When Charles R. Schwab started his own firm in the 1970s, he and other discount brokers opened up the markets to regular folks, giving them the chance to make colossal investing mistakes just like Wall Street’s fancier clientele.
Of course, Charles Schwab Corp. (SCHW ) also made it easier for lucky or smart amateurs to make lots of money in the markets, while paying dramatically lower trading fees than they would at traditional Wall Street brokerage firms. Eventually, the company, which expanded into 401(k) plan management, banking and the investment advisory business, made Chuck Schwab a billionaire.
The company's advisory accounts now total $150 billion. The 76-year-old chairman of Schwab dropped by Bloomberg’s New York City offices on Dec. 9 to talk about his company’s introduction of an "accountability guarantee" for clients in those accounts. Starting this quarter, if advisory clients are unhappy for any reason, they can get a refund of the last quarter's fees. The pledge is an effort to capture customers who have grown distrustful of the financial industry. "It's about time somebody stepped up," Schwab says. "Nobody stands up and takes responsibility."
Since the talk was about accountability, it seemed in order to ask about investing mistakes Schwab himself may have made over his career. After all, the occasional blunder is an inevitable part of do-it-yourself investing. What investing mistakes does he blame himself for?
His investing mea culpa: Procrastination. "Sometimes my mistake has been hesitancy about acting on the decisions I've made,” he says. “When's the best time to invest? It's today, not tomorrow."
Schwab cites his interest in Google Inc. (GOOG ), which went public in 2004. "We couldn't buy Google on the IPO but I knew I wanted to own it. I was gonna go big. It came out, and went down a bit. I got distracted by something and didn't get in." This wasn't just a hunch, he says. He had researched Google’s business model and knew Google Chairman Eric Schmidt.
"Actually," Schwab adds, "I did the same with Facebook."
Google is up almost 900 percent since its IPO and Facebook Inc. (FB ) has risen 30 percent since it went public in May 2012. Schwab says he reassures himself by saying, "'Don't worry, Chuck, your index fund has some Facebook and Google.'"
Schwab’s mutual funds likely do hold shares in these companies. Bloomberg estimates he has a net worth of $5.7 billion, making him the 77th richest American on the Bloomberg Billionaires Index . Much of that is due not to catching a wave of tech IPOs but from his own company’s success.
Charles Schwab Corp. went public in 1987, after Schwab bought it back from Bank of America. (He’d sold it to them in 1983 for $55 million.) Since then, he’s collected more than $1.6 billion from share sales and dividends, and still owns one in eight of the company's outstanding shares.
This year has been good to Schwab shareholders, and especially good to the man whose name is on the front door: The stock is up 74 percent, which Bloomberg estimates added another $1.7 billion to his personal wealth.