How does Charles Schwab make money?

Charles Schwab makes money via direct commissions and/or transaction fees that customers pay for its brokerage services. Charles Schwab makes money in a number of different ways though, here is a closer look:

• Brokerage services

  Charles Schwab often acts as a mediator between buyers and sellers in different marketplaces. Normally, for this service, it charges a commission for specific trades it helps execute. These trades can be for extremely large companies and corporations, or more simple stock trades concerning smaller investors or individuals.

• Interest on deposits, loans, and securities

  This is one of Charles Schwab's biggest revenue generators. In 2022, the company earned around $10 billion from interest on deposits, loans, and securities.

• Asset management

  Charles Schwab also acts as an asset manager by advising and managing a client's investments. This includes things like stocks, bonds, mutual funds, EFTs, and other investments. It assists in asset allocation or how to divide a client's investable assets into different asset classes. Charles Schwab banks a lot of profit from these types of services.

• Underwriting services

  Charles Schwab also provides underwriting services. These services are for organizations that need to raise funds. Charles Schwab purchases stock in an IPO with a plan to market the stock to investors. Charles Schwab normally uses a flat fee underwriting charge to cover any potential losses and also to generate revenue.

• Mergers and Acquisitions

  A merger and/or acquisition refers to either the combining of two companies into one business entity or the purchasing of one company by another with the goal of either ingesting the purchased company's business or buying them out for competitive alleviation. Charles Schwab charges fees to the companies involved for advisory services.