Thank you. Well, thank you very much. That brought back quite a few memories, to say the least. I don't know who that old guy was in the chair, but he had a beautiful red tie on. I know that.
Well, welcome to our 31st meeting as a group of shareholders, 31 years later. It's incredible. And thank you for those on the website, who are watching us also today and people here present in the auditorium. Thank you for coming and spending a little bit of your time with us. And I am so happy to celebrate our 31st anniversary of being a public company.
I just have to say as an aside, I'm so proud to and also humbled by the fact that we've had such incredible growth over these last 31 years. Actually, the company went public when it was about 10 years old when we did go public. And this 40 some years has just been a remarkable thing. As I see around today, we had our Board meeting. It takes a big team, a bigger and bigger team.
But somehow, our magic, I think, is creating a team that can work together and solve issues for our clients and bring them financial help all the way along. And my belief has always been wonderful. You all think about your own personal health, but financial health is really fundamentally important to all of us in our society today. And we need more people looking after their own financial health because it's as we get more complicated, certainly with kinds of ways that we're expected to save enough money for our own personal retirements. That's one of the main goals that I personally am ambitious about in terms of trying to help people get there and have adequate sums to retire on, not knowing not even suspecting that they're going to live 15 or 20 years longer than ever anticipated.
So that's one of my big issues on my plate. Our meeting today, as always, is a chance for us as a group to show you what we're doing, what we have done and give you a little perspective on where we're going. And that we'll try to accomplish that today. We'll have a period of questions and answers. And we have a young man over there, I know has a question on his mind.
I think his name is Turbo Air. I think that's his nickname, something like that. Now what is it? Turbo? Okay.
You're going to be first up on that microphone, sir. He was here last year. You remember a wonderful young man, investing for his future for sure. We'll have the Q and A, as I said. And as always, our agenda is fairly straightforward.
We'll start off with David Garfield giving us the General Counsel's perspective. He'll cover the business agenda, including the number of proxies and the results of those. And we'll hear from Peter Crawford, our CFO, who was just coming on board last year and has done a fantastic job this last year as our CFO and doing a wonderful job. Peter, thank you. I'll talk about the results of 2017, 2017 and a little clue as to what's happening in 2018.
And this is a sneak preview of what that is. All the news is good today. So you can leave here, have a cookie or a coffee, leave here feeling really good. You made the right decision to come here to the right company. So after Peter's presentation, Walt will give us a CEO report.
He does a very thorough job. And if you do have questions, he and I will be together at the end to try to take on any questions you might have. Before I sit down and hear these presentations, I want to first acknowledge our Board of Directors, who are staying right up here in front. I want to call out their names. And as I call out your name, please stand up.
And so first, with John Adams. Thank you, John. Walt Bender, of course, Walt, Preston Butcher and I have a thing to say about Preston. Preston has been on our Board for 30 years. He whispered to me just a few months ago, Chuck, I think it's the time I should probably step aside.
So we argued about it long and hard for sure. And finally, he won in the argument. So he's going to go off by golf. He's going to fly fish. He's going to do a lot of interesting things.
He also told me he's going to spend a lot of his time giving away his money. They've made so much money on the board, exercising his options and so forth. He's going to be the 1st guy you want to hit on any philanthropy deal. That's the first guy. So Preston came and joined our board 1 year after we went public and served through thick and thin.
And we've had some thick and thin times along the way. And as I said today, we're really pretty thick on everything right now, to say the least. So I want you all to help me thank Preston for a wonderful 30 years of service. Thank you, Preston. Remain standing.
Oh, that's okay. You can sit down. I know we're getting along in age.
So other members of the
Board, Joan Day, would you please be recognized? Thank you, Joan. Chris Dodds Steve Ellis Mark Goldfarb, who is on our board, had to go back. He's expecting the birth of his first grandson. So we gave him a little time off to do that.
Bill Harrah, Frank Harringer, Steve Macklin, Arun Soren, Paula Snead, Roger Walder and finally, but foremost, Mr. Wilson, Bob Wilson. Thank you so much, my Board. How about a round of applause for all of them? I have one more introduction.
I think he's officially a member of the board depending on the vote here. But our last but our newest director, who's been a nominee from our he's been with us actually 9 years on our ETF Schwab Board. We have several different boards here. We have money market fund, we have ETF boards. Anyway, Charlie Ruffle has been on that board.
Charlie, would you stand up please? Where are you? Here you are. Just joining the board. How about round of applause?
4 of our members of the board sitting here that you just met are up for election this time period, and we'll hear about the results in a few moments. Walt Benninger, Joan Day, Chris Dodds and Mark Goldfarb are all up for reelection. I'm very optimistic that they'll be reelected. So another round of applause for all our Board members, including Charlie Roffler. Now I'd like to recognize our executive team.
These are the people every day who really run the company and make things really tick. And all the various complications that this company has grown into, they make it happen and make it look so smooth and easy like nothing's nothing could be more from the truth. It's very complicated. And thank you for what you do every day. But maybe the Executive Board could stand up and be recognized.
Thank you very much. They keep the company on an unbelievable curve and we'll hear more about that later. But that curve is definitely on the upward slope and going at a pretty good rate. I'd also like to recognize our fellow employees, who we have now almost I think it's over 19,000 employees in total, which is a remarkable number. It's not a record number.
We've been years past, we had a large number. We were pretty inefficient then. So we've become very efficient and 19,000 people help us do what we do every day. How about a round of applause for our hardworking employees? Those in the room who are Schwab employees, can you raise your hand?
I don't know if there are any in here. Yes. Used to be we had 100 of them in here, but they're all working so hard. They're all upstairs. Thank you for doing all your work.
And most importantly, I want to say thank you to our clients. I know there are many of our clients are in here who are also shareholders, and they're looking after money. And they're looking after their shareholdings by being here today. But without them without over 10, almost 11,000,000 people who are shareholders or investors in Schwab through various kinds of accounts. Thank you very much for being a part and trusting us with your money.
And we know that we earn your confidence every day and we have to make that a commitment to you and we certainly will. How about a round of applause for our clients? And now I'm going to ask David to come up and carry on the business portion of the meeting. And I'll be back with you with Walt after with the Q and A.
Thank you, Chuck. As the first item of business, I would like to introduce our Inspector of Election and our independent auditors. The Board of Directors appointed the Inspector of Election to conduct the voting for this meeting. This year, our Inspector of Election is Equiniti Trust Company, a representative of Equiniti, Matthew Pesicka is with us today. Mr.
Pesicka has filed an oath of Inspector with me. He also has informed me that based on a preliminary count, we have a quorum for this meeting because more than 94% of the company's approximately 1,300,000,000 shares that are entitled to vote are represented by proxy at this meeting. Our independent auditors are Deloitte and Touche LLP. Ms. Carol Larsen of Deloitte and Touche is here at the meeting, and we'll be happy to respond to your questions during the question and answer period.
The polls are now open for voting on the proposals. If you were a stockholder as of March 16th this year and have not returned your proxy card, voted by telephone or voted on the Internet or would like to change the instructions in your proxy card or your telephone or Internet vote, you may vote at this time. For stockholders in the room, please raise your hand and one of our representatives will give you a ballot. For those of you attending our virtual meeting, you may click on the vote now button on the webcast console to cast your ballot. Now I would like to present the 5 proposals we are asking stockholders to vote on this year.
The first proposal is to elect 5 directors. This year, Walter W. Bettinger II, Joan T. Day, Christopher V. Dodds and Charles A.
Ruffel have been nominated for election to the Board of Directors. The second proposal is to ratify the selection of Deloitte and Touche LLP as the independent companies independent as the companies, excuse me, independent auditors. The 3rd proposal is the advisory approval of named executive officer compensation. The 4th proposal is for approval of the 2013 13 Stock Incentive Plan as amended and restated. And the 5th proposal is for approval of the amended and restated bylaws to adopt proxy access.
The Board of Directors has recommended that you vote in favor of each of the proposals to elect directors, ratify the independent auditors, provided advisory approval of named executive compensation, approved the 2013 stock incentive plan as amended and restated and approved the amended and restated bylaws to adopt proxy access. Each of these proposals is described in the company's 2018 proxy statement. If you'd like to review our 2018 proxy statement, you can pick up a copy at the registration desk. We also have been notified that stockholders intend to present 2 proposals for your consideration at this meeting. Todd Natley, representing the New York City Employees Retirement System, the New York City Police Pension Fund and the New York City Board of Education Retirement System will present the 1st stockholder proposal requesting annual disclosure of EEO-one data.
Mr. Matley, will you please step forward to the microphone?
Thank you very much for the time. My name is Todd Matley. I'm with the California Public Employees Retirement System. And I would like to formally introduce Proposal Number 6 filed by Scott Stringer and the New York City Comptroller on EEO-one data. Thank you very much.
Thank you, Mr. Madley. Mr. Tvedden here? All right.
Mr. Madeley, would you also present the second proposal?
Yes, I'd like to introduce proposal number 7 into business as well on political contributions. Thank you.
Thank you. The Board of Directors has recommended that you vote against these stockholder proposals. The statements against these proposals are contained in the 2018 proxy statement. If you have completed a ballot, you may hand it to one of our Schwab representatives now. If you're participating in the virtual annual meeting, please click on the vote now button to cast your ballot electronically through the Internet at this time.
If you have completed a ballot during the meeting, your vote will be counted at the end of the meeting and reflected in the final report of the Inspector of Election and in the minutes of the annual meeting. The polls are now closed. The Inspector of Election has completed a preliminary count of the proxies that were voted during the weeks leading up to the meeting. The preliminary count shows that more than 98% of the shares voting on the proposal and present at the meeting by proxy have been voted in favor of each of Walter W. Bettinger II, Joan T.
Day, Christopher V. Dodds, Mark A. Goldfarb and Charles A. Ruffle. So they have been elected to the Board of Directors.
More than 97% of the shares voting on the proposal and present at the meeting by proxy have been voted in favor of the ratification of the selection of Deloitte and Tuchel LP as the company's independent auditors. And that proposal has been approved. More than 95% of the shares voting on the proposal and present at the meeting by proxy have been voted in favor of the advisory approval of named executive officer compensation. And that proposal has been approved. More than 96% of the shares voting on the proposal and present at the meeting by proxy have been voted in favor of the approval of the stock incentive plan as amended and restated and that proposal has been approved.
Less than 78% of outstanding shares have been voted in favor of the approval of the amended and restated bylaws to adopt proxy access. That proposal requires 80% of all That proposal requires 80% of all outstanding shares voting in favor for approval, and it has been defeated. Less than 36% of the shares voting on the proposal and present at the meeting by proxy have been voted in favor of approval of the stockholder proposal requesting annual disclosure of EEO-one data and that proposal has been defeated. Less than 25% of the shares voting on the proposal and present at the meeting by proxy have been voted in favor of approval of the stockholder proposal requesting disclosure of the company's political contribution and expenditures, recipients and related policies and procedures. And that proposal has been defeated.
This adjourns the business portion of the meeting. Thank you very much for your attention. We will now hear from our Chief Financial Officer, Peter Crawford.
All right. Well, thank you very much, David. It is certainly and welcome, everyone, here in the room and on the webcast. It's certainly a pleasure and a privilege being here at our Annual Stockholder Meeting, especially coming on the heels of a very strong 12 months for the company, one that brought a lot of rewards for both our clients and all of you, our stockholders. Now I wish I could just do what Chuck did and just say all good news.
And it is all good news, but I wish my job was so easy that on the earnings call, I can just say all good news, any questions. But I will provide a little bit more detail than what Chuck provided in his intro. But first, before I get into the meat of it, we have this very important and eagerly anticipated forward looking statements page. The intent of which is to remind you that I will be talking about the future, as will Chuck and Walt following me. And as much effort as we put into our forecasting process and our strategy, events often unfold in ways different from what we contemplate and different from what we envision.
And so to the extent that events unfold differently than that, and you want to make sure you keep up to date on our latest news and information, make sure you check our latest disclosures on aboucherub.com, tune in to our quarterly webcast the latest news information and perspective. But before I talk about the future, I want to talk about the past and specifically about 2017. It seems like a long time ago. 2017 was clearly a remarkable year and a remarkable year for this company. Just about a year ago, my predecessor Joe Martinotto, who's down there in the audience here, was up on stage laying out our baseline scenario for 2017.
And I emphasize it was a scenario, not a forecast. And that scenario contemplated modest market appreciation, a single Fed increase in the middle of the year, a flattening of the yield curve meaning we expected long term rates to go up but not as quite as much as short term rates and we expected relatively flattish starts. And in that scenario, we envisioned that we would have low double digit revenue growth even accounting for the several $100,000,000 of pricing reductions that we put into place in the 1st and second quarter of last year. And we figured we'd achieve a roughly 100 to 300 basis point spread between our revenue growth and our expense growth and achieve a pretax margin of just over 41% or so. Now clearly, 2017 evolved from a macro standpoint a lot better than that baseline scenario.
The equity markets were up almost 20%. We had 3 Fed increases rather than the one that we assumed in our scenario. And client trading activity was actually up 10% year over year. In fact, the only macro factor that really worked against us was long term rates that were lower for most of the year before rising towards the end of the year. So given all that, it's not at all surprising that our performance significantly outdid the scenario results that we anticipated.
With revenue growth of 15%, we capitalized on the favorable economic environment to make some significant investments in our business and driving the long term growth of our business and grew expenses by 11% year over year. But even doing so, we achieved 4.40 basis points of operating leverage, meaning we grew our revenue by 4.4 percentage points more than our expenses and achieved a pretax margin of just over 42%. And with all that, that enabled us to grow our earnings per share by 23% year over year, even accounting for a $46,000,000 one time tax adjustment related to the enactment of tax reform late last year. Now I'd be the first to say that our stock price is not the only barometer or even the most important barometer of our ability, our success in executing on our strategy. But even so, certainly gratifying to see our steadily increasing earnings reflected in a rising price for SCHW, which all of you perhaps noticed as well.
So as we turn the page to 2018, our success in 2017 from both a financial and an operating standpoint paves the way for what we expect will be very strong results in 2018 as well. Now at our winter business update a couple of months ago, we did something a little bit different in that we laid out not one, but actually 2 different scenarios given the uncertainty around Fed policy this year. So in one scenario, we assume the Fed would increase one time in the middle of the year. In the second scenario, more of the upside scenario, we assume that the Fed would move actually 3 times over the course of the year. And what those scenarios have in common is the same assumption about that 6.5% market appreciation, a flattening of the yield curve and in this case, a slight increase in trading activity, daily average revenue trades or DARTs.
And we said in those scenarios, in that range of scenarios, we'd expect our revenue to grow by low to mid double digits. We'd expect there to be a spread between our revenue growth and our expense growth of between 100 basis points and perhaps 400 basis points in terms of the difference between revenue and expense growth and a pre tax margin of somewhere between 43% and perhaps 45%. Now the year thus far has unfolded in a way looks a lot more like that 3 rate hike scenario. With the Fed already having moved in March and the odds are right now are close to 100 percent market is expecting the Fed to move in June and likely later this year as well. With long term rates up sharply even above the levels that we contemplated in this plan and with our trading activity, our clients' trading activity definitely up more than that slightly level
that we contemplated in the plan. So that
so from that contemplated in the plan. So that so from that standpoint, not at all surprising as we look at our Q1 results that they reflect the benefit of those macro tailwinds that we have as well as the continued strong business momentum that we've seen. So revenue growth in the Q1 was up 15%. It's our 11th consecutive quarter of record revenue. And that 15% revenue growth was driven primarily by growth in net interest revenue, although I point out that we actually were up year over year in our trading revenue as well despite the impact of the commission reductions in the Q1 of last year.
Expenses were up 13% year over year, which is a little bit above our in going expectations and above the levels that you've seen in previous years. That's a function of a number of different things. That's a function of the strong asset gathering we had in the Q1, which drives higher incentive compensation the heavy call and trading volumes that we experienced from our clients, that client heavy client engagement higher flows into Schwab Funds and ETFs as well as the renewal of volatility that we saw in the Q1. But even with that 13% growth in expenses, we grew our pretax margin by 1.3 percentage points to 41.8% in the Q1 and grew pretax income, emphasis pretax income, by 19% year over year. So this is not just a story of tax reform.
Although I will say that tax reform certainly helped us and helped us achieve an 18% return on equity in the Q1. Those of you doing the math at home have figured that our expense growth rate in 2018 should look somewhat similar to the expense growth rate that we saw in 17 or perhaps even a little bit higher. But I want to emphasize that we're taking a little bit of a different approach to managing expenses this year than we have in previous years. So in previous years, we deliberately backloaded some of our spending and made it contingent on how the market would unfold, how the macroeconomic environment would unfold, figuring that if things unfolded well, then we could green light some of that spending. Given the nature of some of the investments that we're making this year, we wanted to move forward on those investments early in the year, and make it less dependent on how the macro environment unfolded.
That means a couple of things. First is our level of spending is likely to be somewhat more consistent quarter over quarter in 2018. But second is that level of spending is likely to fluctuate less based on the macro environment. So the environment continues to be as favorable as it has been. We see something that looks more like that 3 rate hike scenario or perhaps even better.
That means that operating leverage, that gap between our revenue and expense growth should be higher than what we contemplated in those two scenarios I laid out earlier. I will point out that there are other factors that influence our expenses, volume related factors and growth of assets and growth in our Schwab plants and ETFs as we saw in the Q1. So there may be a little bit of fluctuation anyway, but it will be less about what happens in the macro environment in terms of our conscious choice to move forward or not move forward on some of the spending initiatives. So let me close by saying Schwab as a company has never been healthier. We've never been in a stronger competitive position than we are today.
Our through client size strategy is working exactly as intended. And our financial formula, our financial model is working exactly as intended as well. That through client size strategy being recognized, being rewarded as clients bring us more of their business and prospects turn to us. And we through our unique business model that combines banking and brokerage and asset management, we're able to turn that business growth into revenue growth. And then through ongoing expense discipline, turn that revenue growth even higher levels of earnings growth.
And be a thoughtful approach to capital management, make sure we're rewarding all of you, our stockholders. It is admittedly a pretty straightforward approach, but it's really the discipline to stick with that through most of our 40 plus year history that I think has really set us apart and made us so successful in executing on that. I think it will make us successful in the years ahead. So with that, let me turn it over to our CEO, Walt Benjure.
Thank you, Peter. Thank you, Peter. Good afternoon, everyone. Thanks for joining us today here at here in San Francisco and also on the webcast. Chuck talked about 31 years that we've been having these meetings.
I've had the honor to speak with you, I think, for 12 years. So it's it truly is one of the highlights of what I get the opportunity to experience each year to spend these few minutes together. And whereas Peter spent a lot of time talking about the result of the extraordinary trust that our clients place in us, I'd like to spend my time talking about the strategies that we implement that have contributed in a great way to that trust. It really begins with the core of our through client size strategy, and that is what we call the virtuous cycle. Now many people considering businesses and business strategies probably would look at this chart that we're about to spend a minute on and say, that's not really how businesses operate.
But I have news for them. This is the way that Schwab operates. Our virtuous cycle begins with a very simple concept of challenging the status quo on behalf of our clients. What that means is we're using our knowledge and experience in this industry to constantly ask, isn't there a better way? Isn't there a better way to deliver improved services at a lower cost, more value left in the pocket of the client whose money it actually is.
And I'm going to go through some details on each one of these, but I just want to mention briefly because it was shortly before our meeting a year ago I shared, we made voluntary price moves that saved our clients almost $400,000,000 last year, leaving that money back in their pocket. So when Peter talked about things like 15% revenue growth, that was in addition to the savings that we passed on to clients. As a result, clients reward us with more business. It sounds simple, doesn't it? Do the right thing by your clients, and they will choose to do more business with you.
And they brought us a record level of almost $200,000,000,000 in net new assets last year alone. Every time I say that number, it's sort of shocking to me, dollars 200,000,000,000 of net money in 1 year alone clients brought to us in our core assets. As a result, as they bring this additional business to us, it leads to record financial results. Just over $8,500,000,000 in revenue, 15% revenue growth, strong margins. That leads to outstanding stockholder value in terms of our return on equity and EPS growth.
And then we reinvest because in order to make the virtuous cycle continue year after year after year, it means putting money back into the business, hiring more professionals, investing in technology, ensuring that our risk management capabilities are world class to our clients. So we reinvest in the business, and it starts the cycle all over again. A beautiful, simple strategy of doing the right thing by other people and the result being an extraordinary company with extraordinary results. So to take a minute and talk in detail about a couple more of these, I mentioned earlier the commission reduction. So last year, we reduced stock trading commissions from $8.95 to $4.95 Now I don't know what commissions were when Chuck opened doors over 4 decades ago, but I know they were a lot more than $4.95 So for under $5 a person can trade as many shares of stock as they would like to buy or sell.
We also enhanced our money market cash like investment instruments by lowering our management fees substantially because by taking a lower fee in the money market funds, it leaves more interest left for our clients. Now you may recall during the 5 or 6 years in which the Federal Reserve Open Market Committee maintained interest rates at a near zero rate, we waived our management fees to the tune of about $1,000,000,000 to ensure our clients didn't have negative yields. And as soon as rates started to move up, we lowered our fees substantially down to levels that are near the lowest in the entire industry so that we can provide the maximum amount of yield to our clients on their cash and money market funds. In the index space, we lowered our management fees for index mutual funds, the fastest growing area for investing across our country to the lowest rates across the industry. And we took one other step, which I think is incredibly what I call Schwab like, meaning this is the way Chuck has always thought about the business.
We said every investor, no matter their size, no matter how large or how small, pays one single rate for index fund, for example, as low as 3 basis points, the lowest index fee in the industry, bar none. But we gave that to everyone, where virtually all of our competitors use what's called a share class model, where maybe a person with $10,000,000 pays that pays 3, 4 or 5 basis points, but a person with less pays often 4 or 5 times more. So very Schwab like to say every client of ours gets the same extraordinary deal, the lowest cost across the industry. And then the last thing that I have up on the slide here, again, seems very straightforward but unique in our business, we said we will have a very simple satisfaction guarantee. If for any reason any of our clients are disappointed in the service they receive, the quality of service, the quality of advice, anything that we do for them in return for them paying us, if they're dissatisfied, all they have to do is raise their hand, and we will return to them 100% of what they paid.
It just seems extraordinary in our industry that we're the only one to do that and still the only one delivering a satisfaction guarantee. In an industry where so many other firms copy, no one has copied us into this space and say simply, if we've disappointed you, that's on us, not on you, and we will return any amount that you've paid us. Step 2 in the virtuous cycle, it works. And you can see via this chart a quarterly reflection of the net new assets that clients have brought to us. In the Q1 of 2018, again, another record, $66,000,000,000 in net new money.
That's on top of the almost $200,000,000,000 in core net new assets clients brought us last year. I also want to identify the line graph at the top. I'm color blind, but they told me in my prep session that's purple. So I'm going to believe that they weren't playing a trick on me and that, that is a purple line. That's called a transfer of account or transfer of asset ratio.
It's the cleanest measure in our industry of how you're doing on a market share basis. And what that 2.3 factor shows, which I've never seen a number like that in my 35 plus years in this industry, means that for every dollar that a client chooses to remove from Schwab and take to a competitor, someone else brings $2.30 to us, a rather extraordinary measure of market share acquisition and again, I think, a reflection of a through client size strategy. 3rd parties notice also. And 3rd parties, in this case, J. D.
Power, has recognized Schwab for the 3rd consecutive year as being top rated in full service brokerage firms. Again, an interesting positioning with J. D. Power recognizing Schwab, who many people may hearken back to its origins 4 decades ago as a discount firm, when in reality today, we deliver a no trade offs proposition where clients still benefit from the pricing of a discount firm but actually receive a level of advice and full service not offered by anyone else. And it's not just about the past, as Peter talked about.
It's also positioning for the future. We're not only accelerating our rate of growth, as this chart shows, in our net new asset figure, but we're doing it on an ever growing base. So we're growing faster than ever before as our percentage of net new asset acquisition is applied to a larger and larger base of client assets today just short of $3,500,000,000,000 So just in wrapping up my comments, I wanted to share with you some of the thinking that goes on inside our company, how we make decisions. Because a lot of times, I'll have conversations like this with owners of our stock or analysts who cover our company or reporters, and they'll say, I hear all the things you say, Walt, about the strategy through client size, virtuous cycle, the no trade offs approach. But how do you actually make it work inside the company?
And one of the major ways we make it work inside the company is we operate with principles, what we call here guiding principles. And what we try to do is apply these guiding principles in every situation that we're faced with. And I just thought it would be helpful this year to actually share with all of you these. There's 5 very straightforward ones. 1st, trust is everything, earned over time, lost in an instant.
We are fundamentally in the trust business. People save their money, invest their money with us, and they count on it being there. They count on us doing the right thing. They count on us using the knowledge we have in our business to give them a better value, not simply try to figure out a way to optimize our own economics at the corporate level. And we know, as we have seen with many companies across many industries in recent years, trust can be lost in just that instant.
2nd is that price matters more than ever and in our industry more than most. Price matters because, as I often say about investing, everything is an uncertainty but one, one factor, and that is what you pay. Everything else is an uncertainty. So as I recommend in every case, try to pay as little as you possibly can to get the quality of advice and service that you want. And we have a tremendous responsibility to ensure you're paying the absolute lowest that we can deliver quality service and results for our clients and still deliver appropriate rewards for our stockholders.
3rd, clients deserve efficient experiences every time. This is an issue of respect. As Chuck mentioned, with almost 11,000,000 clients working with us and often interacting with us on a daily basis, we demonstrate respect for our clients by ensuring that they can get the things that they need done in an efficient, effective and accurate manner. And that doesn't mean we're perfect. That's why we have a satisfaction guarantee.
But our aspiration is to ensure that every experience is as efficient as it can be. 4th, every prospective or existing client is critical to our future, no matter how large or small. Simple example, the one I referenced earlier, when we slashed the fees on our index mutual funds to the lowest level of any provider in the industry, we didn't do it just for the affluent client or the high net worth client. We did it for every client, no matter how large or how small. And then last, and maybe this is most important in terms of the development of a company's brand and the building of an organization like Chuck has built over these last 4 plus decades, Actions matter more than words.
My guess is you could come to an annual stockholders meeting like this one or any one of them across the country, and you'll hear a lot of fascinating commentary. But what we actually do matters a lot more than what we say. And in fact, what we have to say about ourselves probably matters less today than it ever has before. What really matters today is what we do and what others objectively and honestly have to say about us. So these are the guiding principles that we utilize to implement our strategy.
And hopefully, ensuring these, it provides a bit more insight into the way we try to operate Charles Schwab here in 2018. So let me go ahead and make a couple of quick comments before Chuck joins me up on stage. We're going to transition into our Q and A segment. A couple of ground rules, if I could. First, just out of respect for all of the stockholders here in the room as well as those on the webcast, we'd like this to be a forum for questions, not for statements.
There's plenty of opportunity for people to make statements. But out of respect for the people here in the room and on the webcast, we'd like this to be an interaction. And ideally, we'd like it to be an interaction about business, the things that we do at Charles Schwab to try to serve clients. We will ask if you could approach 1 of the mics if you have a question. Tell us your name and whether you're a stockholder or you're actually a proxy for a stockholder.
And we would prefer if you could limit to one question for each person, again, out of respect for all attendees rather than having individuals monopolize the time that Chuck and I have available. We'll try to get to as many questions as possible. If we're not able to get to it, hopefully, we'll be able to provide another form of response to you. If you have an individual question about your account out of privacy, we would not be able to address that. But we do have Jeremy Hoover from one of our local branches here in the back of the room, and Jeremy would be more than happy to help you.
So with that, I'd love to have the opportunity to welcome our Founder and Chairman, Chuck Schwab, back to Sage with me. Who also, by the way, is the best person to work with that I could ever imagine. Thank you, Paul.
What a great presentation he just made. It makes me want to buy more stock.
Can't get
enough of it.
All right. So we'll go ahead and open up the microphones for questions. And I think if people on the webcast have questions, they can also send them in. And we have a representative here working with that to provide questions. So again, if you could start and offer us your name and whether you're a stockholder or a proxy.
Hello. I'm William Schneider from San Francisco. I have about 800 shares. Using all the tools you have online, ABC ratings and the great support we get from the branches, you think robo investors through your analysis of the success so far, you think they could beat the S and P?
I hope so. Well, the track record of our intelligent portfolios program, which is a digital advisory or sometimes objective of a program like Intelligent Portfolios is to build a diversified portfolio as opposed to a S and P 500 portfolio. So it's probably going to have over time ideally a bit of a smoother ride than a 100% stock portfolio, maybe not return as much over time, but probably not with some of the ups and downs.
Yes, it's intended to be not a racehorse. It's supposed to be a very sound way to accumulate money, put money aside in a sound way and to live through the ups and downs of the market and hopefully meet your long term goals. Thank
you, Wayne. Question here?
Hi. My name is Eric Sprague from Roseville. When you lowered the fees to $4.95 obviously, the main reason was it's part of the virtuous cycle and doing right by the clients. But the competitive landscape has to be part of the thought process. And so how much of it was Ameritrade and E*TRADE versus future competitors?
You tweeted that Barron's journalist got carried away with what you said about Amazon. I think it was more about FAANG companies in general. And so if Google Ventures does more Robinhood type of funding to brokerages aimed at millennials, because I think the trading fees, they're already less than 10% of the total revenue, right? Right. $200,000,000 on $2,400,000,000 So I mean, theoretically, you could go to 0.
But I'm just wondering about that thought process.
It's a really good question. From a strategy standpoint, I think what we want to do is find that right balance point between delivering as much value to our clients as we can, while still providing a reasonable return to shareholders. I'd actually like to recite a quick story from years past of a meeting I had with Chuck, which I believe informs the way we try to look at things like pricing strategies and competitors. This is early on in my tenure as President of the company. I don't think I was CEO yet.
This is probably maybe 12 years ago. And we were faced with a very complex pricing issue that involved competitors. And we did in the classic business school format, we did a wonderful 50 page PowerPoint deck with charts and graphs. And it had what if scenarios. If competitors do this, we could do this, all these various choices.
And I sat down with Chuck to walk through it. And of course, those of you who know Chuck know what a gentleman he is. He was patient and let me get to about Page 2 or 3. And then Chuck interrupted me very nicely, and he said, Walt, this looks like great work, and there's a tremendous amount of effort that's gone into it. But I have a question.
Forget the competition, what's the right thing to do by the client? I said, Well, that's easy. It's Option A. And Chuck said, There's nothing really more to do do Option A. That's the way we try to analyze those.
Competitors will react or not react or do whatever they will do. But if we consistently do the right thing by the client, I think we ultimately win. And I think the results of the last 4 decades demonstrate that. Thank you.
Yes, sir.
Hi. I'm Dirk Neihart from Berkeley, California. And I have two questions. Why do we think 13% women on our Board of Directors is a fair gender ratio? Surely, we can do better.
My second question is one of the women outside gave me a card we're not giving our shareholders much less than we're not giving our shareholders much less than a percent of dividend yield. And we're not giving our employees much. How many employees even had a 5% raise this year? Certainly, we can do a better job.
Thank you, Dirk. I referenced the Board 1 as a
chair there.
Well, the Board, obviously, we try as a Board to have the best Board possible in terms of intellect capacity, experience, all of those things, the diversity issues that we try to address. We want to reflect our client base, the diversity component. We want to have people who have also maybe investors too, so they have empathy for our client base. That's important to me. Have total empathy for our clients and the spectrum of our clients, whether they're small, young or big or large investors, We need to have that perspective.
And so I think we've done a reasonably good job. I think a very good job, frankly. And I hope that meets your test.
I think from a compensation standpoint, what we try to do with our employees, again, is find that right balance point between cash compensation and other forms of assisting our employees build wealth. So for example, we offer a stock investment program where we discount the stock by about 15% and let employees purchase stock in the company at that discounted rate. And although it's correct that our dividend today is a relatively modest level, our total stockholder return in 2017 was 31% compared to a Standard and Poor's 500 Index, which did 22%. So we try to provide a series of ways to assist our employees in salary, benefits, equity and Schwab. And then our most popular benefit we offer of all is our sabbatical program, which remains unique across our industry, where every 5 years, we provide employees the opportunity to have 4 weeks off paid time to do whatever they want to do, volunteer in their communities, spend time traveling.
And that actually is the single most popular benefit that we offer. And I guess the last thing I'd say, rolling it together, is the true measure is employee retention. And our employee retention rates, I believe, are near or at the envy of our entire industry. People want to come to work for Schwab. And when they get to Schwab, many of them enjoy being Schwabis for the rest of life.
Yes, sir. Welcome back.
Thank you. Good afternoon, Mr. Chuck and Mr. Walt. My name is Masai, and I'm 10 years old and I'm a stockholder.
What steps are the board taking to improve stockholder value, especially mines?
So he just asked, what steps is the Board taking to improve stockholder value? Well, Walt just
made a wonderful presentation. I hope you go over that again and again. Maybe we can get you copies of that so you can take it back to some of your classmates and discuss that. Then you'll have probably some questions. And I'm sure Walter and myself will be happy to answer that sometime, maybe on the telephone.
But we work every day trying to, 1st of all, make experience for our clients. And you're a client. We want to make your experience every day a better one. So you bring more of your savings and more of your earnings along the way and put them in your account here and hopefully buy appropriate investments for yourself so that you meet your long term goals eventually. And you're just beginning, that's really pretty important.
I'm really pleased to see you at this age, thinking about all these things. I wish more kids your age were doing this. You're a perfect example of what should be done. But over the long term, we try to provide different services for you and help you invest and hope you get appropriate returns and get the experience you want and the outcomes that you want over the long term.
Thank you.
Thank you.
That's okay. You can come back again. You talk to your mom and
100% for squab and 100% going up, up, up.
Thank you, Mosai. Yes, sir.
Hi, I'm John Foley from San Francisco. My question is about the movement toward sweep money market funds being FDIC insured in the Schwab Bank, I believe, these tend to yield less than the purchase money market funds. I'm wondering if there are plans to offer the option to sweep into the funds that are now purchased only.
Sure. So what we've tried to do with our client cash strategy is offer our clients a variety of the best possible choices we can relative to the competitive marketplace. So for example, for long term investment cash, we offer a program called CD OneSource or Certificate of Deposit OneSource. And what we do is we go around to all of the top banks in the country that would like to participate and offer the highest yielding certificates of deposit we possibly can that you can buy at Schwab without paying any form of a commission. Course, those are FDIC insured up to the $250,000 limit.
Then for cash that you maybe have more of an intermediate term need for, we offer what are called purchased money funds. And that's a money market mutual fund that you buy shares in and then sell shares when you want to utilize that money. And that's the program I referenced earlier, where we've lowered the fees to where we're near the lowest in
the industry because the lower our fee,
the more the net that you intend to keep that you intend to keep in cash for the long term. And then for the purposes of things like sweep or a checking account balance, that should only be money that you intend to utilize in the near term, the competitive set there is relative to most similar transaction accounts that have checking features, automated bill pay, the ability to withdraw money from any ATM worldwide with no fee, another feature of Schwab's program. And the competitive set there on yields is actually quite low. We've chosen to pay several times more than most of our competitors for these types of transaction accounts. However, I would emphasize that if you intend to have your cash longer term, you do not want to have it sitting in a transaction account any more than you would leave large amounts of your money in a checking account.
You want to go ahead and move it into one of the purchased money funds and then go ahead and liquidate that if you decide you want to get access to that cash for a transaction. That's the way to purely optimize your yield. Thank you. Other questions we have? Do we have any questions from the web console?
Okay, I guess we do not. So if there are not any other questions, I'd like to thank all of you for joining us and turn it over, Chuck, for any parting words you might have for our attendees.
Well, again, thank you so much for attending our 31st meeting here with the shareholders public shareholders now. It's been a great 31 years. And I think the discipline that we've all gotten from being a public company, I think, is really important. Some of our competitors are private. And I've always thought we should be public and be transparent about everything we do and see.
So you see our financial statement, you see how we run the company very conservatively. The most important thing to me, frankly, is to make sure that we have safety and soundness and have an ethical operation all the time. And you are counted as 1st in our order of business. Clients, we really honor you. And we every day try to own your earn your trust.
So thank you so much. And we'll be around for a few minutes and grab a coffee or a donut or something like that. No donuts, I don't think, but maybe cookies. Thank you very much. Thank you.