Dec. 15 (Bloomberg) -- Charles Schwab Corp., the second- largest independent brokerage by client assets, plans to cut more than 100 jobs, or less than 1 percent of its staff, as the drop in U.S. stocks lowers revenue next year.

The staff reductions will cost $20 million before taxes in the fourth quarter, San Francisco-based Schwab said in a statement today. The jobs to be eliminated are at the “officer level,” and the company will decide in the next two months whether further reductions are needed in the first half of 2009.

The steepest yearly drop in the Standard & Poor’s 500 Index since 1931 has eroded asset-management fees, which account for almost half of Charles Schwab’s revenue. Chief Executive Officer Walter Bettinger said today he plans to cut operating expenses by about 8 percent next year to help sustain profits as asset- management fees decline and trading slows.

“The company had already decreased its operating expenses through 2008 and what this does is provide them with more of a cushion if the market gets even worse,” said Patrick O’Shaughnessy, an analyst with Raymond James Financial Inc. who has a “market perform” rating on the stock. “It also provides the potential that operating margins might even expand in 2009, if the markets do reasonably well.”

Schwab today reported the slowest pace of new brokerage accounts and net new assets in a year. The company opened 60,000 accounts in November and drew $5.9 billion in net new assets, compared with $12.1 billion a year earlier when the S&P 500 traded near record levels. Client assets totaled $1.11 trillion.

Brokerages Trim Jobs

Fidelity Investments, Schwab’s closest rival in assets, plans to eliminate 3,000 jobs, or 7 percent of its staff, by the end of the first quarter. AllianceBernstein Holding LP and BlackRock Inc. in New York, Legg Mason Inc. in Baltimore, and Janus Capital Group Inc. in Denver also are cutting jobs.

Schwab’s net revenue declined for the first time in seven quarters in the period ended Sept. 30. Revenue from re-investing client assets tumbled 16 percent from a year earlier because of the Federal Reserve’s cut in interest rates. Total expenses slipped 3.5 percent from a year earlier.

“We expect to see stiff headwinds from an unprecedented financial environment,” Bettinger said in the statement. “Protecting our financial strength and operating performance under these circumstances requires us to manage expenses even more aggressively.”

Schwab said today is plans to curb spending on marketing and new projects and combine leadership across the firm. Last month, the company consolidated its businesses handling corporate retirement plans and a unit catering to independent investment advisers.

‘Ahead of Curve’

The moves are “slightly head of the curve at the moment,” said Richard Repetto, an analyst at Sandler O’Neill & Partners in New York, who has a “buy” rating on the stock. “The client performance metrics were a little bit sluggish, but they don’t surprise me given the economic environment.”

Schwab declined 60 cents to $16.11 in composite trading on the Nasdaq Stock Market at. The stock has declined 37 percent this year, compared with a 66 percent drop in the American Stock Exchanges Broker-Dealer Index.

Schwab will be largest independent brokerage in the benchmark after the sale of Merrill Lynch & Co. to Bank of America Corp., which should be completed this month.

To contact the reporter on this story: Edgar Ortega in New York at ebarrales@bloomberg.net.

Last Updated: December 15, 2008 16:19 EST