in this area. So let's jump into the acquisition update first.
I think it probably goes without saying we had a very busy year last year. Starting back in May, we acquired the assets of the USAA brokerage business and we also entered into an ongoing referral agreement to provide brokerage and wealth management services to USAA members. The business was integrated smoothly and while we didn't bring over Rainy Systems as we transitioned to the accounts directly onto the Schwab platform, we did bring over some great talent in the wealth management space in that transaction. And we're still in the early stages of introducing these clients to all the great capabilities of Schwab. And we also have that the intellectual property of Motif and we expect to be launching products in both the thematic investing and the direct indexing areas later this year.
Then in July, we closed on the acquisition of Wassmer Schroeder, a nearly $11,000,000,000 fixed income asset manager expertise in the muni market. And last month, we launched 20 SMA strategies, including 2 ultra short duration, 6 core strategies and 12 bond ladders. And then we took a couple of months off. In October, we closed on the TD Ameritrade acquisition. This was clearly a much larger transaction than the prior 3 with expected benefits ranging across scale efficiencies, the platform enhancements, talent acquisition.
So let's move on to the next slide and I'll provide a little more detailed update on the integration progress. We're now a few months into execution and we continue to validate the estimates that we made around the expense synergies. The total expected reduction in expenses is still $1,800,000,000 to $2,000,000,000 and we still expect to get the broker dealer conversion in 18 to 36 months. I would have liked to have been able to tighten up this conversion window at this point, but the enormous volumes of activity that we're seeing on both platforms has forced us to relook at some of the capacity planning assumptions that we made early on in our planning And we're going to have to make some adjustments to our early plans as we contemplate being able to handle these kinds of extraordinary volumes on 1 consolidated platform. So we will be back in the future with some updates on the timing on those windows.
But for now, we're still sticking to the 18 to 36 months. Now that said, we do still expect to achieve 25% to 35% of the total cost synergies in the 1st year With continued progress over time until we get to the conversion, we can significantly reduce the technology and other operating platform expenses. And as Walt indicated, in this environment, we're protecting service staff, but we still feel confident that we'll be able to achieve the projected cost reductions from the baseline level of expenses, while allowing for more expense growth that's tied to the volume changes that we've experienced. Peter is going to have more details on this in his section. So of course, we'll keep you updated on both revenue and expense synergy projections as we get further into integration.
And on the revenue side, we have a couple of updates here as well. So, we had originally listed order routing revenue as a potential dissynergy and we've gotten a look at more of the details and updated our analysis and we now believe that the impact could be flat to modestly positive absent any changes in market structures. We're working toward a transition in Q2 to a harmonized routing model and we'll have more details as we make this switch. And of course, as we work through this, we'll continue to focus on execution quality for our clients throughout the transition. With respect to the IDA balances, we see an opportunity to move more balances sooner than our base case assumed.
So if balances stay flat to where they are today, we could move at least $20,000,000,000 from the IDA to our balance sheet in the 1st year, which is higher than the $10,000,000,000 we previously communicated. This results from a combination of factors including growth in overall balances as well as an increase in uninsured balances. And even in this environment, we pick up about 65 basis points when money moves from the IDA to our balance sheet. And again, Peter will have more to say about all things balance sheet in his presentation. So let's move on to some of the other initiatives that we have underway beyond acquisitions and integration because that's not the only thing that we're focused on.
We've been working on what we've called application modernization for a few years now. That's really a wrap of fork in 3 key areas, updating software, modernizing hosting and enhancing data centers. So, with respect to updating the software, newer programming languages on distributed systems not only run more efficiently, but they also allow us to build complex capabilities in a simpler and quicker manner using fewer total lines of code than older languages. And so, just as an example, over the course of this effort, we expect to retire just under half of the 64,000,000 active lines of code in our existing books and record system, retiring or rewriting well over 400 applications. We expect to complete this work concurrent with the end of integration, which is still consistent with our original timeline, but we've had to make some sequencing adjustments as we've had to accommodate the integration work.
With respect to modernization of hosting, today all our new business services are deployed to private cloud and about half of our business service traffic from channels is handled by PaaS or SaaS or IaaS related deployments. Our technology stack positions us to leverage public cloud where it best serves speed and will allow for hybrid deployments or full portability to the public cloud, again, where this makes appropriate business sense. On the enhanced data centers, we're improving resiliency across company data centers at distance and multiple public cloud deployments. And these deployments are the manifestation of Schwab's most current standards for physical security and technology capabilities. Now financially, all of this work will show up in a couple of different ways.
Much of it's going to bleed into the run rate over time as new services are delivered into production, helping us bend the cost curve down as we absorb new volumes. Unit costs in areas like account opening and trading have already seen meaningful improvement. And there will also be a significant ramp down resources as we get to the end of integration, given the magnitude of the resources we're applying to this work over such a limited timeframe. So this effort not only helps drive scale efficiency, but it also adds greater systems resiliency along with significant reductions in time to market from a deployment standpoint, a true win win win. Now part of the efficiency and resiliency benefits will come with a continued focus on a cloud first approach to hosting.
As we've talked about before, we've been building out our private cloud for a few years, as well as actively utilizing SaaS and PaaS solutions. We've also been testing and learning in the public cloud for some time and we're preparing for some bigger deployments this year. There are some benefits the public cloud provides that we're looking to take full advantage of. So, examples here include advanced capabilities that require substantial processing power like artificial intelligence and machine learning or burst capacity that makes the most of the pay for use pricing model or things like storage of very large datasets that are handled efficiently in the cloud. That said, there are some applications that we expect will run on premise for a number of years.
So we're aiming for a hybrid cloud environment as our target operating state at the end of all of this work. Finally, we're leveraging the digital transformation work to help us ramp to the volume levels necessary to absorb the TBA volume in a cost effective manner. We continue to make inroads on digital self-service, helping clients do more of what they want simply and elegantly online. So, paper will still be available for the clients who want to use it, but we're continuing to drive more paperless adoption by removing friction in the process. We strive to make the digital process the easy path, so clients never even look for the paper alternative.
And this is equally true in both the retail and advisor space. And more and more, clients try to interact digitally first. So, enabling them with tools like online status both meets them in their channel of choice and takes calls off of our service lines. We look to automate process wherever it makes sense and as volumes increase either organically or through acquisition, the business cases get stronger for more investment in this area. And we've now automated enough of our processes that optimizing the exception processes has become an important scale lever for us.
Getting work that really needs a human touch to the right place to be dealt with quickly and efficiently enhances client experience and maximizes the use of our labor talent. So, while this transition has been a focus of ours for a few years, the increases in volume that we've seen and contemplate post conversion makes this work even more critical to building scale in the future. So that was it for the prepared comments. I'd like to open the floor to questions at this time. Jeff, would you like to get us started?
Hi, Joe. Thank you so much. I think before we get started, just given the volume of the inbound around, again, as mentioned during wall section, market structure and payment order flow, maybe just wanted to see if you had any additional comments that you wanted mention at this time about that topic.
Sure. So I'd highlight again that the comments that I made around the look we took on the differences in order routing revenues that we had in the synergy case versus what we expect now. And so we've in the current market structure assessed that rather than being a negative that could be flat to slightly positive potentially for us. But that did have a caveat in there, as I said, in the current market structure. With regard to market structure, at this point, I don't think we know more than anybody else on this call does.
And so, we're just not going to engage in speculation at this point around changes that may come to market. I will say that I've been in the industry now 24 years and I think we've seen several evolutions in the past and the industry has continued to adapt and change around how it handles order flow and to these things that there are changes, I would expect that that will be the case going forward as well. But we have no insights on what those changes might be. We're going to remain focused on making sure our clients get great execution regardless of what happens there.
Understood. Thanks for taking the time. Maybe can you talk a little bit more, Joe, about Schwab Systems and how they've been performing given the sustained record high activity levels and how you feel you're positioned from a capacity perspective going forward?
Yes. So I would say thank goodness we started some of the application modernization work when we did. And I wish we had started potentially about 6 months earlier. So, we've taken a tremendous load off of the mainframe at this point in time. And so, the distributed platforms have been remarkably stable and available over the course of the increases that we've seen in volume.
I just remind everybody that if you kind of look back to where we were at the time that we were talking about the acquisition, we've now surpassed actual levels that exceed the capacity plan that we had talked about for what we thought we might need to grow into in the future. So, in about a year's time, we've gone from what we thought was 4 times capacity to using that 4 times plus already and having to rethink what new capacity levels need to look like. We have seen some stress on some of our systems, particularly in the communications between the distributed systems in the mainframe. We have a number of things in the works to continue to make progress on that front very quickly, which should help us scale even more dramatically here in the next couple of weeks. But it's we've seen just dramatic increases in volume in both sides, both in legacy TDA and legacy Schwab.
And I think we've learned a few things about where we want to go into in terms of providing appropriate capacity for what consolidated firms don't look like. But all things considered, given that the spike we've seen in the activity levels, I think we've held up
reasonably well. We would have liked
to have been 100% for our clients and we realize any interruption is not good. But, I think we've been able to get back up pretty quickly when we've had issues and maintained availability largely for our clients throughout this big spike in traffic.
Great. Thanks, Yaron. I should have noted that question was credited to Chris Harris. Kind of a follow-up here from Steven Chubak at Wolfe Research. Given some of the rethink on capacity levels, how does this inform the longer term expense growth rate relative to what you'd spoken to previously?
And perhaps some of that could be you could start and Peter might layer onto that later in the presentation.
Yes, I would say Peter is definitely going to have a presentation component of this in his presentation, we should leave the details to him. But I would say for now that it's probably best to think of this as a couple of in a couple of ways. So, one is when we talked about synergies, we talked about cost reductions off of the base of the 2 companies going into the transaction and we're still highly confident that we're going to be able to get those kinds of reductions off of that base level of spending. But any spending going forward is definitely going to be half to be adjusted for the growth that we have seen in volumes and activity that neither of the firms would have been able to absorb without some degree of expense growth and the consolidated firm won't be able to absorb it without some degree of expense growth as well. I'd like to say that the opportunities for us to continue to drive further scale into the business at the size that we're running at now means that maybe the expense growth in consolidation would be a little bit less than the 2 firms on a standalone basis would have experienced.
But there is going to have to be some expense increase that's going to come along with these volume increases. And Peter has got much more of that I think detailed in his presentation.
Next question comes from Will Nance at Goldman Sachs. How would you characterize maybe the split of the cost savings that are tied to, we'll say, the specific broker dealer integration effort versus the other pieces of the broader integration streams?
Yes. So,
we've already said that we're going to get 25% to 35% this year without getting to that integration piece that's still a couple of years forward. So, I'd say it's probably fair to think of it as being sort of 1 third broker dealer systems, maybe a little bit more than that and 2 thirds other non bond systems related costs. So, I mean, it's that year 3 or even tailing into year 4 as we go through the process of retiring all those old systems, there's a pretty substantial savings that's going to come from getting to that integration point.
Great. Thank you. And maybe kind of on the same line, next question from Richard Repetto at Piper Sandler. How would you think about these 1st 12 month synergies, kind of the pace and cadence of that? Is that a little more, we'll say, pro rata across the 12 months or is it more specific or lumpy?
So, it's probably a little lumpier. So, as we think about the patterns here, I'd say we got off to a pretty good start quickly with that first wave of reductions. And now we're moving into a pretty steady state of reductions on, let's just call it a quarterly basis. Obviously, we're not going to be able to repeat that big first wave consistently every quarter. I would expect that we will show consistent progress, although probably at a slower pace between here and when we start getting to the point where we can retire some of those systems and then a pickup toward the end as we get to an ability to start to actually turning off the systems and shutting down those platforms.
Next question from Brian Bedell at Deutsche Bank. Could you maybe provide some perspective on maybe you're the team's kind of highest conviction 2 or 3 revenue, product service revenue related synergies after client day 1?
So, I think some of this is the revenue pieces you may hear from other folks. But I think that there are a number of synergies that are directly related to the acquisition. I think as we started talking about order routing revenue, that was a bit of a surprise. Clearly, the top of the list is the IDA balance movements. That's definitely the big synergy that we identified in the transaction and still by and large remains the big synergy that we'd be focused on.
Beyond that, I think we've identified that there is really a number of products and services that the legacy TDA clients haven't really had access to some of our great wealth management products, some of our lending products and even some of the maybe smaller or less physical things like access to Schwab Charitable, all of those I think are going to combine to probably produce a significant lift to us on the revenue side. Likewise, as we bring some of the enhanced trading capabilities onto the Schwab platform and make it available to the existing Schwab client set, I would expect that we will likely see some pickup in trading and things like advanced order types or some capabilities like futures that may not have been as available on the Schwab platform. So, I think what we're going to see is the best of both firms getting distributed across the client base with uplift kind of across the board depending on what products that the clients have been exposed to historically.
Got it. Understood. Maybe circling a little bit back to some of the clearing. Next question from Ken Worthington at JP Morgan. Given some of the stress levels that other smaller, let's say, less scaled diversified client firms industry have experienced of late.
What are some of the advantages of Schwab's client platform relative to others?
Sure. So, I think it's a variety of things. So, it's the investments we've made in systems to be available and up and running and just quality and breadth of the platform that we're able to provide. You couple that with the strength of the firm and clearly we have a very strong balance sheet, a very strong capital level, access to liquidity and ability to meet our reserve requirements as well as our margin requirements at places like OCC and NSCC. We've been doing this for a very long time and have rigorous controls in place to ensure that those executions are going to be met, get into the details of the clearing operation and the details that we monitor and the controls we have around how we clear trades, how we process trades, how we deal with sales.
And then finally, again, into looking at some of the things like execution quality, we just provide really great fills for our clients on the transactions that they undertake. And it's from soup to nuts, it's hard to find something that we don't do as well or better than most in the industry. So again, if you're looking for a safe and solid place to trade with great capabilities, hard to imagine we don't come up pretty high on that list on pretty much any measure.
Next question from Andrew Hollenhworth at Holland Advisors. Could you talk a little bit about the underlying assumptions of the let's say the dis synergy around the TDA transaction from client attrition to competitors or losses due to lower trading at 0. Has anything changed to that assumption based on evolution since signing and recent events?
Yes. So, I mean, I'd say at this point, we don't have any formal updates. But with all the volume that we're seeing, it's hard to see how we like many others in the industry haven't been pleasantly surprised by client acquisition. So on a net basis, I'd say we're ahead of where we expected to be at this point, but I don't really have an update on just the gross attrition numbers.
Makes sense. Next question is from Michael Carrier at Bank of America. When the industry experiences the type of volatility that we've seen of late, how coordinated are the platforms in the clearinghouses with the regulators to ensure overall system safety?
Yes. And so, I mean, I may not be the best one to address this question across the industry. I just we can say that I do see really good coordination, not so much across firms but throughout the industry. So I do see things like margin requirements adjust automatically as volatility levels start to increase to ensure that everybody's margin posting is going up some to make sure that the exchanges don't get what holding the bag in short capital. So everybody's trades are going to clear.
I think those mechanisms have been well practiced. I think the various utilities have over the years become better capitalized, have more liquidity, have more core strength on their own. And when you combine that with the activities that they've undertaken, I just think clients should feel pretty confident that the industry as a whole is providing a safe place for people to transact. As Walt said, there are certain transactions that have a propensity to leave individual firms at risk. And so, we took certain actions to protect our firm and our clients from that kind of a risk.
That's more of an individual choice as opposed to something that's coordinated across the industry. But overall, I think this week is probably a pretty good example. We've seen a lot of volatility and yet the vast majority of the industry is in pretty good shape. Great.
Thank you. Probably a bit of a follow on here from Michael Cyprys at Morgan Stanley. I suspect you won't want to go too deep in the weeds, but perhaps some high level perspectives on how Schwab's clearing and margin requirements have evolved over, let's say, the past month or so? Sure. So, yes, that's an interesting question in the context
of integration that most of our practices and legacy TDA practices were really well developed and thoughtful. We have really good models in place, really great monitoring that's built. And so and I would say really on either side, you didn't see much change as a result of what's happened in the marketplace. We are going through a process of aligning some of our models and assumptions and just kind of the underlying math to get to a place where we pick the best of both and monitor these kinds of levels consistently so that when we add the numbers up, we are getting to a firm wide view as opposed to 2 company points of view. But even there, I'd say, it's really fine tuning what has been some great thought on both sides and some great modeling on both sides, just to bring alignment as opposed to, I don't think we've identified any substantial shortcomings in either firm's approach.
It's just with all of these things, there's always a little bit of art that gets applied to science here. And we're just trying to align the art a bit as we're looking to bring the two fronts together.
Great. Thank you so much. Maybe a quick follow on from Mr. Cypress at Morgan Stanley. How maybe do you expect any further evolution or changes to the approach to risk management at the firm?
So, as I said, I think there's going to be some modest changes that are going to come from getting to a unified perspective. I would say that the legacy TDA approach, largely because of the size of their trader base, Mike, I've indicated that they were allowing slightly bigger in consolidation risk bucket than maybe the Schwab side was. And we're going to have to reconcile those points of view. I don't think that we're going to see a dramatic change in philosophy or risk appetite. There may be some fine tuning that continues to happen as we look at the nature of the trader base that operates in that legacy TBA business and make sure that the practices that we're adopting across the firm work for the broader set of clients and the kinds of activities that they've been able to undertake.
We are definitely not looking at straining the traders out in the community because we've tightened down on risk parameters dramatically, we do understand that we need to continue to be smart about how we manage risk and make sure that we're protecting the firm for the benefit of our clients for the long run, but applying the most sophisticated approaches that we can to do that and allowing the clients to take smart and informed risk on their own part as well.
And maybe we'll just we'll wrap up here with one final question. And I know you touched on this a bit in your remarks and maybe just to given
the area
of focus, just to tie a bow on it. Could you maybe provide a little more color around what changed between, let's say, signing, closing and then today in terms of how we're viewing order flow revenue as going from a potential dissynergy to maybe less so today?
Yes. So, one of the challenges that we had because of the nature of the antitrust review was there was a lot of data that we weren't able to exchange prior to close. And some of the details on how order routing was working at each firm and the nature and detailed type of the various trades was not available to us. So, as we've been able to get that information, process it and do a much more detailed review of what's coming in, where it's going, what are the opportunities, we've got a much better picture of what that revenue opportunity looks like. And so, I'd say the changes that we're making in the forecast here have more to do, which is getting better information than changes in approach to how we think about managing order routing going forward.
Great. Well, thank you so much, Joe. Great session. We appreciate you taking the time this morning.
Okay. Thanks, everybody.
Great. Well, now, I'd like to invite Nisha Hathy, our Chief Digital Officer to join us on stage to talk about Schwab's accelerating digital transformation.
Great. Thanks, Jeff. Hopefully, I'm coming in okay in this new technology experience we're all going through here. It's great to be here. As Jess said, I'm Schwab's Chief Digital Officer, Nisha Hafi, and I lead an enterprise called Digital Services.
And I think the last time I joined you, we were still pretty early in our digital transformation efforts. And so I'm glad to be here today to share a little bit of the progress that we've made as well as talk a little bit about 2020 and the type of digital engagement we saw in 2020, how it's affecting investors and advisors, and then give you a little bit of glimpse into some of the exciting work that we have underway around growth and innovation side of digital, which is really focused on thematic investing. So, and I know Walt touched on that already, so
we'll go a little bit deeper.
So as you might remember, our digital transformation efforts at Schwab have been focused on key 3 key objectives. First of all, it's all about the client experience. So how do we make a seamless multi channel experience, frictionless, make it easy to do business with Schwab. The second is around reducing the cost of serving clients and this is particularly important given the level of organic and inorganic growth that we're seeing. Really important to continue to think about both the front end interface as well as the back end processing and thinking about how we drive down costs of serving clients.
And then finally, driving growth and innovation, and this really is about leveraging digital to improve our competitive position as well as advance our scale advantage. And lucky fortunately, we did not wait for the pandemic to get started on our digital transformation efforts. And over the past few years, we've made a lot of progress. If you look at the next slide, you'll see that the progress that we've made, we've literally introduced hundreds of new client experience enhancements and the progress that we've made kind of goes on a spectrum of efforts that are more focused on efficiency and scale as well as client experience as all the way to efforts that are more focused on innovation and growth. And I won't go through all of them on the page here and this is just a small sampling of those hundreds of enhancements, but I will focus on a couple of them just
to give you a sense of the type of work in
progress. And I'll start with the retail onboarding example on the top left hand side. Retail onboarding, as you can imagine, is a key experience for a new investor. They're coming to Schwab for the first time and a really important aspect of that relationship. It's a great opportunity to build trust, to grow shared wallet.
And it's also a time when investors are highly engaged. What we saw in 2020 is about 92% of our accounts were opened online and digital, and that's actually up from 84% of prior year. Now that has a real that creates a real advantage for consumers and the investor who's going through that onboarding process because it's seamless, it's easy to do in the comfort
of their home or on
their mobile device. But it also drives efficiency. And one of the key metrics we look at around efficiency when it comes to onboarding is how often does a client call in during that onboarding process. So for example, in 2019, we saw that we use something called a call ratio. We saw that 53% of the time, a little more than half of the time, an investor who was going through the onboarding process would call into our contact center and talk to somebody for help kind of completing that process.
What we saw in 2020 is we were able to reduce that to 42%. You can imagine that has a significant impact on the client experience. Now clients can get through that process more easily, but also has a tremendous impact on our client facing staff and our contact center, because now that capacity can be reused for higher value conversations with clients. Another aspect of that efficiency is actually not in the contact center, but in our back end processing. And I'll use the example here of digital account open for advisors to give you a sense of that.
So digital account open is a capability we introduced a couple of years ago, which allows an advisor to open an account completely electronically digitally for a client. And last year in 2020, we saw over 40,000 accounts open digitally. Now, when a client advisor opens an account digitally, what that allows them to do is actually fill out the information about the client all on a digital interface and really make sure that all that information is accurate. And what that does is it reduces are not in good order rates. So not in good order is the amount of time that you can imagine an advisor, their clients in our back office have to go back and forth trying to make sure that we have all the information about the client.
And when an account is open digitally through digital account open, we see a dramatically lower NIGO, not in good order rate and that really creates a lot of operating leverage and scale for our back office, as well as of course that enhanced experience for the advisor and the investor. And that 4% just to give you a sense compares to about 35% or so when an advisor uses paper, paper based account open process. So really a significant advantage and you can see how it's a significant advantage from a client experience perspective as well as for operating efficiency. If we move towards the right of the spectrum, you see some of the enhancements that we've made around innovation and growth with digital. And I'll just spotlight a couple here.
Our digital planning efforts, Schwab plan on schwab.com is really a really compelling experience where an investor can get a full fledged financial plan on their own in their own time and since we've launched that over 18,000 clients have joined and decided to create their own financial plan online. We also, many of you know, launched Schwab Stock Slices, which leverages a fractional share capabilities and allows an investor to buy fractions of a share or give fractions of a share to a loved one. And while they slice with 100,000, we're actually approaching 200,000 households now that have leveraged Schwab stock prices. And what we see here is the average investor is actually a little bit younger. Our average retail client is in the early 50s or so.
The clients who are using Schwab's Dux devices are a little bit younger. We've also had the opportunity to innovate on the advisor side as well. And one key highlight here is our 3rd party integration platform. I'll talk a little bit more about this later, but we've spent quite a bit of time as we welcomed our TDA colleagues looking at the integration platforms that they have in GEO as well as what we have in Schwab Advisor Center. And it's been great to see the amount of work that's gone on on both sides and the opportunity to serve investors and advisors that are through this platform.
In 2020, we saw a 40% increase in volume when you look at that Schwab third party integration universe and we saw almost 800 new advisors join and start using the APIs that had never used them before. So a real testament to the power of those capabilities as it helps an advisor drive their office drive more efficiency in their office. If we look at 2020 a little bit more deeply, you'll get a sense of some of what we're seeing around digital engagement. And this slide shows you and if you read our earnings release, you heard a little bit, you read a little bit about the level of interactions we've seen digitally and Walt touched on this as well. Just on schwab.com alone, we sell over a 1000000000 interactions logins on Schwab.com alone.
And you can see how much of a ramp that is over the prior couple of years. The move to mobile is also something that's really quite astounding when we look at just the volume of our clients that are now using mobile. And by the way, in any given month around between 38% 42% of our clients are only using a mobile device in our retail business. So, it's a tremendous platform for clients to kind of get the easy work done, the things that they want to read about are early easy transactions. But one of the things that we saw in 2020 was just how much more they were using the mobile app, not just for to read or to check a balance, but actually to engage with us, whether it was through an account open, you can see 3 times more account opens or 4 times more trades.
So the move to mobile is certainly a significant one and we're making investments to ensure that the mobile app has all the functionality that clients want. It's already well received, but there's more that we can do to ensure that that's a channel that really is robust and serves our clients' needs into the future.
We're now over a quarter up
to between a quarter and
35% of trades are actually happening on mobile.
So it's really a
tremendous growth channel from
a trading perspective as well.
So it wasn't just
the retail business where we saw the move
to digital. We saw that
on the RA side as well. And here you see the Schwab platform as well as the TD platform. So we saw a significant increase in account open digitally. So about 40% or so on both sides Schwab and TD Ameritrade of accounts are open digitally today. And that's up 74% on the Schwab side, 62% on the T Ameritrade side.
And advisors tend to be more use more paper than our retail clients, which is a real opportunity. But what we saw in 2020 is that they really started taking advantage of more of the digital capabilities that we offer. Some of those capabilities, for example, we launched new digital actions, which allows an advisor to actually have a completely digital interface on common transactions that they might have otherwise filled out a form to complete. And what we saw is right from the start, we launched this during 2020 and we saw right from the quite a strong adoption of those new digital actions. And it's going to be a continued area of investment given the opportunity that we have to drive scale for those advisory firms as well as scale for our back office.
On the TD Ameritrade side, we also completed a big milestone, which is a migration to the VEI ONE platform. And this is an important milestone as we think about getting closer to client conversion and migrating our clients to a single platform into the future. So, if we take a look forward, 2020 was really a special year, an impactful year when it came to digital engagement. Many of us engaged digitally for the first time, many of our clients engaged digitally for the first time in interactions and transactions that they wouldn't have otherwise completed digitally. And we believe that that digital adoption trend is definitely here to stay.
You can see here on the slide, many consumers plan to continue to use that those digital tools into the future, even after the pandemic. And I think the longer the pandemic goes on, the more likely we're going to see that continued use.
The other trend that we think
is really important here is the demand for financial advice. And we talked about this earlier today is that that's not just digital, but it's both digital and human advice. We know that satisfaction for clients is much stronger when both digital and human interactions are mixed. And we see this in offers, for example, as our Schwab Intelligent Portfolios premium offer, where an investor can get access to our digital advice capabilities and access to a certified financial planner. And during times of volatility, especially in 2020, we saw a strong uptick in the appointments that investors were making with those certified financial planners.
So they have mostly digital relationships, but they when they really want to talk to someone, they have access to that CFP. The final trend here that we think is really important is this focus on personalized experiences. And this is going to be something that really will kind of set the tone for the next topic I'm going to talk about, which is thematic investing. When we look at personalized experiences, we know that investors are more engaged and asking more than ever to ensure that the investments that they're making, the services that they're using are aligned with their values and beliefs. And this is a real opportunity when we think about serving our self directed client base.
So, let's talk a little bit about thematic investing. So, as I mentioned, self directed clients are a huge population for Schwab. Actually in our retail business, about 93% of our clients actually self identify as either fully or partially self directed. And if you add to that the highly self directed population at TD Ameritrade and the large population of newer younger investors entering the industry, it's really a very large and growing population. Actually, it's really cited that this is the fastest growing segment that they've seen this year with a 21% year over year growth in self directed investors.
Given our history in this space as well as the recognition that we've gotten over the years such as JD Powers and number 1 in self directed, we know that we can serve these clients well, but we continue to evolve the capabilities and digital can play a big part of that. So what is thematic investing? So as Walt mentioned, thematic investing is really an opportunity for an investor to basically invest in something that they believe in, an area of interest idea theme that they have strong beliefs about. It enables the client act on the investing ideas that are important to them. So, it could be a tech or a consumer trend, think about artificial intelligence or the mighty millennial or digital dollars or it could be a social or environmental trend like climate change or LGBTQ friendly or curing cancer.
There are lots of themes that are interesting to investors and up till now, investors would have to go out and do the research on their own to try to identify what are the companies that have the biggest exposure to that particular thing. With this offer, we're going to be offering clients an inventory of curated themes and they'll be based on that sophisticated research platform that we actually purchased last year, you may remember from Motif Investing. Motif Investing developed a really robust strategy and platform that mines terabytes of data, both structured and unstructured data in order to identify stocks that have the most exposure to a particular theme. And each theme is basically a winded basket of stocks that are that have that most exposure to that particular trend or topic. Clients are going to be able to research a theme, purchase it as is or they can customize it.
It is a self directed offer after all. And they'll be able to regularly update that theme based on the updates that we provide through our proprietary research engine. They'll also be able to track performance and of course update and personalize whenever they want buy or sell more at any time. We'll leverage the fractional share trading capability that I mentioned earlier, and that will allow us to be able to offer this at a really low minimum. Even an investor with just a few $100 will be able to purchase Athene.
And we're planning to charge an asset based fee for this offering that will be aligned with our heritage of offering great solutions to clients at a great value. We're working on this offer right now and we plan to launch it in the second half of this year. So we're excited about this new take in digital and how we can drive both win win monetization and a new great experience for all those health directed clients. So, I hope this gives you a sense of the progress that we're making around digital transformation. We have a lot more to look forward to, but I'm going to actually hand it off now to my colleague, Rick Wurster, who heads up our Schwab Asset Management Solutions team.
And then I'll be back again with Rick for the Q and A session. So, Rick, over to you.
Thank you, Nisha, and hello, everyone.
I'm thrilled to be here today
to share how Schwab Asset Management Solutions or SAMS is helping Schwab deliver on the objectives Walt has put forward, which is to build scale, deliver on client friendly monetization and support our client segments. A couple of months ago, my teenage daughter asked me to take her shopping. We went to a department store and she was thrilled to go through the racks and racks of clothing to pick out exactly what she wanted. And while I thoroughly enjoyed my time with her, I found the shopping experience to be a bit overwhelming. I contrast that with the way my wife likes to shop and the experience Walt referenced earlier.
She uses Stitch Fix for a stylist who understands her goals and preferences, works to build a wardrobe that meets her needs. A box of clothing appears on our doorstep once a month. She keeps what she likes and sends back what she doesn't. It's simple and it's personalized. Those are 2 very different ways to shop with different levels of choice, help and guidance.
And the different approaches work well for different people. Just like individuals have different preferences when it comes to clothes shopping, we know that individuals have different preferences when it comes to how they invest and how they manage their wealth. My goal in our time today is to discuss a few things. 1st, to demonstrate how Sam's is well positioned to meet the spectrum of clients investing and wealth management needs in the way that works best for them, driving both great client outcomes and growing our business in the future.
I'll share a little background on
how we strategically aligned our asset management capabilities and expertise within Schwab, and I'll speak to some of the financial dynamics that are impacting our business. I'll also highlight some of our accomplishments in 2020 and our high priority initiatives for 2021. Over the last 18 months, we've strategically aligned our asset management capabilities and our wealth management expertise from across the firm to maximize the impact we can have on our business and on our clients. We brought together our research groups, our 3rd party platforms, our investment groups, all under one umbrella with a unified vision to help enhance the financial lives of our clients. We've also welcomed several acquisitions.
Together, we have an incredible opportunity to use our scale and expertise to drive great client outcomes and to grow our asset management business. So what does this look like for our clients? To go back to the shopping experience analogy, we strive to meet the needs of individuals with a wide range of and objectives. Taking a look at the left hand side of the slide, you'll see someone reading a fashion magazine. Just like fashion experts share commentary on trends, our investment experts share perspectives on the market and wealth management topics like taxes and financial planning.
Clients engaged in our research at record levels in 2020 with over 20,000,000 views of our content. Providing guidance to self directed clients is important to us to deliver on our commitment to improve the financial lives of our clients, and we think that's particularly true in environments like this. Moving to the center of the slide, you see the racks of clothing that my daughter found so thrilling in offering her incredible choice. We also offer flexibility and choice via a platform that supports $2,300,000,000,000 of assets and 22,000 products from hundreds of asset managers. And like many department stores, we have our own house brand and the products we manage ourselves stand for high quality at great value.
We now manage $600,000,000,000 in assets as of the end of 2020. And finally, if you take a look at the right hand side of the slide, you'll see the type of personalized fashion solutions that my wife prefers. Within Sam's, we know many investors want the help and guidance of an expert to manage a solution for them. And we offer clients a variety of advice offers, including Schwab Private Client, which had $148,000,000,000 under advisement as of twelvethirty one. Beating the varied needs of our clients is at the heart of everything we do at Schwab and within Sam's.
And we are well positioned to help clients with a broad spectrum of investing preferences to meet their financial goals. I'd now like to discuss the financial dynamics of our business. Our goal is to deliver for clients and in doing so, to contribute in a bigger way to Schwab's Economics. Our asset management business has experienced 60% asset growth over the past 5 years. Revenue over that same time period has grown at about 2% annually and now stands at $3,500,000,000 benefiting from a return to solid growth in 2020.
There are a couple of factors that have compressed revenue growth. 1st, there's tremendous fee compression in our industry, and we have been a purposeful leader ourselves in driving down the cost of investing. We've also experienced headwinds in our mutual fund OneSource business as clients have sought investment opportunities beyond active mutual funds. And we're also waiving 100 of 1,000,000 of dollars of revenue in our money funds given the interest rate environment. Now while there have been some headwinds, there have also been some tailwinds, notably in advice.
If you take a look at the yellow bars on the left, you'll see we've experienced 11% annualized growth in our advice business. If you pivot over to the right hand side of the chart, you'll see the revenue on client assets or Roca of our advice business is the highest of all of our asset management businesses. And what's interesting about that is that our advice clients also have the highest client promoter scores, meaning they are our happiest clients. This represents the power of the opportunity. We can monetize our business by growing our advice offering, while increasing the satisfaction of our clients at the same time.
We also spent 2020 pivoting towards opportunities to drive client friendly monetization across a large client base to enable stronger growth. And I'm going to describe some of those opportunities in a few minutes. 2020 was a year of foundational growth for Sam's that laid the groundwork for opportunities going forward, and I'd like to hit on a few of the highlights, starting with acquisitions and integrations. First, the acquisition of Motif helps position us to deliver for clients in the personalized investing space, a space I expect to grow and one in which we should be a leader. 2nd, the acquisition of the Wozner Schroeder Strategies evolves our fixed income offering.
As Joe highlighted earlier, just last month, we launched 20 fixed income SMAs and bond ladders to Schwab's retail clients. And finally, USAA and TDA bring us scale, as well as opportunity in the case of TDA, and I'll expand on that in a minute. Moving on to product distribution, we continue to differentiate between 3rd party asset managers partners, something we will continue to accelerate. We built our semi transparent ETF, active ETF platform. We advanced our alternatives offering for advisor services clients.
And we began the work to make alternatives available to retail clients to meet the needs of our higher net worth clients. We doubled annuity sales and we made important investments in our SMA operational capabilities, which will allow us to expand our wealth management business in the future. On the regulatory front, we've had to respond to a lot of new rules and guidance from the regulators, and we have successfully positioned the organization for new developments like the ETF rule, new semi transparent active ETFs and regulation best interest. Finally, on personalized outcomes, we made progress on 2 important topics, retirement income and ESG. As Nishu mentioned earlier, we know ESG is a growing importance to many investors.
And we created a new landing page with a point of view. We also created a new role and identified a leader to head our ESG strategy and to accelerate our actions in the space. With those 2020 accomplishments behind us, I'd like to focus on the 6 areas of highest priority for us in 2021 that will help support Schwab's objectives of building scale, driving client friendly monetization and supporting client segments. I'll start with TDA Ameritrade, which provides us with some attractive potential revenue synergies. I'm going to highlight 3.
The first is advice. At TDA, roughly 8% of retail clients use advice. I've swabbed that number is over 18%. We believe there's 100 and 1,000,000 in annual revenue potential if we can increase the use of advice in a meaningful way. And in addition, we know this may result in more satisfied clients based on the client promoter scores we discussed earlier.
2nd, we have an opportunity to take our proprietary ETFs and money funds to TDA and that is already underway. We have 2% share of index assets at TDA and a 23% share of Schwab index assets. Competitors have often as high as 60% to 90% share in proprietary assets. Growing our share at TDA and gaining more share at Schwab represents potential revenue upside. 3rd, we have an opportunity to take the best of each firm's 3rd party asset manager contracts and believe there are potential revenue synergies there as well.
2nd high priority area is personalized investing, which I believe is the next frontier of asset management and that we are well positioned to be a market leader. Personalized investing will allow us to optimize taxes for clients, manage concentrated positions and align investments to client values, all things that I believe are increasing in importance. Nisha spoke to this topic as well. And from a firm wide perspective, Schwab can help empower personalized investing by delivering the resources, guidance and investment choices that clients need to meet their unique needs and objectives. I want to briefly cover 3 areas within personalized investing that we're focused on in 2021.
The first is direct indexing. While the market today is $300,000,000,000 to $400,000,000,000 we expect it to grow to over $1,000,000,000,000 in assets. Leading in this space requires the ability to deliver great tax outcomes and we've never had to distribute a capital gain in the history of our equity ETFs. It also requires great SMA capabilities, and we're the number 3 provider in the country. Also, it requires the ability to be a great indexer and our investment management group is one of the top 5 ETF competitors and one of the top 3 index fund companies in the industry.
We also created and managed the Schwab 1,000 Index, which has been a great index and will be an important part of our strategy in the future. 2nd, there's an opportunity in thematic investing that Nishtha covered earlier. And 3rd, I want to call out ESG. We know this is an area of increasing importance for investors and we have and will continue to take a number of steps to help clients. While I can't share specifics, I can say that we will be increasing our presence in the ESG space within the next year beyond the thematic and direct indexing initiatives that Nishu and I have discussed.
Now let's turn to our 3rd high priority item for 2021, fixed income expansion. When we look at Schwab retail clients today, we estimate their assets at Schwab are split roughly 80% equity, 20% fixed income. However, we believe their overall asset allocation is closer to a sixty-forty split. That means our clients do a lot of their equity business here, but some of their fixed income holdings may be elsewhere. It's also true in Advisor Services, where currently only about 10% of client assets at Schwab are in fixed income.
That is 100 of 1,000,000,000 of fixed income assets that may be held away, and that's a huge opportunity for us. In 2021, we're focused on leveraging acquisition of the Wazmer Schroeder Strategies to deliver more personalized fixed income SMAs at a lower price than competitive products on our platform and with greater profits for the firm. That is a win for clients and a win for our business. We will also collaborate with the digital team to make building your own fixed income portfolio easier. While fixed income experts can build a portfolio of bonds today, we want to create a more guided experience for investors to allow any investor to build a fixed income portfolio.
Moving on to priority 4, I'll briefly discuss operating platform modernization. When the Sam's organization came together, we needed to bring several asset management groups under one operating platform. We started this important work in 2020 and it will continue in 2021. In addition to the efficiencies and scale we expect this to bring to our business, it will also bring unified managed account investing capabilities to the firm, something that will be critical to the future success of our wealth management business. Speaking of wealth management, let's move to our 5th area of high priority, and that's wealth management.
We see a bull market for advice. Many clients want that expert next to them to help guide them to the place they want to get to financially. We see great opportunity to accelerate growth and increase capacity in our wealth management business, to add a discretionary wealth management offering to our lineup, and over time to create an enriched wealth management experience. This is an area where we delight clients and monetize our business. It's also a tremendous additional growth opportunity for us.
Finally, I'll wrap up with our 6th priority, 3rd party platform enhancements. We have several opportunities here. 1st, as Walt mentioned earlier, we are pursuing creative partnerships with our 3rd party asset managers to create better outcomes for clients and better economics for us, while preserving our open architecture approach to maintain the choice we know our clients desire. This may be based on more curated search experiences, which make it easier to find great products, while showcasing some of our best partners. 2nd, we'll continue to differentiate between 3rd party asset managers based on how they treat our clients and how they treat us.
3rd, we are using our platforms to enhance the segmentation we deliver to clients by exploring additional opportunities to meet the unique needs
of our higher net
worth clients. Specifically, we've launched new liquidity solutions for these clients and are currently building out an alternatives offering. And with that, I'd like to wrap up. Unlike the fashion world where shoppers must go to a department store or find a subscription delivery service to meet different needs, investors can find solutions to meet a spectrum of investing and wealth management needs all here at Charles Schwab. If you take one thing away from this discussion, I hope it is this.
Sam's is a leading asset manager. We are well positioned to solve the breadth of clients' needs, scale our business and to be an even bigger contributor to Schwab's growth. Thank you for joining. And with that, we have the chance to answer some questions, and I'll turn it over to Jeff who can help with that.
Great. Thank you so much, Rick. And I see Nisha coming back on. I think we have everybody here. Apologies in advance to both of you as we may ping pong back and forth, a lot of interest coming in from the Group on both of your respective worlds.
So well done on the presentations. Let's take our first question would be for you, Nisha, and this comes from Richard Peto at Piper Sandler. Can you talk a bit about how you differentiate Schwab's efforts on the digital mobile app area with as compared to competitors and who have tended to target perhaps what would be described as a younger, newer investor base. How do you think about that? And are these customers not in Trop's focus or what's the design target?
Yes. I mean, well, it's a great question. Mobile is certainly a hot topic.
And I would say that our mobile app has a lot of
clients to serve. So one of our strategies is we chose to have a single mobile app and actually we used to have a Schwab intelligent portfolio separate mobile app that we actually are now migrating right into the Schwab mobile app. What that means is that single mobile app has to serve a lot of different constituencies. So, we do strive to kind of create customized experiences for different segments of clients and that's actually something that we're going to do more of. But the mobile app tends to serve even younger investors well.
I wouldn't say that they are not in scope for the mobile app. And if we look at our data, over 50% of our new firm clients are under the age of 40. And so, we see strong adoption, strong interest in Schwab and then strong adoption from in that mobile app. I would say that areas that we're focused on in the mobile app often are areas that we haven't invested in as heavily. And actually part of our work with TD Ameritrade is actually making some enhancements in the Schwab mobile app that bring some of those capabilities that TD Ameritrade had in their mobile app into the Schwab mobile app.
So some examples of that would be things around trading experiences. So TD Ameritrade has had such a prowess in the trading area and our Schwab mobile app hasn't always had some of those capabilities. So I think those are capabilities that we're focused on. We're also going to add more health and guidance content to help those younger, newer investors because that's also an area where we focus a little bit more on the web when it comes to help and guidance and not as much on mobile. So, those are two areas that I think are enhancements and will really kind of serve that younger population that at this point tends to be much more active.
Great. Thank you, Nishan. And maybe one adjacent follow-up here from Alvin Lokey at GIC. Looking at the digital retail onboarding experience, how would you rate Schwab's experience today versus some of the other more, we'll say, technology first competitors? And how what measures you use to assess any gaps or how you're performing on that experience front?
Yes. I think this is an area we've made a lot of progress. And actually, over the last couple of years, one of the things we've done is institute a lot more user experience testing. We do a lot of data testing to try to help an investor get through that experience. And so now with 92% of accounts being opened online, we do have to serve a broader swath of investors and account types when you think about opening an account at Schwab versus some of those tech led companies that are marked the startups out there especially.
And so we are focused on trying to make sure that we create the scale. So we don't want to have multiple onboarding experiences, But doing things in the user interface, doing client testing, we can kind of experiment and try to figure out how do we optimize the experience for any given segment of clients. And that's really a lot of the work and that's how we've made such progress around, for example, that call in ratio that I mentioned. So having a lot more investors successfully complete that without feeling like they need to call in. Although I'll tell you, when investors is engaging with us for the first time, sometimes they do want that extra validation and it's great that we have the contact center to be able to support them, which I think is also a difference from some of those tech like firms where sometimes someone gets stuck in that process and they don't really have someone to call in to get the support.
Great. Thank you so much. Rick, maybe one for you. A handful of questions coming in from the analysts regarding maybe having you expand a bit on the alternatives offering that you alluded to in your remarks around recent evolution of the arrangement with I Capital and just what your vision is for where we are today and where you see that alternatives offering going over the near term?
Yes, I tie it back into the broader strategy that Walt has laid out around segmentation. We want to meet the unique needs that our higher net worth clients have. And we know that's a group of clients that are highly sought out by a lot of our competitors. And some of the things that our competitors bring are really differentiated and personalized liquidity solutions for those clients as well as compelling alternative Charles Schwab. So over the next 12 to 18 months, we're here at Charles Schwab.
So over the next 12 to 18 months, we're building out a platform that we expect our higher net worth clients can engage on and access leading alternative options, so they can benefit from the diversification in their portfolios here at Charles Schwab and not have to go elsewhere. We've also on the liquidity side added 2 liquidity options for our higher net worth clients that came via the acquisition of Wazmer Schroeder. And we've already been engaged with some of our highest net worth clients that we're evaluating going other places and we've been able to keep them here. And this dovetails some of the work that we've done to build out our wealth strategist group to help provide advice to this higher net worth group of individuals. So it's all tied into an effort to segment our client base, delivered on the unique needs of our higher net worth clients and make sure that people come to Schwabbe for all the things we stand for, great value in delivering great product, service and advice.
And we need to do that at all in all client segments and in particular for our high net worth clients.
Excellent. Thank you so much, Rick. And this one, we'll start again with you, Rick. This may be an opportunity for both of you to weigh in. As you both think about opportunities across, we'll say, this broad bucket of personalized investing, do we do you believe that Schwab currently has all the capabilities or building blocks necessary to deliver or do you see maybe additional supplementation through M and A or other means?
Well, I think we've got a great starting point. I wouldn't trade our starting point for anyone else's in the industry. We've got incredible distribution. We've got millions of clients and trillions of assets. And we've got an investing capability that I think for given what we need to do is the best in the industry.
And we've got, I think, the best digital capabilities in the industry. So if you put together distribution, our investment capabilities and our digital platform, I think we're going to have a really competitive offering in the personalized investing space.
Great. Apologies, that question was from Dan Fannon at Jefferies. Let's take a look here, sorry, so much interest. It may be too early to comment, Vinesha, maybe a follow on here around specifically your comments on thematic investing. Maybe just your level of optimism about client near term to medium term client uptake, as well as would we would folks anticipate this being available on both Schwab and TD pre client day 1?
Yes. Well, it is a new experience. I mean, motif investing was a leader in thematic investing, but thematic investing is a newer experience. And so it's a little bit hard to predict what uptick is going to be. But I would say that given what we are seeing from other experiences that we introduce, we see a pretty strong uptick from that self directed client base, which comprises so many so a specified percentage of our overall client base.
And we know that a lot of those newer investors are highly engaged. And so I think it's hard to be more specific about what that uptick is going to be, but I do think that we feel pretty bullish that we're going to have a strong reception. And especially if you again tie it back to what investors are interested in these days with regards to ESG and some of this kind of belief values driven investing, it really is a much simpler, more automated type experience to kind of express that in your portfolio without having to do all that research yourself. So we think that the value proposition is pretty compelling. The plan is to introduce this on the Schwab properties, so both Schwab dotcom and the Schwab mobile app and not introduce them on the legacy TD properties.
So, there will be a period of time where it will be available on the Schwab properties and of course, those TBA clients can open Schwab accounts and engage with thematic investing.
Jeff, maybe I can just add one anecdote, which is, I would say in the ETF space, the thematic ETFs have been one of the hottest and most quickly growing areas. I think this year, the firm with the 2nd highest amount of inflows is a thematic oriented firm. So I think it's something that's clearly resonating with clients and is potentially well timed for us, I believe.
Next question from Devin Ryan at JMP Securities. Probably for both, maybe I'll ask Nishu to start. As the firm scales and continues to make technology enhancements and has access to more customer data in which to utilize, which can be powerful to help evolve and improve the experience. How do you balance that evolution with privacy and security mandates?
Yes, it's such an important topic. So that's actually one of the areas of digital services is our data team. So our data analysts and insights teams fit in this in my enterprise. And actually one of the big areas of focus is how do you I call it the line between cool and creepy. So how do you make sure that you use the data that our clients entrust with us, use it in a way to create compelling experiences, because they are demanding that, they are expecting a certain level personalization in digital and in human interaction, but not crossover where it feels inappropriate.
And then add on top of that, how do
we keep all this data secure and ensure that we are meeting their expectations and of course, regulatory expectations with regards to privacy. So it's a complicated series of decisions, but I would say that Walt touched on our focus on trust and client relationship. At the end of the day, that is paramount. And so we are never going to use client data in a way that feels inappropriate to them. And generally, the way we use client data today is actually just to power the experiences that they've asked us to power for them.
So it's helping us understand, for example, that onboarding question, the account of big question, it helps us understand when they were in the digital channel, they fell out of the digital channel, they called the contact center and how do we serve them better so that they don't have to call in if they don't want to. So we use the data in those ways, but really are very thoughtful to ensure that we kind of continue to focus on client trust first and foremost.
Great. Thanks for that, Nisha. Rick, maybe one for you here. This is from Michael Cyprys at Morgan Stanley. Can you talk a bit more about the strategy around distributing Shaw proprietary asset measure products off platform and how the distribution team is resourced and perhaps any additional high level stats or trends you would be wanting to share?
Hey, Michael, thanks for the question. Off platform has been an area of strength for us. We had I think our strongest year ever last year off platform or one of our top 2 certainly and we're off to a really strong start this year. We have a well resourced team and we've got a great product that we stand behind. Our products are among the lowest cost in the industry in the biggest areas that are most core to clients' asset allocation.
So our platform is a priority for us, something that we're well resourced to go after. I would say though, we view ourselves as having a tremendous opportunity on platform and and appreciation for the Schwab brand. And so our 1st place to start, and appreciation for the Schwab brand. And so our 1st place to start is clearly on platform. But given the strength of the products and the scale we're shooting for, off platform is an important distribution area for us and it's been an area of strength.
Last year, we found that off platform clients, given the price action in March, clients were rotating out of some of the long held ETFs that they held from
some of
our competitors and they rotated into ours at very low cost and great products for them. On platform, though, that created some headwinds at times because on platform, we do have a strong share and as they were tax loss harvesting and moving out of our ATS, they went into others, but I expect that to come back at some point. So all in all, off platform has been an area of strength. We expect it to be an area we continue to focus on. But on platform, we have such a strong opportunity.
We'll continue to make that our high focus of our efforts.
And a question from Bill Katz at Citigroup. During one of your prepared remarks, you talked a little bit about ROCA trends within the industry. What are you seeing particularly within, we'll say, the advisory solutions sleeve of that, any types of longer term trends around fee pressure or change in mix across different types of advice solutions that are being utilized by clients?
I'd say a couple of things. I would say Roca in the advice business has held up reasonably strongly. It's an area where there is a bull market where clients want help. They want someone to own their outcome and to help guide them towards the outcome they're aspiring towards. And I think increasingly people don't want the stress and worry of having to manage their portfolio or at least some portion of clients don't want that stress and worry.
They want someone to do that for them. As a result, we've seen high demand for advice solutions. We haven't seen a lot of broker pressure. Now our broker has come down. If you go back to that page from earlier in the presentation, you'll see that our broker and advice has come down.
That's been a mix shift as our intelligent portfolios have grown, which have a lower ROKA. Our overall ROKA and advice has come down, but that's been purely driven by mix. Our fees have stayed relatively steady across all of our advice programs. I'd say an area where we have tried to be disruptive is in the fixed income SMA space, where with lower yields, we think price matters maybe more than ever in the SMA space. And with our launch of the Wodgner strategies, we launched underneath where the competition is we actually will we actually will increase our profits at the same time while bringing lower fees to our clients.
So that's where we see a little bit of pressure, but we proactively addressed it.
Great. Thank you so much for that, Rick. Nishu, maybe back to you, a question from Michael Carrier of Bank of America. On the digital side, you did provide some very nice year over year growth metrics that are helpful. But would you be able to share any additional color around the percentage of overall clients that are engaging in digital?
And is there a difference in the demographics of clients that are utilizing digital channels more than those that aren't?
It's interesting. It really is across the board. I think for years, there was maybe a myth out there that our older clients were not engaging in digital and we see engagement across the board. So when we look at the whether it's the move to mobile, whether it's just increased interactions, given things like use of our live chat or our new our natural language process machine learning based intelligent assistant on our mobile app, all of those have pretty diverse representation across the different client segments and different demographics. So there's not one population that's driving the growth in digital.
It really is pretty diverse. And actually, some of the investments we've made, for example, around the retirement we call it the retirement journey. So some of our clients were nearing retirement or in retirement, things like being able to do your RMD online. And we've actually seen lots of strong digital adoption and even those experiences, which I think traditionally we might have thought would require more of a human interaction. And so, I do think it's pretty across the board, not driven by, for example, younger investors.
Great. Thank you for that. Next question from Craig Siegenthaler at Credit Suisse. Rick, maybe just is looking at to understand maybe the dynamics of the of any potential overlap between Schwab's proprietary advice solutions and those offered by the RAAs that constitute us. Maybe taking a moment to remind folks of our thoughtful approach to balancing the relationship between the AS side of businesses?
Yes. I mean, the first thing I'd say is I go back to a chart Walt showed earlier in the presentation where we have 13% share of client assets in the industry. There's 87% that we don't have. And so I think collectively there's plenty of opportunity for us all to help clients. So from our perspective, I think it's a win win relationship for us and the RIAs.
I think we want our clients to be helped in a way that makes sense for them, so that they can get to the best place that they want to want and need to get to. I think where we find the Temerara advisors to be particularly distinctive is in some of the more tricky situations that are tougher for our business at the scale we manage to potentially manage. But we think a couple of things. 1, you can get great advice with our advisors. You can get great advice here at Charles Schwab.
There's plenty of clients in the industry who would benefit from working with both of us. And there's many clients that don't work with us today, the other 87% that we both collectively can go hopefully address and we'll both have very growing businesses if we can do that.
And maybe time for one last question here. Rick, I'll probably start with you and Manish, if you'd like to weigh in, please feel free. There's talk about since the announcement of the TD Ameritrade transaction, the potential opportunity of increasing advice penetration with that client base, particularly relative to the 18% to 20% -ish at Schwab today, what do you all believe is a achievable target or framework to think about that advice penetration offering? And that question comes from Stephen Chubak at Wolfe.
Stephen, thanks for the question. It's an interesting question. I think intuitively people think, well, TDA is all about trading, so clients aren't going to be very receptive to advice. But I believe they used to say the same thing when we had about around 8% penetration of retail clients here at Charles Schwab. And over the course of 5, 10 years through a lot of effort in building out great programs, we've been able to grow that share.
My expectation is the same at TDA that if we have great programs that can benefit clients that can help them get to the place they need to get to financially, that they will be embraced. The other thing I would say is we know that many TDA clients will do their trading business at TDA and then go somewhere else for advice. And if we have great offers, we can have them do their trading here at Schwab and keep their advice here at Schwab. And so that's our goal. If we can deliver a world class experience, I see no reason to believe we can't evolve on the same path that we have here at Schwab, which has been roughly from 8% to 18%.
I think it's very doable at TDA. Now, of course, we'll learn more over time. Perhaps there really are differences we're not aware of, but we used to have these same concerns at Schwab and have overcome them with great programs at great prices.
Yes. I would just add on
to that, Rick, is just we have some experience
from Schwab Intelligent Portfolios, particularly when you think about when you look at the trader population at Schwab, Legacy Schwab, what you see is that we have very strong adoption with our Schwab intelligent portfolios of traders. And again, like Rick said, sometimes bifurcating their assets into the part that they self direct and really do their research and place their trades to the part that they really want to have someone else serve them. So whether it's Intelligent Portfolios or another managed investing offer, we have experienced and kind of seeing those traders engage with us in different ways. So I think we feel pretty confident that there will be at least some population of that to the Ameritrade population that will be pretty enthusiastic because of the robustness of the advice offerings that we have relative to what they were able to experience at TD Ameritrade.
Excellent. Thank you very thank you both very much for your time and thoughtful responses today. Great session. Everyone has now earned the 1st break of the day. So I think we're about maybe 10 plus minutes.
We'll come back at 10 after the hour with Jonathan Craig to kick off the retail portion of the program. So when Mr. Fowler reappears in your screen, now it's time to retake your seats. So thank you all both again and see you all in a few minutes.
Thanks everyone.
Thank you.
As I mentioned before, Jonathan, Catherine and Stacy will go in a string and then we'll do Q and A with the group. So you can put your questions in at any time during their presentations or then during the live session. So with that, I'm going to turn it over to Jonathan.
Great. Thank you, Rich. So I thought I'd use the next 15 minutes or so to provide an update on some of the major accomplishments in the retail business in 2020 and then share some of the priorities for 2021 beyond. I thought I'd start by acknowledging this has already been done, but acknowledging what an incredibly unique year 2020 really was for all of us. Think the saying was unprecedented is truly an understatement.
On the external environment, we had to deal with a global pandemic, the likes of which I don't think any of us have ever seen. We have to deal with significant social unrest. We saw highly charged political environment. And of course, that was just externally. Internally, we had to figure out how to get all of our employees home and not just home, but working productively at home.
And of course, we had to deal with record client volumes. It's truly a remarkable year by any account. And of course, this year so far has been anything but a return to normalcy. I think one of the hallmarks of a great company is that they stay on offense even when they are winning and even in the face of significant change. And I think that's what we saw in 2020 and continue to see.
I think that defines Charles Schwab and I think it very much defines the retail business at Schwab. So with that, let me touch on some of our accomplishments from 2020. In 2020, we continue to innovate across the client spectrum with many new products and solutions. Couple of examples come to mind, we launched Schwab Intelligent Income, a real breakthrough way for clients to decumulate their portfolios in a tax smart way across multiple accounts. We launched fractional trading with Schwab stock slices.
Not only did we launch that capability, but we combined it with a unique gifting capability that many of our clients were asking for. Many of them wanted to gift fractional shares to their loved ones, their children, their grandchildren, really powerful capability both for today and for future generations. We also continued our investment in planning. I know Nisha talked about this, but it was so important. We launched a free digital planning capability to complement our already significant investments in live planning.
We expanded our commitment to deepening client relationships, including adding more dedicated relationships for more of our clients. And we expanded our branch network by opening independent branches in communities across the country. We made significant investments in our ultra high net worth offering, including watching a new wealth advisor role and supporting roles around that wealth advisor, all aimed at serving that $10,000,000 plus client. These clients at Schwab tend to be largely self directed, but make no mistake, they have very unique needs and we need to be there to serve those needs. And the investments we made here were all about that.
And we continued our investment in what we call enterprise service transformation. I've talked about this in the past, but this is a critical multiyear, multimillion dollar investments, all aimed at making Schwab even easier to do business with, while at the same time creating scale for the organization, critically important. And there are so many examples I can point to there, but the launch of virtual assistant, the scaling of virtual callback across the firm and so many digital enhancements, again, all aimed at making Schwab even easier to do business with. And of course, in addition to doing all that, we had 4 major integrations, acquisitions and associated integrations. Also had to adapt to significant regulatory change, not the least of which was regulation best interest.
So clearly, a busy year with many accomplishments and all done in a fairly challenged macro environment. In addition to those accomplishments, we also took some very meaningful steps to begin the integration of TD Ameritrade to our go forward operating model. An important example of that work is the work we did combining the Schwab and TBA branch network into one common footprint. We had tremendous opportunity there because 90% of TD branches were within 10 miles of the Schwab branch. So, to drive that work, we agreed on a set of principles very early on.
Number 1, and maybe most importantly, we agreed we would move fast because we wanted to remove uncertainty from the system. In fact, we wanted to take advantage of the fact that many branches, all TDA branches had been closed since the pandemic. We agreed that we would select the best locations and be entirely agnostic as to whether they were Schwab or TBA locations. We agreed we would do everything possible to maintain or improve even in some cases the proximity that we have to our clients. And finally, we agreed with leverage co location between now and client conversion.
Colocation offers lots of benefits, not just real estate benefits and cost benefits, but also cultural benefits as Schwab and TDA employees start to work side by side even before client conversion. The result in all that work is we closed 2 16 branches across Schwab and TBA. We did that within less than 30 days past legal day 1. So moved very quickly, closed 216. That left us with or has left us with 4 17 physical branches, 140 of which are the ones that are co located.
Again, that's where a Schwab employee is now going into a TDA branch or a TDA employee is working in the Schwab branch. So, 2 separate broker dealers are co located in 1 physical presence. And maybe most important with this remaining footprint that we have as of today, 90% of our combined clients are within 25 miles of the branch, a physical branch. And we were also able to assign nearly all 1,000,000 plus TBA clients to our relationship. So very significant progress with more to come, but very significant progress on combining the branch networks.
With all that work, the accomplishments, the integration work, I think it's fair to say we entered 2021 with a very healthy combined retail franchise. A lot of that health comes from the strong results that both firms put up, both firm wide, but certainly on the retail side. Both Schwab and TD Ameritrade collectively delivered net asset growth net new asset growth of over 90% year over year, co sold growth of over 175% and DAC growth of nearly 2 50%. What that yields is a franchise that is now 3,000,000,000,000 in combined retail assets, 22,000,000 plus retail accounts and over 5,000,000,000 plus daily average trades. So certainly a retail business of size and scale, but also a retail business that has been well recognized across the industry.
On the Schwab side, J. D. Powers named Schwab number 1 in self directed brokerage and direct banking and in the large plan 401 space. And of course, TBA has been rated a top broker by stockbrokers.com and Investors Business Daily. These are just a few examples of what could be a much broader trophy shelf we could share.
But suffice to say really strong results and so strong industry recognition that positions us well going into 2021. So with that backdrop, let me talk about how we'll operate our retail business in 2021 and priorities for each of the businesses. Structurally, between now and client conversion, we will maintain 2 brands in the marketplace, but we will act as one firm. Acting as one firm means among other things, it will align our operating models and business practices. It means we will not directly compete with each other in the marketplace.
And it means we will make it as easy as possible for our dual clients to interact across both firms. And certainly to the extent that a client wants to convert early, we will make that easy as well of course. We still will have 2 retail businesses in the marketplace. On the TDA side, we're going to go to market with the existing value proposition. Said another way, we will not be making meaningful enhancements on the TDA side where there are gaps, we will be introducing clients to Schwab product where we can.
And we will also be marketing the TDA brand in the marketplace, heavily as you'd expect, but a lot of it will be trader centric. On the Schwab side, it will be business as usual. We will continue to go to market with our no trade offs value proposition across the client spectrum and you'll continue to see our marketing across that spectrum as well. Let me touch just a little bit more detail on the differences between EHL. I'll start with TDA.
Between now and conversion, we fully expect a lot of ramped up competition going after those TDA assets. To be clear, we don't expect much success, but we certainly expect the activity. Given that, not surprisingly, a lot of our focus is going to be on solidifying and building upon the already strong relationships that TD has built with those clients and really creating confidence in and really excitement around the eventual conversion. To do that, we'll do launch lots of initiatives and I'm not going to go through them all, but let me just highlight a couple today. We launched a TDA satisfaction guarantee that mimics the Schwab satisfaction guarantee that's been so successful in the marketplace.
We stood up a dedicated client conversion concierge team for anyone who wants to convert early. We've begun to reopen the branches consistent with the Schwab approach, which of course is to put our employees' health and safety first, but also be there for our clients where we can. What that means is we're opening branches in a phased approach across the country that very much take into account the local conditions because the local conditions are very different everywhere as you all know. We've begun we did assign all the 1,000,000 plus TBA clients to a dedicated relationship and we've begun to introduce some of the 10,000,000 plus clients to Schwab Wealth Advisors where it makes sense. And finally, of course, we're equipping the TV FCs with what they need to continue to win in the marketplace, including the ability to introduce Schwab product where it makes sense.
So, those are just a couple of examples of our money more. I think the important point is just to say that we our priority between now and conversion with TD is very much to build upon and solidify the very strong relationships that TV has built over the years in the face of what we think will be certainly some activity trying to go after those assets. On the Schwab side, we'll continue to invest in the middle trade offs value proposition. What that means at the highest levels for emerging affluent and affluent clients will continue to go to market with great service with leading app and web experiences with a broad set of advisory solutions and planning solutions and much more. Means for high net worth and ultra high net worth will of course offer all of that, but we will also expand our relationship models and service commitments for these clients and will also sharpen the value that we give to these clients both in pricing and product access.
And for Trader, critically important segment, we will continue to build out our Trader capabilities with an enhanced focus on bringing over the TBA trader ecosystem of content, of education and platforms as soon as we can. And of course, I could not be more excited about a lot of the work that Rick and Nisha talked about in particular around thematic investing and direct indexing. I think both of those are going to have broad, broad appeal across this entire client spectrum. So, those are the high level priorities for each of the retail businesses in 2021. But longer term, to be sure, what I am most energized about with the integration of TDA and Schwab is I feel like we are truly building a retail powerhouse that brings together the best of retail advice and trading and relationships all under one roof, all under one brand.
Very specifically, what that means is we're going to combine Schwab's depth of capability and retail advice and our proven ability to engage clients with that advice with PDA's clear leadership in serving active traders. We're going to combine Schwab's commitment to great service and great relationships with TDA's incredible ability to use content and education to build relationships. We're going to combine Schwab's history of disruption on behalf of getting clients better outcomes, often trying to often by using our scale to deliver clients incredible value with TBA's rich history of disruption as well, but often focused on digital and product innovations. And finally, we're going to combine a retail business at Schwab that tends to be more levered to asset levels and interest rates with the TBA business that tends to be a little bit more levered to volatility. So overall, it certainly to me feels like it is set up for it to be an incredible combination for clients, which is most important and of course for stockholders and of course employees as well.
So, I just close by saying 2020 was a unique and unprecedented year, but the teams I think delivered and delivered incredibly well. We are very well positioned going into 2021 and beyond with strong momentum and strong industry recognition. Between now and client conversion, we will go to market as 2 retail businesses, but we will act as one firm. And ultimately, what we are building is a true retail leader that brings together the best of advice, trading and relationships, all under one roof. So with that, I think I'm going to introduce Catherine Dolladay.
Kathryn leads our Workplace Financial Services organization, which is a critical part of the Investor Services team. And I think I will be back up for Q and A with Catherine and Stacy in a few minutes. So, Catherine, it's all yours.
Thanks, Jonathan. Good morning or afternoon to folks. I'm Kathryn Golladay and I lead Workplace Financial Services. I thought today we would talk about how we serve employers and their employees and the role of workplace within Schwab. And then also just take a high level look at our focus in 2021.
So I
know that some of you may not be as familiar with our workplace business. And so I thought it was appropriate to spend a few minutes and provide an overview. So we serve employers and their employees across 3 different areas: retirement, stock plan and compliance solutions. And these businesses help to drive growth for the firm and connect Schwab to millions of employees. What they hear us call them participants, who become investors through their workplace.
So a quick recap, and let me start with Schwab's overall strategy in the retirement space. So our focus here is really on defined contribution plans and largely 401, but we serve other types of plans as well. We provide trust and custody services and a self directed brokerage product, PCRA. And then finally, we work with plans that range from the very small end of the market all the way up through plans that are $1,000,000,000 plus in size. And we do that through 2 businesses, Retirement Plan Services, that's the top left hand corner of your slide and Retirement Plan Services and Retirement Business Services.
So retirement plan services, that's the bundled 401 business at Schwab. We focus on the mid to large market plan very often with professional services firms. You see really strong retention of assets through 401 rollovers and just a great pipeline of new investors who first experienced Schwab through their retirement plan. So Retirement Business Services, again, top right, they work with intermediaries. These may be independent record keepers and advisors who offer retirement plans to employers.
Typically, this is where we show up in the smaller end of the market. They report to advisor services, but retirement overall, the 2 businesses combined, it contributes to Schwab's overall retirement plan, scale and presence in the market. All right, let's shift gears to the other two businesses that round out workplace, Stock Plan Services that provides a full range of solutions for an employer's equity compensation needs. Our focus here are companies that offer broad based equity plans and generally in high growth sectors. If you look at a participant in one of these plans, they tend to be affluent or emerging affluent and that aligns well with Schwab.
And then finally, compliance solutions business. We serve employers who have a responsibility to monitor their employees' trading activity. And then as the designated broker for those employees, we can provide them with the breadth of services that Schwab has to offer. On the next slide, I wanted to give you just a snapshot of customer satisfaction. I mentioned that one of our primary roles is to service the front door to Schwab for millions of investors and for most for the first impression.
And so as you would expect, we focus a lot of our effort on providing a positive experience to drive satisfaction and ultimately loyalty. So Jonathan just mentioned the J. D. Power recognition that the retirement business has received the last 4 years and Schwab's own CPS scores also shows strong and steady improvement across both retirement and stock plan participants. But our focus on client satisfaction that extends to the employer as well, because they're really the true buyer of our services within workplace, of course, on behalf of their employees.
So past 4 years, more best in class awards than any other rated retirement plan provider. This was Plan Sponsor Magazine. It's one of the key industry trade publications in that space. And then Stock Plan Services rated very highly in the 2020 Group 5 satisfaction and loyalty survey, very highly across key elements of full administration service. And for those of you that aren't familiar with Group 5, they really do the preeminent satisfaction survey in that space.
All right. With that as a backdrop, let's look at 2020 accomplishments. And heading into 2020, we had tailwinds, I think that helped us to capitalize on our strategy of grow, retain, extend, that's grow our employer client base, while achieving a high level of plan retention and of course extend those participant relationships. And so let me just touch on a few of them. And 1st and foremost, I also wanted to mention, I'm impressed with the way our teams We introduced new capabilities, just to mention a couple in compliance solutions.
We enhanced our employer managed trade rule capabilities, really making it easier for clients to do business with us. And in retirement plan services, we continue to build out our digital capabilities and introduced my financial guide. Like other parts of Schwab, we believe in the best of combining the best of technology and people and so also made investments into our client relationship service model. Like other parts of Schwab, keen focus on the TDA integration. And then I'll point out something that impacted the retirement space, regulatory changes, the CARES Act in particular, which was essentially effective when it was signed into law.
And quite proud of the way the teams shifted focus to the CARES Act implications for our clients, so that our clients could focus on what they needed to, which was the evolving pandemic situation and running their business and taking care of employees. All right, let's shift now on the next slide and talk about how workplace how we win in the marketplace. Is really based on 3 things. And the first is, we show up really well when it comes to service and brand and flexibility. With employers and sponsors, we have high satisfaction rates and strong client retention, 97 plus percent there.
And in both stock plan and retirement, we've had some strong sales results over the years. So first, we went on brand service flexibility and we also take a holistic approach to helping participants. Because we know that many employers and more and more employers over time, they're so interested in their employees' financial wellness and they want to work with a partner that can help them with their needs, but also help their employees reach their goals. And so we're always have a keen focus on client engagement, 80% engagement now across the businesses in the various channels. And we found that the more that they engage, how they want to engage phone, chat, online, mobile, the higher the satisfaction, so an evolving cycle.
And then the last thing I would point out and this is retirement in particular, but we stay really focused on supporting the plan consultant or advisor. So the majority of employers that we work with also have a plan consultant, often a fiduciary is their trusted partner. This is commonplace for any plan outside the small market. And so supporting them and helping them succeed and thrive is quite important. All right, let's take a look at 2021 at a high level.
Our strategy remains the same and we'll continue on the path that we've been on. And that's a focus to grow the workplace business here at Schwab. And the initiatives we have in place, several of which are on the slide, will support that strategy. This is one of the initiatives in particular that I would like to touch on, and that's our focus on the new participant experience, say, 1st 6 to 18 months. This might be someone who's changing jobs and coming to a company that we serve or maybe it's a new plan that we've won.
But this is a really important time when someone's changing jobs, right? They're evaluating their entire financial situation and it's a moment of real engagement. And so we continue to look to make investments here in an omnichannel fashion. And I see that as a win win, right? Good for our clients, both our employers and their employees who they want to help And good for Schwab as we really strive to make it easy for those interested participants to access all that Schwab has to offer.
And so our focus winning new business that allows us to increase the participant base and increase our scale, building trust and retaining clients and serving participants well to build long term Schwab clients. That's the continued focus for Workplace. And so in summary, I just wanted to share my enthusiasm as well, my excitement for 2021 and where we're going. I think the strategy we have in place is a winning strategy for workplace at Schwab and we've got a really strong team committed to serving clients. And so with that, I would like to introduce my colleague, Stacy Hammond.
Thanks so much for your time today. I'll be back during Q and A. Stacy?
Thanks, Catherine. Hi, everyone. I'm Stacy Hammond, and I'm joining you from the office in San Francisco, like many folks on the call today, hedging against a teen, a tween and a dog that likes to announce the arrival of any UPS delivery of which there are many. So this is not my home view. Today, we're going to talk a little bit about how retail is acquiring new clients.
Let me first orient us on the map of where we are in terms of Schwab. So anything I talk about today is about Schwab new retail growth. I'll make a couple of references to TDA, but the details are all about Schwab. And finally, we're talking about retail specifically. Retail represents about 2 thirds of our annual household growth at Schwab with the other percentages being made up by investors who are served by our independent advisors through advisor services and the population that Catherine just talked about, the participants in our 401 plan through retirement plan services.
Today, we're going to focus on the 2 thirds that are new to retail. We have seen absolutely tremendous growth in our retail households over the past 5 years with the most pronounced growth, of course, happening between 2019 heading into 2020. 2020 alone was about 3 times the number of new clients we acquired to Schwab over 2016. I was struck this morning as I was driving into San Francisco that 866 1,000 new households at Schwab is almost as if we acquired the entire population of San Francisco in a single year. This is investors who are trusting Schwab to help them build and manage their wealth.
Let's talk a little bit about the profile of those investors. With the tremendous growth that we've seen, we've also been able to maintain an incredibly attractive profile of new clients, Starting with a data point that Nisha talked about a couple of presentations ago, about half of our new clients are under the age of 41, demonstrating our ability to grow the pipeline of folks who are coming to Schwab as they start to grow their wealth. In addition to about half of the new clients being less than 41, about a third of our new clients are affluent. They have investable assets of more than $250,000 And finally, about 4% of them within the 1st 3 months of becoming a new client are taking us up on some of our advice capabilities, whether those are digital or live capabilities. And what's remarkable is despite this incredible growth that we've seen, the profile between 2016 2020 has remained remarkably stable.
And I think that's due to the strength of our value proposition and the resiliency of that value despite the market environment. In 2020, we did start to see some changes in the behaviors, so not the profile, but the behavior
of our new
clients, with more clients initially funding with cash. We think this is an indication that it's either new investors getting started investing or it's investors bringing new money to market. So we saw about 60% more of our new clients fund with cash rather than with existing investment securities. They're also initially funding slightly lower. So it's about a 44% lower funding average than we saw over the prior year.
And finally, we're seeing more and more of our new clients indicate that they're interested in being self directed. Nisha also referenced this earlier. So just over half are indicating to us that they are interested in trading and managing their own portfolio. Again, these are changes in behaviors that we saw in 2020. They're still consistent with the profile of the types of clients that we're attracting.
And finally, the households that we're talking about are also representing an increasing share of our total NNA, representing that we're attracting not both the quantity that we want to that tremendous growth in households, but also the quality and the assets that we're driving. So let's talk a little bit about what we're doing to acquire those new clients. We have a well diversified approach, meaning that we're not dependent on any one channel, which is a real advantage. We see clients come because of referrals and we know that trusted recommendations continue to be a primary reason why people join Schwab. Of course, our sales channel, Catherine just talked about the pipeline from workplace financial services to retail.
And finally, marketing. Marketing continues to be an incredibly efficient engine for us. So in the context of that 3x growth that we've seen over the past years, we've seen a very, very modest increase in our total marketing spend, which means that not only are we optimizing across the portfolio, but we're also driving increasing efficiency. Finally, we like to understand the impact of each of the levers on acquisition. And this represents, I think, how well diversified we truly are.
So this is all indexed to referral, which referral and sales have about a 1x impact in terms of households. Catherine's workplace financial services 2x and marketing 3x. I think what I would say about sales as well as the 1x impact in terms of households and clients that we're acquiring, again, that's quantity, they make an outsized impact in terms of quality, which would be the assets that they drive. So let's talk a little bit more about each of these levers, starting with referral. Jonathan referenced the trophy shelf.
And I think that we all know that referrals start with delivering an exceptional client experience. And it is proof of that exceptional client experience when somebody trusts Schwab enough to refer a friend to us. I know that's how I got started as an investor at Schwab well before I was an employee and well before I was 40 actually, but it was through a referral. And of course, we also have our USAA referral program, which is a partnership that is grounded in a tremendous set of shared values and a commitment to serving those who serve. We're only beginning to unlock the potential of that program, and we see lots of opportunity ahead of us.
Our sales channel, whether physically in the branch or on the phone is another lever that we have in acquiring new clients. The branches have done a tremendous job pivoting this last year as we all have to building relationships virtually rather than in person. That's been a pivot that we've done with many of our events like the one we're doing today. We're able to host these for clients as well. And we've been really pleased with the ability to continue the momentum of the sales channel despite having gone virtual.
Of course, our independent branch network in our environments where we are under penetrated and does a great job at bringing new clients into the franchise. And finally, we set up a prospect conversion phone team. So a phone team that is dedicated to talking to prospects and new clients this year, designed to nurture and unlock the leads that we get from the digital channels. This actually works really well in concert with the new client experience that Nisha referenced earlier as well. Finally, within WFS, within Workplace Financial Services, we are focused not only on, of course, capturing the 401 and the assets associated with stock plan, but we are wanting those employees to take an action with Schwab beyond why their employer chose us.
So not just the 401 and not just the stock plan, but to entrust Schwab to manage and grow their wealth. Within retirement plan services, a big focus this year is ensuring that we're introducing more participants to retail earlier in their tenure with the 401. Mischa also referenced that we find that investors tend to be very engaged at the moment of transition. And so when somebody is opening their 401 with Schwab, it's a great moment to talk about all the other capabilities that Schwab has as well that can help them grow and manage their wealth. And of course, with the stock plan, we're focused on ensuring that we hold on to the assets of
the vested equity awards, but also ensuring there are
people in that population, some are really new to investing. This may be their first experience as their equity awards come due. And for some, they're incredibly experienced and with high net worth. And so we want to make sure that we're delivering solutions to all of those participants in that plan, again, to get them to take an action beyond why their employer chose us. And finally, marketing drives tremendous value for Schwab in terms of new clients.
And we achieved this through focus. And it's really a focus on 3 things. So the first is a design target. So we are laser like focused on an affluent and trader target, which halos well beyond those two targets as you saw in the profile of the clients that we looked at earlier. We have to deliver best in class creative.
We are in incredibly noisy environment and it is important that we are grounded in deep client insight. And finally, we have to rigorously measure because that's the only way that we can drive more efficiency into the system. It's the only way we can realize this growth with a flat marketing budget. And next year, we're excited I'm sorry, this year, we're also excited to leveraging the strengths of TBA and Schwab combined, which will give us yet another lever. So in addition to the steady growth that we've demonstrated at Schwab and our evergreen no trade offs value proposition, we bring, as Jonathan referenced, TBA's outsized growth during periods of market volatility.
These are really nice complements for one another. And finally, we're really excited to leverage their brand with active traders, knowing that that is a source of growth over time through both our content, their education and their platforms. So the acquisition of TDA gives us an even more diversified growth engine in addition to what Schwab has demonstrated. In summary, we are really efficiently delivering strong growth and maintaining a very attractive client profile with that growth. That is because of a mosaic of levers that we use to acquire clients.
We are not dependent on any one channel to drive growth. We are diversified across 4. And finally, with the TBA integration, there is even further growth potential ahead as we lean into the moments of volatility as we're seeing now and their ability to attract traders. So with that, Jeff, I will turn it over to you for questions.
Great. Thank you so much, Stacy, and thank you, Jonathan and Catherine. Great presentation by all of you, and we're definitely starting to get a nice queue of questions here. So let's go ahead and dive in. First question is probably directed to you, Jonathan, from Brian Bedell at Deutsche Bank.
Could you share some more perspective on overall Investor Services, client asset NNA growth and how perhaps it might be enhanced by Schwab's improved competitive positioning and viewed as potentially more stable versus smaller, less scaled online competitors?
Sure. Great question. I think in terms of NNA growth, I mean, if you look at the 2020 numbers, obviously, really impressive NNA. And I think our model has proven over the years that it really is an all weather model where that M and A appears to come in, in up markets and down markets and in sideways markets and in highly volatile markets. So I think that's one of the strengths, particularly at Schwab Retail is the attractiveness to the no trade offs value proposition that we talk a lot about, the best of people and technology seems to survive or thrive really in any market environment.
I think 2020 was certainly an indication of that. So, we expect that to continue. And also I'll just highlight, as Stacy said, not just M and A, but the new client profile has been very resilient as well. I think doubling the volume, nearly doubling the volume, but maintaining the same profile is a really powerful indicator of the strength of the retail model.
Next question comes from Will Nance at Goldman Sachs. As I think you've noted in your remarks, Schwab has not historically emphasized the trading segment perhaps as much as others in the market, particularly TDA. How has that perspective evolved over time? And how do you view the importance of the segment going forward as you now have one of the premier active trader platforms in the industry? And are you thinking about ways to lean into that more as you move forward in the competitive landscape?
There's no doubt that trading has become more important certainly in the last 12 to 18 months and in particular traders, active traders have been become much more important to Schwab with the integration TD Ameritrade. And of course, a big reason for that integration was to combine those complementary strengths that I've talked about that really everyone has talked about today. TDA is unquestionably a leader in the trader space and we are absolutely going to leverage that leadership position and bring it into Schwab. And I think their depth and platform and the education and content combined with our depth in service and relationships is going to make for an incredibly powerful trader offer. So, we fully intend to leverage it.
And we also Walt mentioned this earlier, we intend to leverage the equity that they have with traders. So, for example, but not just the Thinkorswim platform, but the Thinkorswim brand. So, I could not be more excited. So far, we've had a great partnership and a lot of commonality in our approach. We have gone to market differently in the past in the trader space, a little bit differently as you'd expect, but bringing the 2 together is going to be powerful.
And we're increasingly important part of retail, no doubt.
Perfect. Thank you, Jonathan. Maybe a question for Catherine, and
I'll try
to break them up. First, Katherine, there's obviously been a lot happening in the particularly in the stock plan business over recent years, as we've seen consolidation across the space and newer firms kind of making a more concerted push. What changes have you noticed to the overall competitive environment? And how are you ensuring continued focus and investment in that area while kind of executing within Schwab's ongoing work streams? And that question is from Brennan Hawken at UBS.
Fantastic. We've seen industry consolidation really in both the stock plan area and retirement. One of the things that I really think about with Workplace and that consolidation are ways that we can continue to grow our business in our winning strategy, which is more of a focus on particular parts of the marketplace and with particular types of clients, but at the same time, doing all that we can to leverage just the enormous scale we have at Schwab. So whether that's partnering with niche area or other parts of the firm, I think those two things are incredibly important. In terms of trends that we see, we find that employers and I mentioned this in my remarks really regardless of the benefit type are very interested in outcomes for their employees and a broader set of, I'll call them wellness capabilities.
And Schwab is just positioned so well there to bring to bear all that we have combined with what we're known for, which is service and flexibility.
Great. Thank you so much for that, Catherine. Jonathan, perhaps starting back with you, a question from Richard Peto at Piper Sandler. How do you view from a competitive landscape some of the higher growth customer acquisition models of the newer app based financial services firms in the market today versus the Schwab model?
Thanks for the question, Rich. We operate in an incredibly fragmented and we have a broad set of competitors across the board. I know you're asking about some of the newer ones, but I'll just start by saying that the competitive landscape broad. We compete with the major banks and the warehouses. We compete with the traditional firms that we competed with and of course now FinTechs.
One of the benefits of competing with so many different firms is certainly for me and my leadership team, we talk about this a lot. We don't focus on any individual one because frankly wouldn't be productive. And it's a little bit liberating because it allows you to focus on the client. So at an Uber level, I would say we spend a lot more time thinking about the clients than any one individual competitor. As it relates to some of the success of the more recent app only based solutions, I respect for all of our competitors, including them.
I think they've done a nice job bringing new folks into the category and some areas done some nice work around innovating around the client experience. I think both of those things are going to benefit the industry and Schwab down the line. But ultimately, I have no doubt, no doubt at all that this industry is a relationship based industry. It's complicated. People want the best of people and technology.
They want to be with a stable firm, especially after times like last week. And they want all of that at a great value. And I think Schwab is uniquely positioned, I think, to deliver that no trade offs, combining the best of people and technology at a great value. And that's a secular trend that I don't think is going away. So respect for I love the fact that new people are entering the category.
I think we all should celebrate that. I think that's good for investing and good for the country and ultimately good for us.
Great. Thank you, Jonathan. And maybe a question for Stacy here from Michael Cyprys at Morgan Stanley. I know you provided some high level overview on kind of client acquisition costs and how you're thinking about that. How have those acquisition costs evolved over time?
And how do you incorporate that into your broader marketing strategy?
Yes. Thanks for the question, Jeff. So maybe I'll take the second half first, which is we use an econometric model to help us understand how to allocate our media dollars in the most efficient way optimizing for affluent households. And so we see evolution cost of acquisition correlate to volatility. So in cost of acquisition correlate to volatility.
So in periods when there are a lot of fish swimming, so to speak, clearly our cost of acquisition goes down because there's simply more shoppers in the market. We're in a low engagement category. And when the market is making news and people actually engage, it helps us. It gives us momentum. And so that drives down the cost per acquisition.
And then in periods where the market isn't making news on our behalf, we find that when we make news, the same dynamic happens. So when there's periods of volatility, we definitely see cost per acquisition decline. I would assume that's the same for our competitors as well. But what's unique about our model is the ability to drive growth regardless of what the market is doing. It's just the CPA probably looks different in each of those dynamics.
Great.
Thank you very much, Stacy. Maybe back to Catherine, a question from Brian Guneen at Generation Investment Management. Perhaps going back to the SBS or the stock plan business, could you provide a little more color around maybe Schwab's size and positioning relative to some of the larger competitors and how the Schwab SBS business has been growing compared to them?
Thanks, Brian. I appreciate the question. When you look at the stock linked category through the consolidation that we've seen, there are really 5, I would say 5 large players in that and Schwab is one of them. We're still smaller in size than some of our competitors, but we're growing quickly and our clients have just a high level of satisfaction with us. So that's how we kind of stack up in terms of the main players in the stock plan space.
Next question is probably for you, Jonathan. This one comes from Chris Harris at Wells Fargo. Could you put some context around how maybe Schwab's success attracting younger clients today or more recently compares to us to Schwab more on a historical basis? And what seems to be resonating most or best with those clients?
I think one of our strengths is the breadth of what we offer. And when you look at sort of the gateway products or people just getting started at Schwab and you look at fractional trading, you look at no fee no advisory fee Schwab Intelligent Portfolios. When you look at us being the only major player that I know of offering subscription based pricing that combines a Revo offer with financial planning. When you look at all the low cost ETF solutions and of course 0 commissions, again, I'm biased, but I can't imagine a better place to get started investing if your first time investing. And by the way, with stock slices now, the ability to gift in a custodial account shares in individual positions is an incredibly powerful way to sort of maybe leapfrog the 401 that the client's first investment experience may not be a 401, it might be a custodial account at Schwab bought by their parents.
But instead of being in a mutual fund, it's an individual position, which gives them a sense of the power of investing when they can tolerate the risk. So I think our success with the younger generation has always been about making it simple, making it easy, bringing costs down. That's we've got a 50 year legacy of history of doing that. But I'd also say more recently, a lot of innovations in the last 5 years, many of them have just built upon that, be it still be it fractional short term target portfolios, fractional shares, low cost ETFs or no commissions.
Great. Thank you, Jonathan. Maybe
a bit of
a follow on from some of the other questions about trends that we're seeing today from Brennan Hawken at UBS. Have you noticed any acceleration in Schwab net TOAs from particular corners of the competitive market space? Or is it staying consistent across the different buckets of competitors, FinTechs to larger banks to other broker dealer platforms, etcetera?
No, it's pretty consistent, no change in patterns. And I would say with FinTechs, any flows back and forth with FinTechs are very, very small and they're very much in our favor. But the rest of the industry where the flows really are back and forth have not changed from prior patterns.
Thank you for that. Maybe another one for you from Craig Siegenthaler at Credit Suisse. You talked about landing at about that 417 branch level. How would you how do you think about that longer term? Is this the optimal size and shape of the branch network?
Or how do you see that evolving as Schwab's strategy continues to move into the future?
I would say, we're not trying to optimize a branch strategy or branch footprint. We're trying to optimize a strategy that brings together the best of people and technology. And a big part of people is having a live and local presence in many communities. It is true, particularly after the pandemic, it's true that relationships can be formed via virtual, via WebEx, via Zoom. But I don't think for many of our clients that's not adequate.
Many of them want a live and local relationship and we believe in that. I will also say the marketer in me, don't underestimate the billboard value of having a branch in a community, not just as a marketing tool, but very specifically as a reminder that Schwab supports that community in a very, very real way. So, the 417, we continue to add franchises. I think we may very quickly be at 418, if not already in the next week as we continue to add independent branches. We'll continue to grow that footprint, but we're not optimizing for any specific number.
We're optimizing for being there for our clients on their terms.
Great. Thanks, Jonathan. And probably have depending on the response, maybe time for one more question here. And we'll start again with you, Jonathan, maybe this is for you and Stacy. This comes from Michael Carrier at Bank of America.
Obviously, clearly strong account and NNA growth over recent periods with the, we'll say, stable allocation of marketing spend. Has the type of marketing spend shifted? And are there other costs that have risen to acquire or retain these accounts? Maybe this is similar to the cash offers that were talked about at previous meetings or is the market just becoming more efficient?
Yes. I would say, let me say a couple of words, I will pass it to Stacy. But quickly, since you brought up cash offers, as we've said a couple of times, we don't believe that competing on a cash offers is a good way to win. You want to win on the strength of your value proposition. We have seen some of those muted a bit in the marketplace, although they still continue.
I think the fact that it's muted is a good thing again for the reasons I said. And I think the industry has probably recognized that Schwab will compete that way if we need to, but it's not how we want to go to market. In terms of the shift in marketing, I'll hand it to Stacy other than to say, it is a dynamic portfolio. It is managed. The beauty of marketing is it is an art and a science.
And the science of marketing is incredibly powerful. And we take a lot of pride in moderating, shifting and evolving not just our spend, our messaging in the moment. And so the answer is it hasn't changed, it's always changing. And if it isn't, that would probably be a problem. I don't know, Stacy, if you want to?
Yes. I absolutely agree. I would say, in terms of shift in spend to the places where we've seen significant increases would be clearly in digital. And this goes back to the point that when the market is making news, that is great momentum for us because people are consuming news. And so we want to be in that environment.
And the other would be, of course, in what we call content syndication, which is taking our market insights and distributing them in a way that people can consume Schwab's perspective when the markets are volatile, like what do they need to do, what do they need to consider. That's a place where we continue to see really great efficiency towards the top of the funnel, because we're there when investors need us, so that when they're ready to take action, they choose well.
Excellent. Thank you all so much, Jonathan, Catherine and Stacy. Really appreciate the time today and look forward to talking to you guys again soon.
Thank you.
Thank you.
Now, I think it's time to invite Mr. Bernie Clark up onto the virtual stage to give us an update on our Advisor Services business.
It's wonderful being here with all of you. I really appreciate this meeting each year and the opportunity we have to talk about our businesses together and also take the Q and A that you inevitably have at the end. It's the most interesting part to me quite honestly. And it occurred to me today as we were preparing for this that for many of you, this is how you've always participated in the meeting. So wanted to thank you for welcoming all of us to your forum of how you've participated.
And it has been an interesting year for all of us, including all of you, As you look at the marketplace and the economics in the industry and things that are happening all around us from the political to the economic landscape, It's an interesting time to be around this space and certainly an interesting time for advisors. So my opportunity here today is always to talk to you about our industry, what we've seen in the results and our vision. But as importantly, it's so much to reconcile what I told you last year and what I'm seeing this year and to give you perspective on where this industry is moving and what the opportunities may be ahead of us. It's been a little known for some period of time, cottage industry that's grown up quite significantly, as you well know, into one of the fastest growing segments and not something that has happened over a brief period of time, but over a long prolonged period for all the reasons you've heard today from everybody who's spoken already. It's a coveted relationship space with fiduciary principles and so important that we continue to reward clients with the best possible outcomes and results as well as experiences that they can possibly have.
So everybody you've heard speak today has been additive to the advisor model, clearly setting the stage for the opportunities we have to differentiate. And let me talk to you a little bit about that differentiation as I think it's really important. We sit here now as a $5,700,000,000,000 space. Several have mentioned the fact that competing here with each other is not the goal. The goal is to continue to grow this space and it has grown significantly as you can see with about an 11% CAGR over that last 10 year period of time.
And if you think about that kind of growth compared to what we've seen, we've been quite consistent with it. And I'm pleased to see that TD has been outperforming it in their growth with almost a 20% CAGR over a similar period of time. And so opportunistically, bringing these firms together is so good for us. The top one, I just wanted to call to your attention because you may say, where's the growth of advisors? How come I'm not seeing it there?
Well, I've got an M and A story I'm going to tell you as I mentioned to you many times in the past. And so what we're seeing is more consolidation happening. We're still seeing the same or more clients or advisor teams coming out, as Walter mentioned, corner office brokers as well as others. But it's important to highlight the fact that many of these firms are joining and or coming together as they do come out. But let's get into, as I often do, some of the different areas of the ecosystem of this business as they are most interesting.
And so I wanted to again talk to you about those who are bringing in both private equity and capability into the space and helping to support those who are going to be independent or those quite honestly who are already independent. I've broken it down into 4 categories for you. We have our platform providers, which make sure that you have an opportunity to come and be in the independent space and have all the support you need, both intellectually as well as physically, tech stacks, etcetera. The financial acquirers that are out there in acquiring firms, I've got some examples of those that I'll talk to as you can see in this slide, which depicts them all by Cimuili. Strategic acquirers, those RAs wanting to be in the M and A space, they're wanting to accelerate growth of their firm plus the firms they can acquire and emerging consolidators, certainly a growing space.
Let me warn you as we get into some of the specifics around this. These firms are not very good at staying in their lane. Each is trying to encroach upon the other and trying to add more capability and more differentiation to make sure that they're advantaging themselves in the marketplace. And you would expect nothing less from such a robust group of clients. And yet they are all additive in my mind to what that $5,700,000,000,000 could be, making sure that more can be in the space and more can stay and grow more quickly in the space.
And so on the platform side, I might highlight Dynasty as it's shown here in the Suruli chart as being a very, very successful model, someone we work very close with. We've had 10 deals with them. Certainly, they've been on an accelerated path towards success and growth that we've seen directly with them. But they work closely with our platform and we see the complementary nature of the 2 platforms together in helping advisors to find their way into independence, often large corner office brokers with large books of business and creating a completion strategy for all of those. Certainly, as I think about the financial acquirers, I could not mention focus, certainly one of the most significant of all of them with 32 transactions in 2019 alone, 32 transactions, quite significant and making sure that they are stretching themselves in a way that acquires firms through merger, through acquisitions, through sub acquisition within their ownership group and creating hybrid models to make sure that they're serving independent advisors or those who want to be independent as well as have some responsibilities to a broker dealer and certainly scaling in a way of their capabilities within their firms, still in new areas that they're migrating their way into.
And Hightower, which has had a very, very aggressive year in acquiring firms as well, somebody who's been on the radar since almost the inception of these concepts. As I get into the strategic acquirers, there's many more players now starting to think about the W2 space, which is kind of interesting as well. We have Steward Partners, who launched a new 1099 affiliated model and the Mariner platform, which has worked closely with Dynasty as well as independently on making sure they're creating a completion strategy for those advisors who are emerging, some smaller, some larger, some acquisitions, some joints, but making sure there's a centralized model. The W-two model is interesting as it takes away a lot of those needs that advisors can't necessarily build well within their own offices around compliance, operational needs and they centralize them in more of a way. Of course, Mercer has been a strategic acquirer for some time, 7 transactions in the last year, about $27,000,000,000 in assets.
And of course, the Carson Group, 60 firms joining them in the last 3 years, very large player at TD Ameritrade, somebody we've been working closely with as well in making sure we can have a strong joint relationship. Beacon Point, a client of ours for a very long time, 4 transactions since the pandemic started. And interestingly enough, generally a West Coast firm, 4 transactions all done in the Southeast, extending their reach, becoming a little bit more national in how they cover clients and certainly following the pattern of clients as well. On the emerging side, boy, I sometimes struggle to talk about someone like a creative planning is emerging at $50,000,000,000 Some might say they have emerged. But in reality, creative planning is one of those models who started it all in comprehensive model of both serving advisors, planning for advisors, advising them, their finances, taxes, legal work, estates, so very, very comprehensive and had tremendous success and great client of both the TD firm and also with the Schwab firm.
We tend to try and think more about them as single clients in today's world. A new entrant on the space, which many of you may have noticed, CI Financial, Curt McAlpine has gotten a lot of headlines recently, but he's been in very aggressively entering in the space, I've had conversations directly with him. We are great strategic partners and he is excited to be in this space and wants to be here for the long term, sees the opportunity. They're the largest wealth manager now in Canada. And so I suspect that we're going to see a lot more from them going forward.
Sanctuary World covering 16 states with 38 partners and 10,000,000,000 dollars and a name that we talked about probably 2 meetings ago as emerging, maybe 3, and of course, 30 partners, which has done a fabulous job in the wealth management space and already has $25,000,000,000 in assets accumulated. So quite significant movements and a lot of capital coming into the space being, I think, really rewarding the growth rate that we have seen overall in the space. So moving on to the next slide, I wanted to talk a little bit about what advisors are facing and some of the things they're telling us as we think about things. So advisors, really, if you think about where they're spending their time, this has been a trend for quite some time. They're spending their time really on client facing activities.
And over time, they have come to really appreciate that that's where their value, that's where their differentiation is in the client facing activities, the relationship. We've talked a lot about digitization, we've talked a lot about capabilities. But in reality, it is a trust and relationship business augmented by all of those other things. And as they realize more and more around that, they're more willing, I think, to spend or send some of those other responsibilities away. Administration, obviously, is somewhat preferred, especially on smaller firms at 23%.
The investment management bucket is the one I've been watching very closely now for years. It's not that it's unimportant, but they don't see it as the major part of their differentiation in the relationship. And hence, they're looking for sometimes other alternatives on the investment management side to do a good job, but not spend quite as much of their time there. And of course, development or their people, we could spend a whole day talking about the need of development of people. In fact, one of my biggest worries in this space is the fact that we have to have more diversity.
We have to have more individuals coming into this space. We have to excite the next generations. We have to excite the CFP programs that exist on campuses. We're doing an awful lot with universities now on behalf of advisors in trying to make sure we're bringing out more accredited capability into the financial services space. The fiduciary model for all of us is the only way forward.
And accreditation is a great way to support really to support that higher bar of capability. If you think about the firms on the chart on the right that are considering whether they would outsource and not outsource, you can see the movement. In just 2018, many would not, that has grown significantly and you're seeing a big movement now I think towards trying to find other solutions. And many have created in house solutions as we see with some of our broker dealer But competitors, as you think about LPL and trying to acquire their way into the space, they've done that several times. They're a challenged model right now, the independent broker dealer model and LPL and they're trying to find a way to be as attractive to the assets they have as the ones they could attract.
They fencer models that have retained a little better, but I'm not sure they found models that really attracted more assets. Clearly, we have done work around Street Smart Edge and Advisor Portfolio Connect, ThinkPipes and iREVAL, as we think about the TD relationship coming on board, institutional intelligent portfolios was one of those examples as well. And to our surprise, many of our advisors said, hey, could you put more model portfolios in there? Rick and I are fast friends in trying to think about how can his business support this business and help create more, even more open architecture for advisors. This is not about making them captive to anything as you might see in some other models.
This is about really giving them another opportunity for the choice and to be able to do some things that they wanted to. And then of course partially delegated models and fully delegated models, which in that space, they tend to talk a little bit more towards the cap space and some of the opportunities that we see there, as many are trying to find opportunities in serving advisors and becoming part of the economic infrastructure of their firms well into the future. So we have all in camps that are quite successful and probably the predominant category as of right now. We have product camps that sit out there and then we have the ability really to see where all in camps and product camps can come together and where we can actually add more value in that equation. As we know, they've been embraced in the marketplace, but maybe not to the level we will see in the future.
And so we're going to continue to see where our opportunity is with the trust we've gained with advisers and the opportunity we have to serve them. And of course, the proximity to their assets. These are clients of Charles Schwab as well as their clients and we can holistically take care of that relationship. I'll get a little more into that in a minute as well. So moving on, I just wanted to, again, I offered to give you some perspective on where we come from.
I often talk to you about growth and where it comes from and why it comes from those places. If we are a $6,000,000,000,000 industry, it truly tells us that we are. And as I've often said to you guys, I feel that number is a little squishy by definition, but it's directionally correct. We know there's $7,000,000,000,000 still out in the independent broker dealers, also a somewhat squishy number and about $10,000,000,000,000 sitting in the banks and warehouses. The opportunity is all away from us.
The 13% that Charles Schwab commands now can grow dramatically. And I believe in our space, especially with the addition of TDA and us coming together, I think we have a huge opportunity here to grow this space even more and bring more assets into more of a fulfilling model for independent for end clients with independent advisers. And as I think about the acquisition throughout the years, as we've gone through the last three as an average, it's not thoroughly consistent, but it's something that we track pretty closely. You can see that our growth, Charles Schwab, Advisor Services, I'll incorporate TD into this number as we get into next year's session as I talk to you a little bit more about what we're doing at that point in time. But 40% has come from other registered investment advisor custodial platforms, 20% has come from independent broker dealer platforms and broker dealers and 40% has come from the traditional models, as I like to call them, the wirehouses and the banks.
And of that, those assets that have come from the $48,000,000,000 that's come to us from independent advisor space already, which is more of a consolidation market share opportunity for us. I would tell you that over 40% of that has come from Fidelity. And so we are winning against the models that sit in this space and having great success, which is very pleasing obviously in making sure that our differentiation is doing what it needs to in the future. And then move on from the competitive space to think about new competitors that are entering into the space, impossible not to look at what's happening. We have Morgan Stanley purchasing E*TRADE, still uncertain what they might do with that asset and the stock plan services is incredibly important to them.
And so the leverage, that's for sure. But we also saw Goldman Sachs acquire at a reasonably large price tag United Capital and starting to build out their wealth management model. It's interesting to see how many people want to be in the space as of this period in time, but the success of the model in our mind has always come with open architecture. And many of these players don't necessarily have an economic model that's going to support that kind of structure. And so it's going to be really interesting to see what they want to do with it and where they want to take it and how long their attention can stay particularly in this space.
We know that Wells Fargo, LPL, Raymond James, all ramping up their efforts. I know that because they try and hire some of our best people. I usually see those people back in the back end coming back around at some point in time, but they know they need the talent, they know they need the innovation to really do more in this space. And advisors are unbelievably demanding, right? What was great yesterday, won't say it today, the next best experience is the one you have somewhere else, sometimes not even in the financial services industry.
What was great yesterday for advisors won't be great tomorrow, it will be price of entry. And so we have to keep raising the bar. Moving into where we see some of the growth coming, I want to highlight the fact that we had $200,000,000,000 in net new elastic growth last year. I sometimes joke that that was probably the first 10 years of this business at Charles Schwab and we had $50,000,000,000 in the Q4, dollars 25,000,000 coming in December, dollars 25,000,000,000 in December. Dollars 50,000,000,000 is more than we accumulated in all of 2011 coming in a single quarter.
It's just unbelievable. As you think about the growth here, we see new RAs and existing RAs. This has been a consistent story. I've told it to you for a long time. Think about it sort of as the 80 20 rule, 80% comes from the Bison's growing successfully and accumulating more assets in the marketplace, taking it from those traditional models and about 20% continues to be those corner office brokers.
A little bit different this year, I'll show you on Slide number 2 here in the middle is the fact that we had more teams, 306 and the average size of those teams is smaller. So I have 2 earning assumptions. I'm not sure they're fact based yet. But one is the fact, obviously, in our joining with TD Ameritrade, we have decided that all new relationships will come to the Schwab platform, so we wouldn't have to transition twice, seems like a smart idea. And so we're seeing more of the relationships that may have considered TD originally coming to us directly.
But I'm also as an assumption, coming to believe that only that ecosystem, technology, capability that's been building up in the marketplace it's allowing firms to come out sooner. I think to the detriment of some of those, what I used to call halfway houses of independent broker dealers, because they don't have to stop there to get bigger before they can come out and take the leap into the fully independent space to the point where we're now, as you think about it in size, and I think Stacy even mentioned this as well, we're about half of the firm's assets and a quarter of the revenues. And I mentioned that specifically onethree of the revenues, because I mentioned specifically because the importance of this business to our company is unprecedented in the industry. This is a core business for us. And I look around and I look at some of the providers in the custodial space and try and think where is this a core business elsewhere?
Where is this a number 1 and number 2 or number 3 business? And I find nobody out there. This is a and I want to participate for many other firms. For us, this is core, and it's incredibly important as we go forward. And why?
Well, take a look at the next slide. It's amazing. It's amazing for me. And I apologize for my emotion. I've been around this thing for 20 years.
And I will tell you, when this started and the movements we were seeing, they were counted in 100 of 1,000,000. Ultimately, they started becoming counted in 1,000,000,000. We're now at 3,100,000,000,000,000 as you think about it in assets, 13,000 combined accounts, just an unbelievable amount of growth that we've seen and successfully seen. I say this to many forums, so I'm going to say it to you. I believe that TD was one of our biggest competitors in the marketplace because there's seriousness around this space.
And that's why I'm so glad to be coming together with them. And I will tell you that was when we did the deal. Now I've spent more time with all of their people. I've looked at what they do. We've looked in great detail at how they've handled their clients, their technologies and they see so many compliments between us.
Again, sometimes it gets written that we didn't have an interest in the small client. Truth is, we had a great interest in the small client. We are there for every size client and we'll continue to be. We're not going to tell someone when they're successful because they've hit a certain number. This is their life's work.
And if they're serious about their business, so are we. And so we'll be in the marketplace for everyone and we'll do it in a way that serves them on their terms. People like to talk about size of advisors. I like to talk more about need of advisors. Small advisors have different needs.
Sometimes those are needs that are more complex around things like regulation, oversight, operations, larger clients may have more transactional needs. You just have you need to handle those kinds of models somewhat differently. And so I think it's important for us to segment in ways that are smart for advisors in ways that address what their needs and capabilities will be in the future. And that will help us continue, I think, to differentiate ourselves on a going forward basis. And if you look at the mix of the pie chart, you can see that we have maybe only 15% or 20% overlap in clients, but almost 50% of the assets accounted for in those overlapping clients are ones that we see as joint relationships.
And so terms of creative planning, Edelman Financial Engines who actually just now reached the deal with us for a long term custody of relationship for both aspects of the business, the TD piece and the Schwab piece together on the Schwab platform. I'm very, very excited about that. We talked to them for a very long time to make sure it was going to be mutually beneficial for all of us. And we'll have many more of those conversations, I'm sure, on some of those unique assets. But going forward, let me project a little into the future.
So, yeah, you have something to hold me accountable for next year when we talk about this. We need to build the combined firm of the future. That is our most important boulder. That's the key level thing that we can be doing and to deliver on the promises. You've heard a couple of people talk to this volume has been unbelievable in the marketplace.
That's good. The bad part is we haven't quite lived up to what we want to on our service promises. And so we're making sure that we're growing fast, we're hiring well into it, we're creating technologies that will create a difference and making sure that we can get the best possible talent into the space, both in our firms and recruitment for our advisors. I kicked off yet again the 8th annual executive leadership program with the next generation of leaders that we will help to train on corporate governance and ownership and entrepreneurialism and balance sheet management into the future to help them run their firms of the future. And I will tell you, 8 years running now, we have 36, I believe, this year in the program, graduated the other class, the other class that just left us at 34.
These are opportunities for us to continue to get to know that next generation of growth and to make sure that we're getting their ideas on what's going to be important, so we can build our strategies around that. I've often said to all of you, I'm not the smartest fan in the world, but I know how to listen to advisors and see their needs and meet them on their terms and find the right places for us to do. So in detail, we're going to welcome the TD Ameritrade clients to Schwab. I always say, I hate this slide when we say welcome, because we already did. One of the advantages of this virtual world is we had TD Ameritrade Advisors at our Impact Conference, just weeks after the final announcement and final approval of the deal, because we could, because it was virtual and they came and they enjoyed it and they got to meet people, but we didn't yet quite get the opportunity to make them part of the community where they get to interact with each other, which is the most valuable thing we can do.
Building long term leverage for our clients and their operating, we share the same goal. We need to scale. We need to be efficient together. The economics in this industry are not going to get wider, they're only going to get tighter. And so more assets need to be served more efficiently with more capabilities with similar cost structures.
So it's really important that we continue to go there and developing differential offers for the future to drive outside economics, both for the clients and for ourselves and delivering on that promise of world class service, probably most important to all of us. So we will continue to move forward aggressively in those ways and always with the face of the advisor at the forefront. It's our pledge, right? We want to put them out in front of clients. We want to make sure they're more and more well known in the industry as an alternative for investors.
So with that, I think I've run out of time, Jeff. I want to turn to you and maybe get to the fun part of the questions.
Sure thing. We always have plenty of extra time for you, Bernie. So no worries at all. But there is a growing queue of questions here. So let's go ahead and dive in.
Let's first question from Chris Allen at Compass Point. Could you talk a little bit about what you're seeing that's driving some of the Schwab's share gains from competitors in the RA custody space?
Advisors, there's a couple of things I would mention and I'd say advisors always reward capability, and they know they want to be in the next place, not the place that they're in. And so they see, I think, our prowess in being able to build a combined platform with the best capabilities of both and driving aggressively forward into new models in the future. I think that's probably one of the biggest driving forces that I see. The other is maybe a little bit of an assumption. I think advisors too are recognizing that consolidation of custodians is an efficient way for them to get where they want to.
And if they were the biggest and they were the best and it's a safe brand for them to be with, then they can create back office efficiencies for themselves and scale a little bit more as well.
Great. Thank you. Next question from Patrick O'Shaughnessy at Raymond James. Keep in mind that we're a few months in past the close and early days of integration. But what have you learned to date in talking with the REAs and advisors about their feelings or desires towards multiple consortia relationships versus consolidating those relationships over time?
I'd say early days, my time has been dominated by talking with advisors at TD specifically, but in joint forums as well. In fact, next month, we have our advisory board, which we run twice a year, and we will have a combined group of TD and Schwab advisory board members in talking about that. And what I'm hearing is the fact that they are appreciating that we care so deeply about this space and that we're open and transparent in our commitments. They care that we came out early and said we're here for all size advisors. They care that we came out early and said we're not going to offer or we enforce custody fees, but we're going to meet the key economic concepts of advisors where we can both be mutually beneficial on that.
And they really appreciate that clarity in what we're doing and transparency of what we're doing. So very good conversations. I will tell you, I've had more conversations about clients wanting to come to us sooner than 18 to 36 months than I have about those looking to find an alternative custodian.
Great. Thank you. And then probably maybe a natural follow on here from Dan Fannon at Jefferies. So, it's been a great opportunity to highlight a lot of the positives and future opportunities of Schwab and TD institution coming together. Any notable pain points or potential frictions that you've seen or that you're keeping top of mind?
Yes, I mean, there's some significant change that's going to happen, right? And regardless, we've made a decision to use Schwab Advisory Center as the platform, the foundation for our future technology. To that, we will be adding great capabilities and trading capabilities like ThinkPipes and Meta Rebow, but it is going to be a change in the back offices of advisors, right? And we're going to have to build training programs and work very closely with them to make sure that this can be as seamless as possible. There's been a lot of conversation about a paperless transition and not having to get client signatures.
We will certainly ensure that in every way that we can, but it's still going to mean that there's a workflow change. And so creating those efficiencies are going to be a bit of a headwind at the start, but I think a bit of an opportunity longer term. As you might suspect, just to further answer, as you might suspect, we found advantages in the TD platform that we didn't have. We found that we have advantages on our platform that they didn't have. The idea of combining them and trying to take that best in class, it's really opportunistic.
Next question from Richard Repetto at Piper Sandler. Obviously, TD had some very strong momentum and net new asset growth over the historical period ahead of the transaction. What are some of the factors that you think led to that growth and what have you observed now post completion of the deal?
I think TD had done a fantastic job at serving their clients, and I think they were world class in how they did it. And I think our sales teams did a world class job at taking small differentiations between our two models and accentuating it. I think it was important for clients to realize and which is why I put that pledge out towards the end of last year of who we were, because I couldn't talk to the clients directly. I think as they're learning who we are, I think there's a commonality of firms here as to the cultures are quite similar. I've known Tom Nally and his team for years.
John Tobar has now joined my leadership team. And I think we're all starting to see that together we can create a big difference here. And I think that's getting to the advisors as well. I think they're starting to appreciate it. Advisors are a community, right?
And as they talk to each other through study groups and come together in that community, they share ideas and they share thoughts on what's going on. And I think that's what we're trying to create is to that viral nature of who we are, what we stand for and the ability and the prowess that we can potentially bring to this market. It's a very, very competitive marketplace. When I talk about our direct competitors with Pershing or Fidelity, you introduced Morgan Stanley, you introduced Goldman Sachs, you introduced this preponderance of third party money that's coming in capital and private equity. This is going to continue to evolve.
I know as I joked before that the TAMs and others wouldn't stay in their lane. We're not going to stay in our lane either. We're going to keep expanding this competition question. Advisors love it. They love it because they think you're the best.
In many cases, they are in their local communities. And the competition simply makes them hungrier and better just as we've done on a fair level.
Great. Thanks, Bernie. And maybe as a follow-up question from Chris Scheller, William Blair. Could you maybe expand a bit further about the evolution of the platform and including maybe some comments around the TAMP space and opportunities to work more closely with those firms?
Yes, I think it's opportunities. We've always worked very, very closely with temps. And as I said, I think we have some opportunity. You heard Rick starting to allude to it through 3rd parties, I think our managed account platforms. Do you know how hard it is to build an open architecture platform?
How many years it's taken us to build this open architecture platform to get agreements with everybody in the marketplace to offer that opportunity. And again, I highlight to you, advisors typically go into independence, not because they necessarily want the better economics, which there are by starting their own terms, what they want is the choice for their clients. And so I think working with open architecture, with third parties, having proprietary products on the shelf as well and things that we can provide are really important. If you think about it, one could call us an operational temp if you wanted to, right, because we do a lot of the servicing for advisors currently in the back office. And so I think we're already in that space.
And as I said, everybody's going to move a little bit into each other's lanes and try and create the best capability they can to serve the clients. We're all about differentiation as advisors are in their communities. Whoever can do the best and serve the most, they're going to be the winners in the future.
Great. Thank you. Thank you for that, Marni. You alluded to this and switching lanes a bit here, not to use your own words, about just kind of some of the service aspects, especially under the recent volumes. Could you talk a bit more about how Schwab is maintaining and investing to keep the quality and availability of service as we work through both recent trends as well as the largest integration of the 2 TD and Schwab custody platforms?
And that question is from Brian Hawken at UBS.
I think as you all know, really what we're encountering now is not around the integration, it's purely around the volume of the marketplace and some of the volatility that we've seen in the marketplace, but that's not unexpected. We know that our technologies and some of the app modifications that technologies we'll bring to bear are going to help us scale more efficiently into these in app like Black Swan events, but into these periods of time when we see this extreme volatility. But people are really important too and we're hiring into people into this. We're certainly leveraging the best talent of both firms. One of the things here is that we're bringing, I mentioned John Tovar who runs much of our, but he runs our broker dealer quite honestly now for the advisor business, Silver at TD, being on that leadership team, great talent, somebody from the future.
There's many, many more that we are going to make sure we're incorporating. So we have a ready pool of talent in effect that we can tap into, which I'm excited about continuing to find opportunities on the combined platforms for us. So again, with synergies in mind and opportunities around efficiency in mind, I think we have a pool to actually attract and continue to keep the culture of service that we've wanted to have along with technologies, So relationship plus technology. Got it. I've not talked to an advisor yet who isn't experiencing the same kind of rush in their back offices in their operational flow.
They've had tremendous success as I showed you by the numbers and the volume is a bit overwhelming for them as well.
Sure. And so next question probably from Michael Carrier at Bank of America. As you're having those conversations with RAs and given the trends within the industry, how much fee pressure or breadth of service offering are what are you hearing from them on those fronts?
It's widespread. Certainly, their fees have not necessarily come under I think the average last we checked was about 76 basis points on average, but they have added so many more capabilities to their models. So their margins have significantly changed, hence the need for scale, the need for efficiency. Obviously, we've removed some of the economic friction points around things like transactions. They're appreciative to the model and how we earn our money, how we monetize our model and the respectful of that.
And so we talk often about how we can continue to be in that synergistic relationship. I know that when it comes to things like custodial fees, which others in the marketplace have alluded to, that is not a model that they embrace. It's not meeting them on their on the middle ground. It's not that they don't want to have good mutually beneficial economics. They want to do it a little bit more on the terms that they can help to support in terms quite honestly that their clients are more aware of.
And so I think we're going to continue, obviously, this is the delta factor. We're going to continue to see downward price pressure. We're, I don't know, you guys know better than I do. We're 15 OCA business or so. We carry maybe A Boca or Eoca of expense that comes along with that.
My mission here is making sure we can continue to be additive to the revenue side and to really manage efficiently the expense side and keep a healthy spread there. Walt talked a little bit earlier before, we've had great success around things like placed asset lines and the liability side of the balance sheet. I think there's a lot more potential to be tapped there. And also it helps to make advisors even more competitive in the marketplace. So it's additive and capability, it should be additive to economics as well.
Great. And along those same lines, another question from Patrick O'Shaughnessy, Raymond James. With, let's say, the evolution either with Fintechs or certain consolidators having, say, newer or evolved cash management solutions. What are you seeing in terms of cash trends or product demands around cash utilization for RIAs? Well, I think RIAs are looking always for the return for their client and trying to
make sure they're effectively putting money to work in the best possible ways. So I think we've seen more investment happening into some product solutions, more the ultra short type solutions, I think that will continue. I think the cash and the convenience of having sweep opportunity far outweighs anything where they'll think about creating something where the cash has to be a way. And I also think that they recognize that it is part of that mutually beneficial economic relationship that we have in monetizing. And I'm not sure they're anxious to disrupt that by any means.
So having the bank is a big differentiator for us, I will tell you, in this marketplace and our ability to compete in the marketplace.
Great. Thanks, Bernie. And probably looking at the time, maybe time for one final question here from Chris Harris at Wells Fargo. Obviously, there's been a lot of emphasis and discussion around the impacts of the recent COVID or current ongoing COVID pandemic and its effect on the retail side of the business. Maybe take a little time providing some perspective on the impacts to AS, particularly growth and maybe advisor risk tolerance or drive towards independence in this kind of pandemic world?
Yes, we clearly that's a great question. I thought it might come up, but we clearly sort of slowdown towards the early parts of the quarantine and early in the pandemic. I think what we saw in the Q4 with the outsized number of $50,000,000,000 in the 4th quarter was that pent up demand coming to market. People realized that this was not a weighted out type of scenario. Advisors are inherently aggressive.
And so we're seeing their growth rate coming into the space larger, as I showed you on the chart before, more teams coming. We're seeing I can't talk about next year, but I'm very pleased the way January has started. I'll just say it that way. And so I think we're going to see this continuing trend of advisors winning in the marketplace. Certainly, they have consolidated more assets with their clients.
Again, Walt said it well, people want a plan. They want something that's personalized and they want someone who can help them guide through that. There's a little less this is an observation. There's a little less handholding through this period of time and some of the volatility we've seen and we saw it back in 2,008 and 2,009. And there was a lot more business development that was happening during that period, because their clients were in good places and they weren't needing to check-in quite as much as they did back in those periods.
Although, I never thought I'd have this conversation with advisors when many of them said to me they were worried about the winter coming. And I said, worried about the winter coming this year, because we right now we meet on the park benches and picnic tables. And when it gets cold in our area of the country, we can't go back inside. So, it's certainly a different way of being. Most of them are at home as we are.
Great. Well, thank you so much for your time today, Bernie. I appreciate the comments and taking the Q and A from the group.
Fabulous questions. Thank you. Thank you, Jeff.
Thank you. Well, everyone, we are going to take our last break of the day. It's going to be much shorter one, probably 3 to 5 minutes. Once again, Mr. Fowler will bring us back from break, followed by our last session from Mr.
Peter Crawford.
All right.
I am back for the last time as promisedthreatened. So we are about to embark on the last session of the day. Peter's queued up and ready to go to take us through closing. So Peter will do prepared remarks, Q and A, and then he will wrap up the day for us altogether. So with that, Mr.
Crawford, take it away.
All right. Well, thank you very much, Rich, and thank you all for hanging in there on this multi hour WebEx. I know I speak for the entire team when I say we're all looking forward to hopefully seeing you in person next year. It's a lot more enjoyable to do this when you're staring at an audience, a live audience versus staring into a computer screen.
Over the last 3
or 4 hours, you've heard from my colleagues about the strong momentum we have in the marketplace, about the progress we're making with the TD Ameritrade integration and our confidence in on the significant opportunities delivering on the significant opportunities that the combination presents. You also heard us talk about the challenges we have faced and how we're we've sought to overcome them and about the exciting initiatives that are underway to add to our scale, to drive greater efficiency, to launch new solutions, asset management and otherwise, to our clients and to create more of a differentiated experience for key segments of our client base. In my time today, I'll do my best to recap an extraordinary year last year that presented challenges for our business, for our employees, for our clients and frankly for the country and for the world. It was also a year in which we were able to meet those challenges and push through the difficulties and produce strong operating and financial performance, even as we significantly advanced our strategic agenda. I'll also talk about why we're really excited about 2021 and beyond.
Our financial story this year is a bit more complicated than the past as it's influenced to a larger extent on one's perspective on the trajectory of this unprecedented level of client engagement that we're seeing, including if and when, as Walt noted in his portion, the trading levels moderate to a certain extent. This uncertainty will influence both the revenue and the expense side of the equation, which makes it frankly a bit more challenging to provide as clear of an outlook as we have in the past. But I think what you'll see when you look past some of those dynamics is this is a company that's performing exceptionally well and is a resilient and all weather business model and is well positioned to capitalize on the opportunities in front of us, all of which it makes us really, really confident and optimistic as we look to the future. So, let's talk about why we're so proud of our 2020 results considering the circumstances. 1 year ago at this meeting, we outlined a scenario, which assumed mostly a status quo environment.
And I think of all the ways that one could describe 2020, I don't think status quo would be at the top of the list. With the onset of the pandemic leading to a sharp reduction in interest rates, nearly as dramatic, although it turned out short lived drop in the equity markets, a surge in volatility and a flight to cash, we updated that scenario at our spring business update. And that assumed flat rates from where we were at that point in time, modest market appreciation from where we were then as well, continued elevated trading, although below the levels we saw in March, and a continued increase in client cash on the balance sheet, given the expected allocation changes from money funds to Bank Sweep, given the lack of yield advantage in having our clients have their cash in money funds. Now, the rest of the year brought a mix of tailwinds and one very large headwind. The markets looked beyond the raging pandemic and rebounded very sharply, reaching of course record levels at the end of the year.
And while short term rates remained anchored near 0, longer term rates declined due to economic worries and the influence of the Fed that it had been dramatically expanding its balance sheet. Our trading levels continue to be quite high, actually increased throughout the year, even excluding the impact of adding TD Ameritrade in the 4th quarter. And our balance sheet, our balance sheet grew more quickly than expected as our clients not only invested not only retreated from money funds and put that money in the bank suite, which we expected, as I mentioned, but they also actually retreated from the equity markets up until November December, despite the strong market rally. Our financial performance for the year reflected those environmental dynamics as well as our exceptional Q4, which of course included TD Ameritrade. Shortly after that acquisition closed in October, at our October business update, we shared an update outlook for the quarter and therefore for the year.
Now, our revenue exceeded those expectations by a wide margin, due in large part to a surge in trading, margin lending and securities lending to record levels. Despite an increase in some volume related expenses, we maintained overall adjusted total expenses within the range we communicated. And as a reminder, adjusted total expenses exclude acquisition and integration costs as well as the amortization of acquired intangibles, which is created via purchase accounting. And that combination produced a full year adjusted pretax margin of over 42%, $2.12 of GAAP EPS and $2.45 of adjusted non GAAP EPS. That was the income statement.
Let's talk about the balance sheet. Our balance sheet grew by 87% during the year due to strong growth in client cash on the balance sheet, which translated into a whopping 67% growth in bank deposits. It also was influenced by the creation of over $20,000,000,000 of goodwill and acquired intangibles via our TD Ameritrade and the other acquisitions. And also consolidating of course TD Ameritrade's large margin book and other assets. Margin loans reached over 60 $4,000,000,000 by the end of the year and now account for over 10% of our interest earning assets.
We issued $5,000,000,000 of preferred equity support balance sheet growth and over $3,000,000,000 of debt to augment our liquidity position. Even so, our Tier 1 leverage ratio declined during the year to 6.3%, below our operating objective of 6.75 percent to 7 percent, but still well above the regulatory minimum. Our success in 2020 puts us in a very strong position as we enter 2021. We always have a number of external, largely uncontrollable and frankly often unpredictable dynamics, which influenced our financial performance and make it challenging to develop and communicate one specific outlook for the year. We typically talk about these as market performance, interest rates, trading behavior, client cash allocations, those are certainly the ones we talk about a lot.
But there are 2 factors this year that make the task of sharing a financial outlook especially difficult. First, the combination with TD Ameritrade has changed our revenue model. With trading accounting for 20% of our 4th quarter revenue and margin lendings and securities lending together more than 10%, we now have roughly a third of our revenue driven by to varying extent by client engagement and training activity. Now, I want to emphasize that we view this development as a good thing. It diversifies our revenue mix.
And it also aligns a greater portion of our revenue with the things that frankly influence more of our cost structure. For example, trades and calls, those are quite correlated. But it does create somewhat more unpredictability around forecasting revenue. There's no forward curve on objective forward curve on what the future hold for trading. And what we can see in the equity markets as we are seeing today, day to day changes of 1% or 2%.
Securities lending, we can see day to day changes that are 20%, 50%, 70% from one day to the next. So, the second factor that makes it a little bit more challenging this year is that the underlying drivers of these sources of revenue I just mentioned, so daily average trades and margin balances as an example, have reached record levels. And I doubt anyone can say definitively what the path will look like from here. Given that we're in uncharted waters and with both the activity and the nature of the ongoing pandemic. And therefore, there's a wider range possibilities for what the future might look like.
Now, those of you who attended the business updates over the years know that we typically share an outlook for the year. It's predicated on a couple of scenarios based off of how various usually macroeconomic assumptions will unfold or might unfold. And for each scenario, we then share our expectations for the potential financial performance that would follow. The assumptions help frame a range around what we consider a likely set of outcomes. Given the uncertainties I mentioned earlier and the difficulty, if not the impossibility for anyone to be able to predict how the dynamics will unfold this year, we're taking a little bit of different approach.
And rather than communicating a couple of scenarios, we're instead providing 3, what I'll call for lack of mathematical illustrations. The objective, however, is the same, which is to help you understand potential financial performance. Each of these illustrations is based off a set of pretty typical underlying assumptions. Average market appreciation from where we started the year, long term rates that follow the forward curve from early January, And expectation that we begin drawing down balances from the IDA starting July 1st. And CapEx spending that is roughly 6% to 7% of revenue, so a similar level as in 2020, at least in percentage terms.
Now, with these illustrations, we choose to flex 3 things across them trading, margin balances and organic balance sheet growth. And organic balance sheet growth being the growth you see in the balance sheet excluding the transfers that we make happen via the IDA or from the IDA. And the first of these illustrations assumes a 20% increase in daily average trades from the Q4 average and a 10% increase in balance sheet cash excluding the IDA transfers, as I just mentioned, and margin balances from our end of Q4 level. The second, since all those metrics are flat to Q4. And the third, you may have guessed, assumes the inverse, a 20% decline in daily average trades from Q4 and a 10% decrease in balance sheet cash and margin balances from the twelvethirty one level.
Each of these three illustrations would produce different levels of course of revenue growth relative to our annualized Q4 revenue. Let me say that again, because that's really, really important. Just as we're comparing the metrics to Q4, we're also comparing the financial performance to Q4 as well. And you can see that depending on how the year unfolds, we can see revenue growth of 5% to 7% in the first illustration to a revenue decline of 6% to 8% in the 3rd illustration, again relative to where we were in Q4. And then adjusted total expenses would also vary.
There are a number of mostly third party expenses that are based off of activity levels. And that will produce an adjusted pretax margin of at least 40%. Now, again, I know you all have gone to this business up to many, many years, many of you. So, you might be tempted to pick the midpoint as some indication of expectations. Don't do it.
That would just be flat out wrong. This is literally just illustrative math. But, these illustrations demonstrate tremendous operating leverage we have in our business. Due to the nature of the drivers being flexed, the implied profit margin on the incremental growth from the 3rd scenario to the 2nd scenario to the first illustration is 80% or more. So, now we show the headline, let's go back and assemble the individual pieces.
And we'll start with NIM, our net interest margin. Those mathematical illustrations that I shared would result in a net interest margin that trends into the 140s through the year. Now, I want to unpack that a bit and talk about the 4 of the biggest factors that will influence NIM prepayment speeds, investment yields, the growth and mix of interest earning assets and the volume of securities lending. Let's start with prepayment speeds. When we receive paydowns on the mortgage backed securities that we own, it triggers incremental premium amortization, which negatively impacts our net interest margin.
This is normal. This is we anticipate this when we buy these securities. In the Q1 of 2020, it amounted to about a 30 basis point drag on the bank on the investment portfolio yield in the bank investment portfolio. And we've done a lot to remove convexity and prepayment risk from our investment portfolio, but with a dramatic drop in long term rates to record low levels and the huge refinancing wave we're experiencing across the industry, an increase of prepayment speeds is just a fact of life. And so, we saw the impact on the portfolio yield increased by 30 basis points, reached 60 basis points by the 4th quarter.
And that translated to an incremental 20 basis point of NIM drag from Q1 to Q4. The good news is that this impact is transient. And while we certainly don't know and we don't expect the refinancing wave to slow for at least the next couple of quarters, as it does and prepayments slow, the removal of that drag will actually lift NIM even in the absence of interest rate increases. Now, another factor that weighed on NIM in 2020 was the decrease in reinvestment rates, which was a function of lower benchmark rates and a compression of credit spreads as the Fed has been very active in buying some of the sectors we target too, as Walt mentioned in his comments upfront. Now, as we receive pay downs and invest new client cash, we're reinvesting at rates below our overall portfolio yield, which of course reduces our net interest margin.
We've seen tremendous growth in our interest earning assets. And with the acquisition, we've also seen a change in the mix of those interest earning assets. Margin loans were 12% of our interest earning assets in the 4th quarter. And given the higher yields on those loans, the revenue we derived accounted for over 20% of our net interest revenue. Bank loans, bank loans grew by 31% last year, and those also offer an attractive spread relative to our investment portfolio.
So, depending on how those two assets continue to grow relative to the growth of Bank Sweep, it will have an impact of course on our net interest margin and our net interest revenue. And finally, securities lending. And not something I talk about regularly or I have talked about regularly on these updates, but likely we'll be doing so more so in the future. You likely noted in our Q4 disclosures that we're now breaking out securities lending into its own line item. And that's because it accounted for over 10% of our net interest revenue in the 4th quarter and contributed 17 basis points towards our net interest margin.
Now, we think there's a lot of opportunity long term to capitalize on the combined strength of TD Ameritrade and Schwab in our securities lending operations. And we've been very, very pleased with the outcome of our fully paid program on the Schwab side, the unabation that's been introduced. We see a lot of opportunity there. But in the near term, it's frankly harder to gauge the market's demand for hard to borrow stocks. So, that will bear watching throughout the year.
Now, the amended IDA agreement we signed with TD Bank allows us to transfer up to $10,000,000,000 of balances from the IDA over to our balance sheet per year. But in the 1st year, as Joe mentioned in his comments, that amount is adjusted upwards or downwards based off of the growth of IDA balances between the closing date and June 30th. And if balances were to remain the same as they are today, which of course will likely will change between now June 30th, but if they remain the same as where they are today, that would mean we can actually transfer upwards of $20,000,000,000 of balances to our balance sheet and pick up a positive spread as we do so.
And it doesn't mean we're going
to do it all at once. And of course, we need to support these transfers with capital. But that is something to expect in the most likely in the second half of the year as well. Now, you've seen the mathematical illustrations, but I also want to, as we always do, I want to give you the specific sensitivities to really aid you in constructing your own scenarios and adjusting the mathematical illustrations based off of what you think is going to happen over the course of the year. And then, you can adjust those over time as you see how the year unfolds.
Okay. So, that was the revenue story. Let's talk about expenses. The part of the P and L where we have more control and more visibility, that was I'll discuss in a minute, it's still influenced by client behavior. Now, with the TD Ameritrade acquisition closed in the Q4, the year over year comparisons to Schwab's standalone expenses for full year 2020 just are not as meaningful.
And so, we're instead relating our anticipated 2021 expenses to our Q4 spending levels, just as we did in the illustrations I talked about earlier. Now, on this time, I'm going to share what the overall number could be for 2021, but I actually want to walk you through how we get there piece by piece. So, I'm going to leave you in suspense for just a little bit longer. So, our adjusted expenses in the quarter in the 4th quarter were about almost $2,300,000,000 And simply multiplying that figure by 4 gets us to $9,100,000,000 of annualized expenses. But that would be overly simplistic as a jumping off point for a couple of reasons.
First, there are some true ups we want to do to create a more appropriate jumping off point. The biggest of these is the 5 calendar days of expenses that TD Ameritrade incurred in October prior to the acquisition, which were therefore not reflected in our results. Also included in there are some adjustments we made to align the TD Ameritrade and Schwab accounting for pass through fees as of January 1st, which has the impact of increasing both revenue and expense. No bottom line impact, but it grosses up both revenue and expense to a certain degree. And second is that Q4 tends to be a bit lighter on the expense front due to seasonal factors, especially relative to Q1, which is heavier with equity grants, HSA contributions, payroll taxes and so forth.
Now, together, those items would add roughly 3 percentage points of growth off that Q4 base, even with no other expense growth in our business. Now, we've talked repeatedly about how we expect normal or core expense growth through the cycle to be mid single digits, assuming a continuation of our recent organic growth trends. For 2021, we expect that, for lack of better term, fundamental expense growth to be roughly 2 to 4 percentage points on top of the Q4 base. This includes things like merit increases, typical third party expense increases, some incremental staffing associated with just normal growth of our client base. More clients in a normal environment, more clients means more phone calls, means more people needing to answer those phones.
But as Walt discussed earlier, this past year has been anything but normal. Our hiring frankly hasn't been able to keep pace with the increased client engagement we've seen. And so, we have some catching up to do in order to restore the service levels and support our growing client base in the way that we and they expect to be served.
Now, this is the item in the waterfall that is
the most variable and uncertain, depending as it does on what happens with client engagement. If we use the range of mathematical illustrations I shared a moment ago as a reference point, that component could account for a further roughly 1 percentage points to 4 percentage points of expense growth beyond the Q4 levels. And in the thought illustration, it would imply some level of expense increase just to catch up to level engagement we've been seeing. But, if we see client engagement drop later this year or next, those are expenses we could actually reduce by harvesting attrition or reducing capacity on demand and other things. Important point is that barring another increase in client engagement, increase in trading volumes from here or increase in phone calls from where we were in Q4, we wouldn't expect this component to contribute to further growth in expenses in future years.
And then finally, we'd expect to realize a further 5% to 6% reduction in expenses beyond the amount we achieved in the Q4 via the expense synergies that Joe alluded to. So, you put all that together and depending on which of those mathematical illustrations you track, we'd expect adjusted expense growth to fall out in the 1% to 4% range above our annualized Q4 spending level. With the level of client engagement, we see throughout the year being the primary driver of that variability. So, turning to capital. Clearly, maintaining sufficient capital is a key enabler of our long term growth.
The preferred issuance in the Q4 combined with the capital accretion associated with the TD Ameritrade acquisition boosted our Tier 1 leverage ratio to 6.3%. Our first objective is to support organic deposit growth and the expected transfers from the IDA. We'd also like to boost our consolidated ratio back to the upper 6s or 7%, and we'd expect that to happen over time. Now, with all the moving pieces this year, we thought it'd be helpful to remind everyone about our long term financial formula. I know we've talked about it probably, I guess, every other year maybe in this business update.
Assuming and
just a refresher,
assuming a continuation of 5% to 7% organic growth and average market appreciation, we expect client asset growth of high single digits. Through our diversified revenue model and ongoing win win monetization efforts, we should be able to convert that high single digit growth in client assets into a comparable level of revenue growth or even a bit better. And then by maintaining long term expense growth in the mid single digit range, we should be able to expand margins. And through ongoing capital return, deliver even stronger growth in earnings per share. As we proceed through the integration, the individual elements may play out a bit differently though.
For example, expense growth may be a bit lower as we harness cost synergies. Revenue growth, well, that may be higher or lower than an asset growth depending on the path of interest rates, the amount of transfers we take, where we pick up spread from the IDA, the pace in which we harness the revenue synergies that we talked about and our other monetization opportunities. And capital return, no capital return may be a bit lower as we experience higher balance sheet growth via the IDA transfers and need capital to support that growth. We think the formula is every bit as relevant today as it was years ago. And so, a long term equation that delivers for our stockholders and doesn't rely on increases in interest rates.
So, let me close with just a few thoughts. You've heard a lot today about the successes we're enjoying marketplace, advancing our strategic agenda, about the challenges we face throughout our business, which I'd be very, very candid and humble in describing those challenges. And also how we're responding to the unusual and rapidly changing environment we find ourselves in. We are in many ways in uncharted territory here. But despite all of that, despite all this changing around us, our strategy has not changed, because it's working and it's as relevant as ever.
And our value proposition, well, that's as compelling as ever. And so, you should see that our priorities moving forward are also quite consistent with what we've been focused on traditionally and what has made us successful for now for over 40 years, focusing on clients and winning in the marketplace, producing strong top line revenue growth in part through the women win win monetization and being disciplined in how we manage capital and expenses, so that we deliver for stockholders even as we deliver for clients. That's what you
come to expect from us
and that's what you can expect from us in the years ahead. So that, we turn it over to Jeff for some Q and A. Jeff?
As you would expect, you are always permanently one of our most favored attendees, so we are building a nice set of questions here for you. Let's start off with a question from Brian Bedell, Deutsche Bank, amongst others. Can you speak to any potential loss exposures that we might be seeing stemming from the recent volatility in the marketplace?
Yes. Thanks, Brian, for that question. So, I will say, our teams that manage that just do a really, really good job. And I won't say that we have had 0 losses. But if you think back to a couple of years ago, it was probably the 1st or Q2 of 2019 where we had some losses associated with a spike in the VIX.
The losses that we've experienced thus far are significantly lower than that. So, definitely not in any way material or I would say meaningful up to this point.
Great. Thanks, Peter. And maybe as a natural follow on, maybe could you share some color on our margin requirements like clearing organizations?
Yes, sure. So, maybe just backing up quickly for those who are less familiar with this. So, with the NSCC, DTCC, we have margin requirements, the cash that we need to deposit there. And those requirements are based off of primarily based off of the value of unsettled trades as well as volatility. And so, with the surge in trading and the spike in volatility last week, we did see a pretty dramatic increase in the margin requirements there.
Fortunately, we have a very robust liquidity stress testing program, just sort of the analog, if you will, to our capital stress testing program. And actually, the increase that we saw last week was actually smaller than what we planned for as part of that liquidity stress testing program. So, we had no issues whatsoever in meeting those obligations and actually have multiples of liquidity available to be able to meet that requirement.
Great. Thanks, Peter. I know you I believe you mentioned this, maybe you could just revisit what you're seeing in terms of the current reinvestment environment and how you see those
evolving? Sure. So, reinvestment rates, maybe break into pieces. So, on the floating rate side, we have seen reinvestment rates come down just a few basis points as a result of again continued Fed activity in some of the sectors that we target. On the fixed rate side, we've seen them increase by probably 10 basis points, I would say, over the last quarter or Higher benchmark rates, but somewhat the tightening of credit spreads.
Now, fortunately, we're as I think you know, we're investing the portfolio probably 85, 15 in terms of fixed and floating. So, we get more benefit from the 10 basis point increase in fixed rates that we lose on the slight decrease in some of those floating rates. And so the overall I would say, the overall reinvestment rates are now in the probably 95 to 110 basis point range. So, again, below our overall portfolio yield, but above where they were just 3 months ago.
Great. Thanks, Peter. And that question came from Michael Cypress at Morgan Stanley, among some others as well. Next question from Dan Fannon at Jefferies. During the presentation today and particularly in yours here, you highlighted the recent increase in client engagement and potentially trying to think about the persistence of that going forward in a post pandemic world.
How are you thinking about activity levels beyond just trading, particularly within like sec lending and margin balances?
Yes. Jan, it's a great question. I mean, that is sort of the $1,000,000,000 question, if you will. And I think that is the uncertainty around that, that makes us hesitant to do what we've done in previous years and say here are the here is the
outlook for the year,
here is a couple of different scenarios and we know you're going to mostly you're going to pick the midpoint of that. And that's why we've done all these mathematical illustrations because we don't know. Know. I don't think anyone really knows. What I will say is that for something like margin balances, we do tend to see those over time or a long enough period of time.
They tend to grow with total client assets. Now, they've as a percentage of total client assets, they do go up and down to a certain extent, but they grow over time at total client assets. So, we'd expect that through the cycle as total client assets grow, the margin balances will grow as well. And I'd say the same thing is true for securities lending. As our margin balances grow, we have more securities to lend and so one would expect that revenue to grow as well.
On securities lending, it's a little bit different because I would say there's still more that we can do to, I would say, expand the opportunity there. As an example, on the Schwab side, we've had a fully paid program for a little while now. That's not a capability that TD Ameritrade has had on the TD Ameritrade side. So, we think there's a real opportunity to make that available to the clients on the TD Ameritrade platform. We also believe that by bringing the 2 operations together, there is actually some revenue synergy that we can derive by combining the 2 books of business and harnessing that combined market presence to ensure we're getting the best rates on the securities that we're lending out.
Great, Peter. And maybe as a natural segue, a bit of a follow-up from Brennan Hawken at UBS. Could you just take just maybe a couple more seconds to dig in there on the sec lending business and explain maybe the mix between the hard to borrow or specials business and other parts of sec lending and kind of where the revenues drive from?
Well, I mean, I think, certainly the bigger portion of it is on the hard to borrow business. One of the key things that we've tried to do and the team has done a great job over the last few years is to automate more of the what I call sort of the lower yielding securities and the lending of those such that the and doing a lot of that just automatically kind of almost like straight through processing of lending those out. And that frees the team's time up to really focus on those hardest to borrow stocks and making sure that we're getting the best price on those and we're optimizing those appropriately with the core segregation engine.
Great. Thanks. Pivoting a little bit to the IDA opportunity, a question from Richard Repetto, Piper Sandler. Could you maybe revisit your expectations around the yield pickup when balances migrate from the IDA to Schwab's balance sheet?
Joe talked about this a little bit. So, the yield pickup today, I would say, is probably in the 60s range as we transfer some of those balances over to the Schwab Bank balance sheet. Now, that is historically lower than what we would have seen previously, but that's where we are at this point in time. We think again, over time, we think that will settle most likely in a range that is higher than that. And that's again, that's if it's in a fixed rate, if it's like for like, if you will, sort of like duration on the IDA versus a like duration security we'd be buying in the bank's investment portfolio.
Great. Thanks, Peter. Next question comes from Michael Carrier, Bank of America. As I think you touched on through portions of your section here, given, let's say, the increased flexibility or maybe uncertainty in some of the drivers around some of the revenue streams like trading margin, sec lending, how flexible is Schwab's expense trajectory related to those items, if we were to see maybe a meaningful change in recent from recent volumes and levels?
I think, it depends the short answer is it depends. It depends on what's driving that. If it's purely a function of environmental factors, let's say, that are outside of the Schwab ecosystem, interest rates going up or down, equity markets going up or down, but the level of client engagement is the same. Yes, there's some third party expenses that would reset, but we wouldn't be looking to pull back on our service levels or our technology spending or whatever, because that's our number one priority. Number one priority at any point in time is to make sure that we emerge from this period of time stronger than we went into it, that we're making the right investments and we're spending money on the right things to ensure the long term profitable growth of the business.
So, we're there for our clients 10, 20 years from now. That's our overarching priority. And so, if our clients are as engaged as they have been with us, with their investments, we don't do anything that's going to jeopardize that. And so, we wouldn't want to pull back. But now, of course, the flip side is, if we do see engagement drop, we see client stock call and we see them stop investing.
And then, I think as you've seen us in the past, it'd be prudent to pull back on some of those expenses. And as I mentioned, stopping the on the phones. There tends to we can potentially harvest attrition there to bring down those lines. We've done that in the past. There's capacity on demand that we could release if we're not seeing the same load on our system as we have in the past.
And there's a lot of as I mentioned, there's a lot of third party expenses that go up and down based off of different volumes, whether it's trading or asset values or whatnot. So again, that's where the flex would be. But, it really is about that level of client engagement and making sure we're continuing to support that client engagement through these times. We want to make sure we're there for them.
Got it. Thank you, Peter. Next question comes from Michael Cyprys at Morgan Stanley. Obviously, we have the smart coming up in the near future. But could you provide a high level or broad perspective around some of the account acquisition and N and A trends and maybe client allocation asset allocation decisions that we've seen so far this year?
Gosh, a preview of the smart,
I hesitate to do that. What I
would say is that, I think Stacy talked about this and Jonathan talked about this as well, is that typically what we see the investing category is a category where it can be a low engagement category. Particularly well. So, when
they're shopping around and saying, let
me look at who I let me engage my investments, let me look at which firm I want to go investments, let me look at which firm I want to go with. I'm actually experiencing this now, I experienced a difference or maybe I'm happy or unhappy or whatever, that's where you see that level of engagement and that's when we do well. And so, I don't think that this difference, what we're seeing right now is anything different from that standpoint than what we've seen in the past. When investors are engaged, Schwab and TD Ameritrade historically have both done
well. Great. Thanks, Peter.
I'll say, stay tuned for the SmartReport now.
Absolutely. A couple coming soon. Next question from Bill Katz at Citigroup. Peter, could you speak to the interplay between balance sheet growth and capital return and how you and the team are thinking about that?
Well, we think that capital return, we think longer term is a really important part of our financial story, as I talked about it a few minutes ago. And we think that will return to being an important part of the financial formula. Our number one priority from a capital standpoint, as I mentioned, is supporting the growth of our client base and supporting the growth and that typically involves growing the balance sheet as well, because as clients come in, they bring a certain amount of cash and that grows the balance sheet. And so, we want to we don't want to do anything from a capital standpoint that would in any way get in the way of that. And so, you've seen our Tier 1 leverage ratio of 6.3% at the end of the year.
Operating objective historically has been 6.75% to 7%. I'm not going to say sit here and say we're absolutely not going to do any buybacks until we get that back to 6.75%. But I think it's reasonable to expect that we want to have more visibility into getting back to those levels before we most likely before we would be resuming that activity.
Perfect. Thank you, Peter. Maybe a related follow on here from Jeremy Campbell, Barclays. When you think about the Tier 1 leverage ratio, can you provide a little more color around how you might see that building going forward? Obviously, preferred has been a priority in the past.
Do you still see that as being a primary support of that going forward?
So I guess 2 parts of that question. So how do I see a building going forward? Hard to say. I don't mean to say it depends, but it does depend. It depends on the pace of organic capital formation and it depends on the growth of the balance sheet that we see, which is a function of the growth in the client base, as well as client's cash allocation decisions.
And of course around how much of that cash that you choose to keep on the balance sheet versus in other solutions like money funds or CDs and so forth. So, it really depends. In terms of the role of preferred, as you know, preferred has become an increasingly important part of our capital stack. And certainly, as we continue to grow capital organically, that creates incremental preferred capacity. I would say in addition to that, we are considering our limit on non common Tier 1 capital, our upper limit on that has been about 25%.
We are considering increasing that a bit, maybe to 30%, which will open up a bit more preferred capacity. But that's still a TBD. But I think regardless, I think preferred will be an important component of our capital stack going forward.
Thanks, Peter. Maybe a little bit of a longer term question here from Will Nance at Goldman Sachs. Looking out beyond 2021, is, we'll say, low to mid single digits still the appropriate longer term underlying growth rate for expenses?
Yes. At various points of time, I
think we've talked about low
to mid or we talked about mid. And I think the difference, I mean, we're parsing a couple of percentage points here or there. I think it absolutely. I guess the short answer is yes. I would certainly say we're very confident that mid single digit, if we're growing it organically at 10% per year as we have over the last 4 years, mid single digits, we think is a very appropriate pace at which to grow our expenses.
That implies some level of ongoing productivity in terms of cost per account, cost per dollar, etcetera. We certainly want to make sure that we're managing our expenses down. That expense on client assets is a key competitive advantage for us. We're very focused in making the investments to continue to drive that down. But we want to make sure we do that in a way that's good for clients.
And I think that's what makes me so excited about sort of work that Nish talked about earlier is the digital transformation that we've gone through is drives that cost down, contributes to limiting that expense growth in a normal environment, but does so in a way that's good for clients. And that's the key thing here. We don't want to just do it arbitrarily in a way that's not good for clients. But I certainly think that these are what we've talked about earlier, when I talked about that financial formula is a very reasonable expectation going forward.
Okay, great. Thanks, Peter. Pivoting back to the TBA transaction, Question from Richard Peto at Piper Sandler. Could you just clarify that the expectation for synergies that you expect to realize in the 1st 12 months following the close of the transaction that's I think what Joe alluded to and you mentioned as well that a 4th to a third of the $1,800,000,000 to $2,000,000 range in run rate synergies?
Sure. So that is still the expectation. I think that's very consistent with the numbers that we've already achieved in the Q4. We talked about I think previously $250,000,000 to $300,000,000 range on a run rate basis by the end of the Q4 and then the numbers I shared in my comments of that further 5% to 6% reduction or again realized reduction in 2021 relative to the Q4 run rate. So that's consistent with that expectation that we had set previously.
I think on the whole, the key thing you should certainly hear or be hearing about expense synergies is that we are very, very confident in hitting those numbers. We've I think we've clearly done a high diligence before we assume those in the model prior to signing the agreement to buy TD Ameritrade a few months ago. But now as we've dug into it and really developed detailed plans around how to hit those numbers and sign accountability how to hit those numbers, we think those are very, very achievable, so in the timeframe that we've talked about.
Great. Thanks, Peter. One follow-up for Mr. Repetto. When we think about the flex across some of these client activity driven metrics, such as trading margin, etcetera, how do you think about framing out the incremental margin on that activity?
Well, I guess, it depends. I mean, if you like to think about trading, even about the incremental margin on trading, it's upwards of 80% or more. And most of the expenses there are pass through fees, frankly, at this point, most certainly some technology capacity and so forth. But it's mostly the pass through fees. So, yes, so it's very, very those activity levels create very high variable margins.
And as we see those volumes increase, we should see a lot of that flow down to the bottom line as well.
Great. Thanks, Peter. And so, I think we're down to our last question of the day here for you. And this one comes from Patrick O'Shaughnessy at Raymond James. How are you thinking about the financial services price deflation impacting revenue growth going forward?
Has most of that already played out or what are your expectations going forward? Yes. So, it's
a great question. I mean, so price deflation in this industry is we're no stranger to that. We have been a driver of that in places, we have responded to that in places. And the money we've seen in investor dollars tend to go after work on price solutions. I'd say 2 things about that.
1 is in an environment like that, having a low cost structure, that expense on client assets I talked about is a big competitive advantage. Having the scale that we have is a big competitive advantage. And so, we're quite comfortable with that. And it's we certainly have seen a lot of that for our entire history. I'll make 2 other points.
One is a big area where that where we saw that historically of course was in commissions. And now that's with commissions at 0, that's basically off the table. And so now you're really looking at other areas that don't have nearly the same impact in terms of the bottom line or certainly don't have the same don't have grabbed the same attention as equity commissions or have for over 40 years. The final thing I would say is, yes, there is price. We have seen dollars grow towards ETFs, index funds and so forth.
We're also seeing price of business where there really is no price. There is no deflation. Advice fees, Bernie talked about this. The RIAs aren't seeing pricing pressure in terms of the fees that they charge and we're not necessarily seeing that in other parts of the business as well. And as much as we experienced some of the movement towards lower cost solutions in the asset management area, we also think there's a lot of these win win monetization opportunities to improve the revenue per client dollar, Having new solutions that come from Schwab versus 3rd parties and collecting more value chain there even as we bring lower cost solutions to our clients, that's an opportunity.
Making more clients, both Schwab and TD Ameritrade legacy clients aware of our advice capabilities, that's a big opportunity. So we think that can offset or more than offset some of the pricing pressure we may see in other parts of the asset management area.
Great. Thank you very much, Peter. So, I think we're out of time for the Q and A portion. So, I appreciate the thoughtful commentary and remarks as well as taking the questions from the audience. I'll turn it back to you for any closing remarks.
Well, first, I would just want to thank all of you. We know that this is a sitting in in a computer screen WebEx for 5 hours is a big investment. And as I say, I look forward to hopefully seeing a lot of you next year in person. These are clearly highly uncertain times and they've tested us. They've tested our people, they've tested our systems and our processes, they've tested our strategy.
And as well as we perform, there is no one here who is raising our hands and declaring victory. We recognize that there is a lot more work to do.
But at
the same time, I know I speak to the entire team when I say that we've never been more excited about the future or felt more confident about about the role that Schwab can play in helping investors. Thank you very much and we look forward to chatting with you again in April. Thanks very much.