Okay. All right. We're going to get started. Good morning everyone. Welcome. I'm Rich Fowler, Head of Investor Relations for Schwab and this is our 2020 Winter Business Update. We hope this will be an interesting day. Just one or two things happened since we were last together. So we'll try to keep everybody awake as we go through the day. We do have a great agenda lined up as usual. So let's get me off stage as quickly as possible. First off, Walt will walk us through the strategic picture as he usually does. Then Joe will join us yet again to walk us through both an update on the Ameritrade transaction and then also to talk about our further work in the digital arena and leveraging scale and efficiency for us. I think Joe is a living proof that much of life can actually be described through quotes from the godfather. Joe is a living embodiment of the – just when I thought it was out, they pull me back in. So we can't let go of Professor Martinetto and we appreciate him spending this time with us. Then Jonathan followed by Bernie will talk about what's going on with the client facing businesses. And then finally, Peter will bring us home with the financial picture as he usually does. So the main reason I'm up here, again, as I always say, is because no one else wants to deal with the next thing, which is the wall of words, which basically is of course around our disclosures and encouraging everyone to keep up with those, we – this year, because of the pending transaction and have a second wall of words, which again relates to specifics around the pending transactions. So again, the main message of all this is please keep in touch with our disclosures. Let's see. Let's talk about Q&A as usual in the room we'll have mic runners, so please raise your hands, wait for the mic, a question and a follow on, we'll work our way around the room. For those of you on the webcast, we will as always take questions from the console. Speakers will look to Jeff Edwards on my team, who will wrangle the webcast questions. And I think that covers our basics here. So I thank you all very much for spending the time with us. We always strive to make these a worthwhile use of your time. And we always, always, always, we made it sound like it, but we really do appreciate the dialogue that these generate with you as we go forward in the year. So with that, let me turn it over to Walt and we'll get started. Sir?

Thank you, Brittany. Is this a remote? Good morning everyone. Thank you for joining us, being here in San Francisco. For everyone on the webcast, thanks a lot for being with us this morning. I'm going to take a little bit of a different approach today in my segment than I have in the past. Let's see if I can work clicker. I'm going to start with a little bit of a backward look as we try to evaluate the picture of where the company is today. So starting with a backward look and then looking realistically at the competitive environment, the intense competitive environment that we operate in today. And then examining how we look to navigate that competitive environment, so that we're in a position to reward our clients as well as our stockholders. And then at the end, I'll go through some results of the way that we have navigated that environment. So a little bit of a reverse approach than we've taken in prior years in evaluating and sharing with you about where Schwab stands today. So this first slide just shows a bit of history both growth in assets, I think. I think that chart on the far left would work out to somewhere around in 11% CAGR. Clients over the course of the last decade are now paying us about 14% less per dollar of their assets overall than they did a decade ago. At the same time, our EPS has grown. And I think that that chart at the middle bottom would work out to about a 15% CAGR in terms of growth in earnings per share. And at the same time, we strive to take bold actions that are consistent with our Through Clients’ Eyes strategies. A couple – last year, of…

It’s Brian Bedell, Deutsche Bank. Well, can you just – talking about the as you alluded to on the deal call back in November, building in the modern wealth – new modern wealth manager. Maybe if you can elaborate what your vision is for that with Ameritrade, say, five years out? And how you see that performer firm competing with the other large the wirehouses especially? And then you mentioned obviously lending is going to become a critical part of this as well. So how you plan on competing with banks? And where you see that whole landscape maybe in five years?

Sure. Well, thanks, Brian. A lot in that question. I think, I guess, I would start with a couple of points in competing with these large integrated banks. One is that we're going to have to leverage our uniqueness, our capabilities, our scale and our efficiency. So we operate the firm today at a total cost of about 16 basis points. We think that some of the transactions that we've announced upon full integration will help lower that 16 basis points a bit, but we will continue to invest in digital capabilities that will further lower that. And by keeping our costs low and sharing back with the client some part of that efficiency, we're going to keep price pressure on the industry to the benefit of the consumer. And that's going to continue to apply pressure to those who may operate at a higher cost. At the same time it's not just about costs. There's also value and relationship involved in that. So we'll continue to expand our capabilities with digital that will deliver great value for clients and a great experience, but for the clients where relationship is important as you saw in the segmentation slide, we are delivering today and we'll deliver an even broader array of relationship capabilities for select clients. Put that all together again, I think you're looking at, as we often say, no trade offs type of environment, great value, great service and for those that it's important, a personal relationship that they can rely on, sometimes that'll be delivered in the retail world, sometimes it will be delivered in the RIA world.

Hey, Rich Repetto with Piper Sandler.

Yes.

That sounds unusual after many years. Well, the combination of Schwab and Ameritrade is getting a lot of attention. The competitor out there has been saying that, you know, looks at it as a big opportunity. And I know you're limited at what you can say and what – and Joe will talk a lot more, but I guess this is your first chance since the announcement to really say more about how you're going to go about it, how are you going to handle competition, what you'll make, how you make investors feel comfortable that you can handle this big 5 trillion in assets overall merger.

Well, I think the announcements and the public statements that have been made by our competitors are logical on their part. And whenever you have a big combination, it is an opportunity for them to pursue the conversion or the winning over of clients who are in one of the two organizations today. It makes a lot of sense for them to do so. And I think it is reflective, again, of the intense competitive world in which we operate. That’s simply the combination of Schwab and Ameritrade does not change the industry. The combined organizations would be somewhere around 11% of investable wealth in the United States. So it's still fairly modest in terms of the overall size and therefore these competitors' comments and actions make a lot of sense for them to pursue. At the same time, we think that the combination of the two puts us in a better position than ever to offer this no trade-offs proposition. So whether you are a trading oriented investor and benefiting from what we would consider in many cases best-in-class trading platforms from Ameritrade, whether you're more of a long-term investor benefiting from many of the capabilities that Schwab has you need banking capabilities. Putting all this together, we believe offers the best complete total experience at Schwab as anyone in the marketplace can deliver in at a value that we think is the best for the consumer. But it's going to be a road to get there. We're working carefully with the Department of Justice today. We have great respect for them. They're thoughtful. They're inquisitive. We're working with them on the industry and how the industry functions and operates from an educational standpoint, but they're very bright, very thoughtful and careful in considering to ensure that they fulfill their duties from a consumer standpoint, but we feel very confident that the combination creates that true ideal model again with no tradeoffs.

Great, Thank you. Mike Cyprys from Morgan Stanley. So I guess just as you're thinking about growth, I am just curious how you're thinking about extending the brand to do more for existing clients and to access new clients perhaps that you have not historically addressed. And maybe you could talk a little bit about particularly on the non-spread based income. Just generally how you think about where you see the most revenue being captured by others on the platform? How you think about trying to get a larger piece of that? And what scenario could you go into active management or try and go more down the technology aspect there?

Yes. So let me do the second part first. I think clearly the greatest opportunity today when we look at the revenue that our clients are generating for third parties is in the asset management space. And so that is a focus of ours in evaluating whether the consumer is getting the absolute best service, best value, best outcomes for what they're paying or are there alternatives that might be better for them overall. And at the same time potentially shift some of the revenue from third parties to us, but again, only in the context if it's in the best interest of the client. But I think asset management is the one that immediately is at the top of the list in ensuring that the client is getting the best possible results there and at the lowest possible cost, leaving as much as we can in their pocket. In terms of brand extension, interesting, our brand is already viewed quite broadly. And it's not just our brand; it's also the work that we do behind the scenes for the RIA. So, the RIAs are having a good success competing in the higher end of the market for people who are looking for the broad, robust capabilities that that many of affluent or high net worth investors are looking for. And at the same time, our brand fares very well with affluent or high net worth investors who are more self-directed oriented and might be looking more for platform service and lower overall cost. So the brand extends quite well. And down into the millennial, I think, Jonathan will share details on this, but over 50% of our new to firm households are under the age of 40. So, we're fairing very, very well in the millennial – the younger investor space with our initiative. So I think our brand has already extended quite well. What's critical for us is to ensure that the experiences that these various client groups have when they come to Schwab are consistent with their expectations for a world-class experience.

Mike Carrier, BofA.

Hey, Mike.

Maybe just one on the competition. So you mentioned that incenting with the cash, the competition. So like – how do you like try to offset that? And then from a product standpoint, in order to differentiate, you mentioned asset management. It seems like there's some regulatory change on annuities and insurance so just from a product standpoint, any other areas that you're interested in?

Yes. So I think that when you have – there's a couple things you have to do with the cash. One is your field has to be aware of the fact that we're not going to lose clients to another organization because of a cash offer. So you have to educate your field, make sure they're aware of that, and then you have to be willing to match what goes on out there even at times when arguably it is uneconomic in the short-run to do so. But there are as we all know organizations over the years who will make uneconomic decisions or what appears to be uneconomic decisions in the short run for a variety of different reasons. And what we don't want to do is allow those organizations and those decisions to undermine our long-term trajectory. So we have to be willing to match. At the same time, as I referenced earlier, Mike, we think it's a strategy that is incredibly shortsighted creates a level of expectations on the part of the consumer that probably are going to forever be difficult to match. And you could definitely find yourself in a place where the consumer expectation is to get a check every time from someone when they're planning to make any type of investment. So it's not a strategy that that we consider an effective long-term one. You asked around…

[Question Inaudible]

Yes. So, the insurance business is a very difficult business with very challenging returns. I think it is likely that you will see us leveraging a bit of our partnership that we have with USAA to deliver quality solutions in that space where they're in the best interest of the client, but I think it's very low probability that you'd see us actually designing or creating or starting an insurance company to offer those types of products. But again, what we'll want to look for is only when it's in the best interest of the client. And if so, USAA has great solutions as do some of the other partners who worked with today.

Thank you.

Craig Siegenthaler, Credit Suisse.

Hi, Craig.

Craig Siegenthaler, Credit Suisse. After the earlier slide on direct index investing, can you just walk us through what is the timeline when you think about when Schwab will be ready to launch these capabilities in the retail channel? And do you think Schwab will be one of the first firms to do this? Or do you think other firms out there will be to do it?

Well, I don't really want to say a timeline for competitive reasons on it, but I think what's less who is first and whether we're first or others are first within the segment of organizations we compete with, but it's really going to be who has the economic incentive to drive this type of very consumer friendly solution into the market. And generally, the organization that would be most apt to do that is someone who has very little to protect in terms of existing proprietary asset management. Because ultimately the argument may well be that the winners and losers if direct indexing becomes a major way of functioning going forward, the winners will be those offering the direct indexing albeit probably at a much lower revenue per dollar of client assets than active asset management and the losers may be those who are doing asset management at a much higher cost. The losers may also be those who are doing indexing just traditional beta oriented indexing that in a packaged format may not be as effective for the underlying consumer as the direct indexing. Time will tell on that. But again, if you look at what we've had come together technology, the coming of fractional share trading which enables things like direct indexing down to the lower level in assets and the elimination of transaction pricing, all those things play together toward direct indexing, playing a meaningful role in the future for investors of all sizes as well as we all know the benefits of being able to customize and include certain areas, exclude certain areas. That's a powerful model I think for the future. I think, Jeff, you have one from the...

Sure, I had a question from the web. Can you elaborate a bit more on the incremental lending opportunities you may want to pursue out of the bank? And what is your comfort level on expanding the ratio of loans to securities?

I think we have great comfort in expanding the ratio of loans to securities as long as our loans that get paid back. And so I would categorize it that that is our strategy and willingness to lend more to our clients particularly tends to be more of our affluent and higher net worth clients, appropriately risk managed and at a reasonable and fair interest rate. We intend to be quite competitive there in support of the RIAs that we work with as well as our principally self-directed high net worth retail investors. It's a critical area for us to compete and we intend to do so. And of course, it makes all the more important to have the banking capabilities that we have here at Schwab.

Dan Fannon, Jefferies. Just to follow up on asset management. If you look at Ameritrade's revenue mix today versus yours, asset management is even a smaller component. So as part of what you're talking about in terms of incremental growth just normalizing their – kind of penetration of their customer base with what you’re already doing? Or is it – I assume there's a combination of both of that?

Yes, I think I would say that it's probably more incremental, not so much relying on the client base of TD Ameritrade. It’s, as you know, when we announced the acquisition we were communicated fairly modest revenue synergies inherent in that and we continued to believe that in many cases, and again, this is a broad brush paint, broad brush statement, so we have to view it through that lens. The Ameritrade clientele is a different clientele than the Schwab clientele, lower account size is much more trading oriented. And so, the idea that there are a tremendous advisory or asset management opportunities in that client base, I think, would be – to make that assumption would be a mistake. Are there some? Yes, of course, there are some. But it is a different client base. Relatively what similar number of accounts, but a little over a fourth of the assets overall, so that in and of itself speaks to the difference of the client base. So what I'm referring to is more capabilities that will be appealing to existing Schwab clients, some percentage of Ameritrade clients and then what we anticipate are ongoing new clients in a manner consistent with what I shared previously about our ability to win new clients in the marketplace. Other questions? Yes. Jeff with the console and then Rich had another question here.

We had one more from the web. Following the commission actions in October, as you look ahead, where do you and the executive team see the most potential price risk in the business and across the broader industry?

I think as we sit here now pricing, I don't know that I would identify an area is having pricing risk. As we sit here now, there are certainly areas that people could look at to consider for pricing moves. There's still some transaction pricing that sits out there. Although arguably – arguably if there was someone in the industry today who felt like there was a significant market share opportunity and a pricing move or other competitive advantage or strategic advantage they could achieve, they would have likely done so as part of their response to our move in October. That's not to say that someone couldn't surprise us, they certainly could. But sort of everyone had the chance to post our announcement in October to reset their pricing to an area where they felt that it optimize their competitive and strategic position. And the fact that everyone has sort of done what they have done, I think would tell us that most feel that that there aren't big gains to be achieved by additional pricing moves today. Again, I could be totally wrong and there could be an announcement this afternoon from one of our competitors, but I think everyone had that opportunity. And as we sit here today most are probably made their decisions.

Well, Rich again. So when you looked at the potential acquisition targets, you picked Ameritrade with a significant RIA network.

Yes.

So, I guess could you give us the thoughts on, was this a surprise? Like it has garnered reasonable amount of press and discussion, I see when you get your second requests, the other day stocks traded-up actually off of that that day. But what – just what are your thoughts on, this, the whole RIA issue and regulation.

Sure, sure. So Bernie I know is going to speak at length to this, so I don't want to jump in front of the things he has to share, but I'll just share some, maybe high-level perspectives on it. We are highly committed to the RIA space. And when I say that, when I say the RIA space, I mean all RIAs, of all sizes and shapes and forms. We have historically been a leader in the sub-100 million AUM RIA space. And so we are excited about combining our RIA capabilities with TD Ameritrade’s RIA capabilities, and serving an even broader array of RIAs of all different sizes. And I think our strategy is certainly to continue to be a premier location for RIAs of all sizes and serve them in a world-class manner. So there's again, I don't want to jump in front of things Bernie is going to share, but the speculation that we in some way, shape or form have a little or no interest in serving RIAs who might not be billion dollar plus RIAs is inaccurate, naive and inconsistent with everything that we have done for the last 25 or 30 years in the RIA space.

And just the broader view about the antitrust sort of review in the advisory space. You can call it RIA.

Yes. So, as I mentioned earlier, the department of justice is thoughtful. They recognize the difference between facts and speculation. These are highly professional individuals who are doing their appropriate job and in looking at any type of combination and ensuring that in the process the consumer wins in that combination and the consumer is not penalized. So, they're doing thoughtful work. We're co-operating fully. We're excited and encouraged to provide them with anything they need to do their job. But again, I just, I want to emphasize our commitment to the RIA space includes all our RIAs of all sizes and we intend as we think we have historically been, being the leading provider for all types of RIAs.

Well Brennan Hawken from UBS.

Hi Brennan.

Just a couple questions on some of the things you mentioned. First on the competition in the cash offers, a lot of it made sense right up until I think the end and I might not have heard it correctly, cause you said the people they are being aggressive doing things that are uneconomic, it's confusing to you, that all made sense. And then I thought you said you told the field we'll match it, but why?

We have to.

Like if competitors are going to do something dumb, it's uneconomic and so you lose a customer, isn't that sort of c'est la vie and then you can just pick up customers elsewhere. Wouldn't doing something that you know is uneconomic to support a net new money or whatever the print or the number is that, doesn't that – isn't that not – doesn't that make sense. I don't get it.

It is hard to disagree with what you said, but I think that the challenge for us when we look at it is that if we do not match, we simply encourage more and more of this behavior. And so when, as I referenced earlier, cash for assets works with a certain percentage of the population. It is effective. It didn't work, people wouldn't do it. And so what we try to do by saying we will match it is we're discouraging that behavior as best as we think we can. And so I – it's not a, there's not a perfect answer and I won't sit here and argue that our answer is the perfect one to do, but I think our view is that discouraging it by making it less effective is better than encouraging it by allowing clients to leave and capture that cash. Now that's not to say in every situation, right? We're going to look at each client, we're going to look at the underlying economics of that client. We're going to evaluate whether this is a serial abuse –well abuser is the wrong word, let's say a serial user of these types of offers. So we're going to apply rational thinking in behind it, but in general, we're not going to lose clients to someone pursuing this type of a strategy and therefore in our mind encourage it on an ongoing basis.

Okay. and then on the – growing the loan book, particularly in the retail side, I might not be remembering correctly, but I think you guys made an effort similar to this about a decade ago to try to grow a prime mortgage book a, which didn't translate into a ton of loan growth. How are you approaching things differently than you've approached in the past on the retail side? What is it that you're going to do to compel some of those loan balances to come to you? And what is it going to end up costing you?

Yes, so I think one of the things we have to be careful with when we evaluate our success in the lending side is we tend to only look at the loans that we keep on our books. And we actually retain a fairly modest percentage of loans overall on our books. Generally, our ARMs and of course in the rate environment we've been in for most of the last decade, few people have been opting for ARMs, much of the lending has occurred in the fixed space. So we're not retaining that. So when you look at loan balances you probably are seeing an under-representation of the success we've had in doing lending with clients. I think when it comes to lending for the most part relationship is key, but you have to have pricing that is competitive in what is to some extent a commodity oriented offering. And when I look back at some of the things that we have done in the past, we probably weren't priced as sharply as we needed to be. For some of the commodity oriented product, particularly with affluent and high-net-worth investors where your risk of default is very, very low. So, there's a bit more sharp pricing that is going on today than we may have in the past. To me, that's probably one of the biggest differences that you'll see that and an expansion of our capabilities and field representation to support our field professionals with lending talent that in the past we didn't have. Today, we have a much more robust and professional team of individuals out there supporting our field.

Christian Bolu, Autonomous Research. Hi. Your market share in the RIA business post the Ameritrade deal will be between 40% and 50%. Just maybe what's your argument as to why that is not anti-competitive?

Yes, let me first say, I'm not sure that I believe that market share percentage

I think it is basically your data that you guys used to present.

Well, when I look back, I think it's at the lower ends of the range that you talked about. I guess the first thing I would do is I would say, let's talk about the size of the funnel here. If you look at the RIA business, we're in the business of serving individuals who advise other people with respect to the investment of their money. That means that the individuals who make a living advising other people on the investment of their money, they have a broad array of choices. It's not just purpose-built platforms. They have the choice to be with independent broker dealers. They have the choice to be with wirehouse brokerage firms. They have the choice to be with hybrids. I think some of the hybrid organizations offer as many as a half dozen or so different models for RIAs. And along with all this other dozens of different custody and brokerage choices, there are also purpose-built platform choices. So if you simply narrow it down to purpose-built platforms, yes, we may be in the 40% range market share combined. But that's after throwing away all of the other options that were available to someone who's in the business of managing money for other people. And let's also keep in mind that the underlying consumer, the underlying investor, nothing has happened to any of their choices. They have all the choices that they had prior to this acquisition that they can go to. So the ultimate consumer in this situation has a complete broad array. And then lastly, as I referenced earlier and Bernie will talk about more, even for those RIAs so we start with this big population of people in the business of managing money for others. And if we skinny it down just to the population who've decided to be on a purpose built platform, post combination, we will be offering them the level of service and value and pricing and capabilities comparable or better than what they have today. So, I'm not sure when I sort of step back and try to look at it as objectively as possible, I'm not sure where I see any type of loss of capabilities, functions, value, price for either the underlying consumer or for the RIA who's chosen to go to a purpose built platform.

This is Brian Bedell from Deutsche Bank again. Just coming back to what you commented on before on the revenue synergy opportunity for the Ameritrade customer base. Obviously more trading focus, but why wouldn't you be more optimistic about the wallet share penetration there? Presumably, they're doing banking somewhere else or wealth management somewhere else and now that you've got a – or you will have an enhanced range of services, should we be thinking or should we be thinking there's a better opportunity to penetrate that customer wallet share?

Well, again, we don't have the details at this point in time to be able to know the size of that opportunity. That is why when we shared on the announcement, the revenue synergy opportunities, they were very, very modest. We don't have that information. It may well be that there is opportunity and that many of the people who have more modest size, average account balances at TD Ameritrade have meaningful wealth outside or they may not. And I think we have to get the data and have that information to be able to express something with a higher degree of confidence. In the meantime, I think consistent with the way that we have tried to always communicate with you, we would rather be a bit more conservative and not show large revenue synergy opportunities without more factual information to back that up.

Thanks, and then just a follow-up back on the – one of the first questions on the long-term competitive response. You're positioning your firm more and more to compete with a broader range of financial service companies, Vanguard, Fidelity, potentially BlackRock with self indexing, if you're successful there of course the wirehouses, why don't you see those other firms trying to – obviously they'll have competitive responses, but why don't you – what barriers to entry or what barriers to them raising their ability to compete with you? Do you see going forward that you will be putting together with the combined firm?

Yes, I think there are very limited barriers for them to enter. In fact, I would argue that it's not just simply us looking to broaden out our appeal. It's them per some of the charts I showed up there. Identifying the segments where we're successful in and striving very hard to come into our space. So, I think the message that I was trying to deliver in part with the opening slides is that everyone, this industry is intensely competitive. And we're broadening our capabilities and others are broadening their capabilities and I think the idea that you can neatly slot organizations into segments that they're trying to be successful in is a decade ago thinking. And so we have to, in order to be successful, we have to be world-class and no trade-offs in all the different segments and all the different sizes, slices of clients based on asset size. And I think they all recognize the same thing, that's why there is a You Invest, that's why there is a Merrill Edge, that's why there is a Marcus and that's just the world that we live in. We feel confident in the combination of our brand, our efficiency, our history of innovation that when you put all those things together, we will be successful in serving clients in this hyper competitive world. But that is the world we live in. It is an intensely competitive world and all lines are sort of blurred as to who works in which space.

Will Nance, Goldman Sachs. I wanted to follow-up on the idea of you getting your fair share of the revenues currently going to other parties. There's always been this narrative around your retail business competing for the advisory business of the advisors on your RIA platform. I guess you've always done a good job managing that conflict with the advisors on your own platform. For some of the advisors on the Ameritrade platform who maybe are less familiar with how you go about that, what sorts of efforts for outreach are you guys contemplating to kind of manage that, that perception as you execute also on kind of getting your fair share of the revenues on your platform?

Sure. Well, Bernie and his leadership team, certainly folks like Jon Beatty and Tom Bradley and others will work hard to communicate the approach that we've historically taken which is very, very rarely do we ever see a situation where there is actual competition. And if we do see that where there is competition for the same client we will generally stand down in the retail space in favor of the RIA while understanding that ultimately the end client has to be the one making the decision. Right? But I think this notion of competition between retail and RIA. Again, it's in many ways it's sort of news that – I wanted to use a phrase, but I'm not going to use that phrase. It's news that may not be totally accurate and it's just not been something that we've seen of consequence. It's been more, and you used the word Will, it's been more of a narrative maybe promoted as a competitive tool than it has been a real thing. And in some ways it's hard for us to sort of prove the negative. We'll do the best that we can. But people will have to experience the fact that the combined organizations are 11% of AUM and there's a lot of opportunity in the 89% much more than being overly concerned about the 11%. Here's a question here with Kyle.

Thanks Kyle Voigt with KBW. Just with respect to the DOJ, some prior deals where the DOJ issued that second request have resulted in a remedy being offered or agreed upon. Assuming the DOJ is focused on the RIA custody business. Do you believe that operationally it's even feasible to offer a remedy for a fraction of the RIA custody business? And you previously mentioned the RIA business as part of the strategic rationale for the Ameritrade transaction. Do you believe that rationale for the transaction would remain in place even excluding a custody business?

So, I'm not really going to speculate on remedies. The second request is to be expected in a deal of this size. It just, there's not enough time without the second request for the Department Of Justice to do their appropriate and professional evaluation of all the implications. So, so I don't think the second request is a signal of anything other than a transaction of this size warrants appropriate diligence and that warrants the second request. Beyond that, I just don't think it's appropriate for me to speculate on remedies. We feel very confident that the transaction as announced is in the best interests of all consumers, both end investors as well as RIAs. And we feel continuing to demonstrate through facts that that's the case. Do you have a question now? I guess not. I guess one more quick one, Jeff.

Yes, one more quick one from the web. A number of firms are looking at some, maybe some newer acquisition channels such as a stock plan service businesses or other corporate relationships. Can you talk a little bit about how Schwab is participating in those newer channels?

Sure. So a core part of our corporate strategy for many years has been the capture of both clients for the retail channel as well as for RIAs via our bundled and unbundled 401(k) businesses, which combined have hundreds of billions of dollars. Many times people only look at our bundled side and aren't cognizant of our unbundled, but our bundled and unbundled 401(k) businesses as well as our stock plan services business. And they make up a meaningful percent. I don't remember the percent off of my head, Jonathan, what's the approximate percent of new to firm households, they'd come from the corporate channels? So it's, a meaningful percent. I don't remember the exact percent. But we can find out the exact percent and Jonathan can communicate it during his segment. Thank you all so much for your time. Thanks for being here today. For those of you who traveled, I look forward at the breaks to have the opportunity to spend more time with you one-on-one or in groups. And I'm going to turn it over to my great colleague, Joe Martinetto to update you on the status of the integration as well, some of our digital initiatives. Thanks Joe.

Thanks Walt. So with the introduction I got, I feel like I should issue a disclaimer at the beginning. No one's going to make you an offer you can't refuse except for maybe superior wealth management services with great price points and value. So, all right that kind of fell on his face. I didn't know he was going to do that. That was the best he could come up with in the moment. I better should move over to the business side and give you what you're looking for the update on the TD Ameritrade transaction as well as spend some time on digital. I think there's some key integration points to steal a word here around what we've been doing with digital and how we plan to approach the integration efforts more broadly. So like to be able to bring that all together. So, starting with the transaction these first couple of slides, it is not going to be a lot new, but this is a transaction that's predominantly driven by building scale. Scale can produce some relatively significant shareholder value, scale becomes a strategic valuation driver when you use it the way we have. So when you drive scale and share some of the benefits of that scale back with your clients, either through product innovation or pricing to create new opportunities to drive growth for the firm for the long run. So this more than just the unlock from reduction of expenses, this is about building a long-term scale model that allows us to continue to create and leverage that, that strategic advantage that comes with building scale. When I talk about scale, what are we talking about? Obviously the consolidated firm is going to be quite large. So, you got some metrics on the side…

Hey, Joe. Thanks Brian Bedell, Deutsche Bank. Maybe just on the integration, thinking about the integration track record, Ameritrade obviously this has been a core competency of their business model for a very long time. You guys have been much more organically focused over a very long period of time. So what gives you the degree of confidence that – obviously a lot is moving over to the Schwab platform, confidence that that will work smoothly. And then talk about maybe the integration teams that you're bringing on from Ameritrade, how you plan to leverage their skills in this and how long are those integration teams staying on throughout the integration?

Yes, so again, I don't think any of us came into this anticipating a tripling of volume on our existing platforms neither us nor they, so there's work that's going to have to get done to stress test those platforms to assess their capacity limitations to build up in places where we may not today be able to immediately double the number of accounts and transactions and make sure that we've got appropriate head room for those days where our clients get really active or for those windows of time where we're successful in the market and bring on new accounts. So there is work going on internally already to try to make sure that we've got a complete look through the technology stack to build the confidence that we can actually bring those accounts onto our platform and absorb that kind of growth with the appropriate degree of head room. With respect to the team, for now I'd say that there's kind of parallel efforts going on. So everything that's happening in Schwab is largely happening in the TD Ameritrade side. They've got ahead of their integration management office, who is somebody who has been involved in their transactions in the past. A lot of the team members that they're bringing in for the work streams are people that have been involved in those transactions in the past. So, for now I'd say they are leveraging their capabilities as best they can. We would expect over time to be able to build bonds across those teams and try to leverage some of the best of their thinking as well as ours. As we get through the DOJ review, it will be easier to share additional information and start to more closely work directly with them and clearly post-close those teams will continue on into the future and both be working for the success of the consolidated entity. So we would very much look to take advantage of the knowledge base they have built up around how to manage these kinds of transactions. Even developing a set of guiding principles I think is a best practice that we may have stolen from them that – what we're actively communicating and trying to make sure that we're getting the best of their knowledge as well as the best of ours as we work our way through this.

Hi. Mike Cyprys from Morgan Stanley. I just have two questions maybe just first on the deal. So it sounds like you've decided to go with the Schwab platform, but also it sounds like you're open to perhaps using some of Ameritrade's systems or platforms in some cases. I was just hoping you could elaborate a little bit more on that in terms of how you think about it and what sort of approach would you take and how you'd go about doing that?

Yes, so it's – I'd like to stay at the capability level and away from the specific platform level because it's way too early to make a commitment to say, we are going to port that platform over. What I think we're focused on now is to the extent that there are specific capabilities that are really important to clients, we're going to try to identify those first and then make sure that we have integration plans in place that allow us to deliver those capabilities. So if that means keeping a thinkorswim platform alive, because that's the most efficient way to deliver those capabilities, that's a choice we might make. If that means taking some of those capabilities that don't exist in a Schwab platform today and embedding them in a Schwab platform, that's a choice we may make. And those are decisions that have to be made over time as we get deeper into understanding each other's capabilities. So it's too soon to comment on specific platforms, but clearly with the retention goals we have and our focus on client experience, there's no way we're going to abandon significant capabilities.

Great. Just the second question was just around kind of going back to your digital initiatives, I was just hoping you could talk a little bit about the technology and the product teams, how you have organized them, how you set that up and how that has evolved over time. So for example, do you have specific teams and people focus on certain aspects of the workflows and client journeys for example, how you are sort of thinking about that and how that's evolving?

Yes, so we stood up in enterprise internally called digital services and pulled all those client facing technology channels together into that organization, so schwab.com and sac.com, mobile, the ChatBot, all of that is now sitting inside of a single enterprise. We have organized that by client-facing segment, largely with some utility capabilities. So a portion of the reason we're able to go faster is we're thinking in more of a utility or service oriented architecture where something like an account open capability is best built once and leveraged in multiple dimensions across multiple platforms as opposed to building a unique client or account open capability for every specific silo. So we've largely organized that way on the digital services organization. We've enhanced their capabilities and skill sets either through recruiting or training around product management. So in a more agile development world, having strong product managers who understand both the client needs as well as the technology platforms is critically important. So they are that bridging organization and product management. And then we've also built up a pretty significant team around user experience and client experience. So a lot of that had been outsourced on a project by project basis in the past. And we found by bringing it in-house, it has allowed us to build some expertise that we're able to again, leverage more universally across the broader set of platforms. In the technology world, then we have been a large scale adopter of agile, so we've got a very large footprint of teams that are structured in agile development capabilities. We are still working on I'd say transforming our understanding and knowledge around making the transition from what was more of a classic product development shop into something that operates more like a platform management shop. And so making sure that we've got clear lines of sight into exactly what each of those teams are doing and which platforms they are decked against. We're I think, still somewhat inflight, but that's the direction that we're going. So it's a much more platform oriented approach to development and product management as opposed to, which was a much more sort of project oriented approach that we took in the past. But along with that comes some real advantages around being able to think longer term about how do you deploy some of these platforms. In the past, I would say that we often built what got funded. So if an organization had money, they could get something built. Today there's a much stronger front door process to say, where does that capability sit on the roadmap? And we're going to build the things that are most strategically and competitively important first. Just having money isn't enough to get you to the top of the list anymore.

Hey, Joe, Rich Repetto. So you started off Joe talking about the long-term scale, contributing to long-term strategic value, not just pure scale but into strategy. And I think it follows on to a lot of things that Walt was saying in return in sort of some of the benefits to clients. So you've been very transparent in the past about messaging, pricing more aggressive pricing. And I guess could you give us examples of what you're talking about here? So we get that message clear and I got one quick follow-up.

Sure. So I'd say, I mean there are multiple examples over the years where I'd say that's exactly the strategy we've followed where we look to build additional scale benefits and we don't drop it all to the bottom line. We are making that trade-off around what do we invest in, how do we invest it, whether it's in new technology platforms or movements in prices or new products and capabilities, but really trying to identify those things that are important that we think are going to drive long-term growth, freeing up enough capacity to make those investments to continue to keep that virtuous cycle moving as opposed to trying to cut ourselves to greatness by reducing expenses, dropping it all to the bottom-line, but under investing for the long-term benefit of our shareholders.

Okay. And then my follow-up would be, you talked about the default platform being – and I respect and that certainly when we've watched Ameritrade integrate with Scottrade, that was one of the things that allowed them to, not that it didn't have a hiccups, but allowed them to move quickly, is that they didn't have this debate about which was the resulting…

Core platform.

Yes core platform, I guess my question is a little bit about what you asked before is like how much of that disintegration, even at this point when you're coming up with ideas like that, this is a guiding principle, that Schwab's platform is the survivor or in the general sense, like how much input are you getting even right now from general guidelines like that from the other side that's had a lot of experience at it.

So I'd say we've shared them with the other side. But that there are there some places and that one in particular where I'd say we probably took a heavier hand in saying this is the direction we want people to go. Without getting too deep into this both firms have been making modernization efforts over the past several years and we find that there are parts of our stack where we're ahead and parts of their stack where they're ahead. So there's not a clear superior platform, but there are elements of both that are probably better or superior to the other. The places that probably wouldn't be a surprise because of the focus of the Ameritrade firm. They are probably further along in some of the modernization work around a lot of the trading capabilities. We are further along in some of the wealth management capabilities and some of the relationship management capabilities. So, how do you pull these pieces together, becomes, the question of the day beyond some of the client facing capabilities there are absolutely some components of what sits in their technologies today that we would want to evaluate very closely to make sure that there, if there are opportunities there for us to get significant advantage that we will look to deploy them. So I'd say even though we have said core books and records, core processing platform is Schwab we are just starting conversations now around those, those deeper components. And if we can enhance the quality of the platform and still hit the timelines and the targets we are very open to picking the best of the stack on both sides. But again, it's got to be, it's got to have enough advantage that it's worth any potential constraint on the timeline.

Mike Carrier, BofA. Just maybe on the, the digitization. So when I think about you, your business, a lot of financial companies, there's a lot of opportunity there. So, maybe a few questions on that and you can give ballparks if you have them, but just trying to figure out like how many of the areas that you've targeted, you are already like live, you mean in terms of having those efficiency plans in place what's usually the path to get like kind of uptake once you do that, so you start seeing those benefits. And then in terms of forward-looking any new opportunities, how does that get to you? I mean from like the force, in terms of new areas for potential efficiencies.

Sure. So yes, we have a very active client set and I think I would say that we’re even sometimes surprised that we will turn on a capability and find people who are using it before we've even made any kind of announcement. So status was one of those, we turned it on and we sort of soft launched it. And the next thing we knew we had a lot of people in the status engine already starting to use it. So that gave us confidence that we should continue to develop it and continue to enhance it. And it's different with different capabilities. There are some things where it takes a bigger push in some kind of awareness raising. There's other things, where the changes are more incremental and to the extent that you can sort of put them in the process that the clients are already using and in essence, maybe nudge them toward an answer that's easier. We can find that we can drive adoption pretty quickly without having to do a lot to really sort of raise broader-based awareness. So it really depends on the specific capability and where it sits in the transaction flow that the clients are using, how big of a push we'll make around awareness and whether we think they're going to find it on their own and start to deploy it. And I think ideas come to us from a lot of sources, but the number one source of the things that we work on come to us from clients. So, we're in a constant feedback process where we're listening to what the clients are asking for and trying to find ways to prioritize those requests. Sometimes they may not even know they're asking for them. So like some of the work we did on the mobile platform around trying to make it easier to fulfill your service experience completely in that channel. We noticed that there was a pretty high fallout rate that was driving call volume that clients didn't really want to have to make that call, but they did it because they couldn't do it in the channel. So, some of it is identifying through their actions where there are things that we are maybe not doing as well as we could or hearing directly from them, Ji, we wish you had this capability. Those things will get a high priority in the prioritization process.

Will Nance, Goldman Sachs. Joe a year ago we heard you talk a lot about the data center initiatives that you guys have to move a lot of your applications to the data center. My impression from that discussion was you had your hands pretty full at the time and I think it's a fair statement that you have more on your plate today. Could you just talk about the level of resources, staffing that you have in your team and how do you think about keeping some of those, I think you were talking in terms of two to three and five to six year timelines from some of your existing technology initiatives. How do you make sure that we get to the end of the Ameritrade integration without in a more tech debt than we had at the start of the process.

Sure. So some of the things that are going to continue to move on regardless the data center is up. It has its core technology stack in it. We're starting application migration. So I mean some of these things, a year later or in some cases, two or three years later have moved pretty far beyond. It would be naive to say that there will not be some interruptions in some of the modernization processes as we work our way through integration. But there may be things that we do in integration to prioritize some of the modernization work. So to the extent we identify things that are capacity constraints that, we're going to want to enhance that work may come forward, other things may slip back. I don't think we're going to be able to bring enough resources to do all of it, but how do you prioritize what needs to pull forward and how do you get maybe twice the benefit out of some of the work is part of what we're trying to identify now. Clearly we've set aside a fairly large bucket of money to work through integration. So to the extent that resources are necessary, we're going to be able to secure those and pay for those inside of that number. The challenge really starts to become subject matter expertise. So where do you start to hit limits around who knows how to address that specific problem and there may be some resourcing constraints that will get pulled into integration and then ultimately move back to some of modernization. But I'd say that at this point, given what we know about how far along we are, we expect to continue to make progress, although it may be slightly diverted in places based on some of the pieces that need to get accelerated for the integration efforts.

Yes, Brennan Hawken, UBS. Two questions. Number one, the new account opening process, the electronic process, now elimination of paper, it looks like a nice step forward, really cool. But when you guys talk about the fact that you're not going to need to repaper the RIA business, do you mean literal paper or do you mean that – that this process will be automated therefore the customer doesn't have to take action because I think..

Let me, let me step back and so if you are an advisor who is leaving a wirehouse and going independent, it is a very cumbersome process. Right? So any you talk to any advisor who has gone through that and Bernie, if I get ahead of myself, please whack me for what I'm saying. But literally for those advisors, it's often a very paper based process where applications are printed. It can be pallets of applications that are mailed out, collected back, processed. It's a time intensive process for the advisor and for us. And I think a lot of them have that in their mindset as they're thinking about going through an integration. The integration should not be anything like that process. So this is two broker dealers under the control of one company. We expect to be able to get approval to do this on a negative consent basis. So, we should literally be able on the day we're ready to convert, move those accounts from one platform to another and they should be up and they should be working and it shouldn't require additional applications. So it shouldn't, not only is it not paper-based, it should not have to go through an automated application process for the vast majority of accounts. I can't say that that it's 100%, but for the vast majority of counts, both on the retail side as well as on the advisor side, we expect to be able to bring the accounts over in an automated fashion.

Okay, great. Thank you. And then my second question was around the integration process. There is a perception amongst investors and it's probably a fair one that Ameritrade's got a lot of experience in integrating deals that Schwab has less experience in some of the prior deals maybe haven't – the integration hasn't gone as well, which has led to some issues. And so how can you assure that the adoption of the processes, the input of the ideas is as pure, right? Like based around just the purity idea versus sometimes people get parochial or territorial and they want their process to be what governs, they want their system being to be what governs. How can you ensure that's as agnostic as it should be in order to get the best outcome?

I don't know that I'm going to be able to give you an assurance that you're going to completely buy, but this is so far a pretty open process. So we're working closely with our peers at the TD Ameritrade organization. They're a great company with very proud organization. They want to have this go smoothly for their clients just like we are a proud organization and we want to have this go smoothly. So everybody incentives are focused on making sure that this integration goes as smoothly as possible for the clients. So yes, hey, where there are people, there are always going to be politics. I think, yes, part of the reason that I'm standing up here talking about integration, my job is to try to ensure that the process works as effectively as possible across all of those work tracks across both of the organizations to get us to a place where the integration is successful for the benefit of our clients, for the benefit of our shareholders. And so we are putting a lot of time into making sure that we've got the right processes in place, we're using the right advisors, we're picking the right models, communication processes are getting built early. I think we're doing everything right at this phase to ensure success. We'll continue to provide you with updates as we have meetings like this on, evolution on timelines and dollars and every anything else. It will be up to you to ultimately judge. But it's got our attention and when I say that it's everybody in the executive leadership team. I mean, you look across the tracks and the track leads and our executives are actively involved in making sure this transaction is going to be successful. And maybe in a way that hasn't happened here before. You got on Jeff on the web or nothing. Okay. Brian?

Just maybe back to the attrition. It sounds like obviously with more of the migration over to the Schwab platform, the attrition risk is really higher. It seems it would be higher in the Ameritrade customer base. However and we could see in their metrics in December that the customer attrition has started. Again, they're saying obviously that's normal for the course of their integration experience. But pre-close how are you thinking about managing that attrition if it's coming from the Ameritrade size and the client base is smaller when you actually close it. And then philosophically for customer service, as you go through the integration process where, how are you thinking about enhancing or keeping the customer service levels very high so that you can manage that attrition at the combined firm. And then it's probably too early to talk about the, when you are actually converting these over. But if there's any sense of a timeline on the actual conversions of the systems, if that's in year three or potentially earlier.

Yes, it's too soon. We're going to need a little time to build those plans. So at this point we're still in the, we are active competitors in the marketplace, so there is not a lot of conversation going on around what they're doing to preserve their client base versus what we're doing in the market until we get approval from the DOJ, we are preserving competition in the marketplace. So that's, it's a little too soon for us to say that we are working together to try to manage that risk. They're taking actions on their side as they see fit. We're taking actions on our side to manage our firm. And, that's probably about as much as I'm able to, as I'm looking at my lawyer. That's probably about all I can say on that topic. So beyond that, things like service, they have a very strong culture of service just like we have a very strong culture of service. Ultimately, we're going to have to make decisions around how do those organizations come together to be able to support the consolidated client base. But again, this isn't really rocket science. I mean there's, there are lot of models that you can deploy around what, how do you build staffing to be able to provide the appropriate degree of service? I think we're both pretty well developed at this and offer really high levels of client service. There's no reason I could think of that, anything in the integration would degrade the service experience to the client set. I got time for one more. If not, I can say let's go to break and we'll see you back in what, 15 – 15 minutes. Thank you all. [Break]

Welcome back. Welcome back, everyone. Grab the last coffee. Really it's a great opportunity to talk to you about the retail business. I really do appreciate it. I've been at Schwab almost 20 years. In fact I think my 20 year anniversary is Friday. So Bernie, if you're working on a card for me, I will appreciate it. But I've been in and around retail the entire time and I can't think of a more exciting time for the retail business as well as for Schwab in general. We made a series of moves in 2019 to position us for 2020 and beyond that were really truly remarkable. You've heard a lot about USAA and TDA and I'll talk more about those and obviously answer questions as they come up. But I think it's also really important to talk about some of the bold marketplace moves that we took in 2019 to just strengthen the core retail franchise. I've spent a few seconds on those. I'm just, these are just a few highlights, you know this well, but we became the first major firm to remove commissions across the board, really changing the industry forever. We also were the first major firm in 2019 to launch subscription based pricing, fundamentally changing how planning is both paid for and delivered. And we've seen some really, really strong success in terms of flows into Schwab intelligent portfolios premium as a result of that move. We substantially enhanced our lending offering. Walt talked about this a little bit, but in the summer of 2019 in partnership with our folks at the bank, we did a couple things. We significantly reduced our rack rate pricing for our clients, but we also significantly, and maybe more importantly enhanced our relationship pricing. So we used to…

Jonathan always does that he switches out my mic, so I can’t say as much as he says. And then we get started here. I really appreciate as always the opportunity to be in front of all of you and the thoughtful consideration you give to our different businesses, its fabulous conversations as well as talking to you from stage. In fact, the questions today are awesome. And one of the things I want to highlight and Walt give me a great lead in for this, I think is the fact that we get to answer these questions here. And too often what I do is I read things out in the marketplace and I read things that I don't necessarily think people have taken the time to ask the appropriate questions to really understand what's going on and what we're trying to do in this business. And so I just wanted to start with a little definitional on some of the things I've been reading. And I don't think people have taken the careful attention to understanding who we are and what we stand for. To start with, we love small clients and I hesitate to even use the word small because these are clients that they're all in. This is their business. This is what's so important to them. And the “under $100 million client is a sweet spot”. It's how we built our business in effect from the beginning. And we'd like all sizes of clients and because it is such an important part to help someone run their business and the responsibility we feel for that, we have to have great service. There's just no question but having great service for that group of clients. Often we talk about technologies and where we want to go…

I think I got the mic here. Craig Siegenthaler, Credit Suisse. Question for Jonathan. I want to see if you could provide an update on the Fintech landscape, post the commission cuts in October. I want to see if you've seen any kind of delta in flows activity between your business, the industry and some of these tech startups with sort of growing assets?

Yes, I mean, we haven't seen anything material since the commission of material change. But I would say they're worthy competitors and they're out there gathering assets where both couple of ways. One is originally through low price and they're continuing to bring low prices now on the lending side or cash management side, certainly in the case of – one of them, Robinhood. And so – there's also – there's a brand value that they bring to the table that – for some clients that they're attracted to. But overall, I would say, first from a broad competitive standpoint. I don't spend a lot of time thinking about any one competitor because we operate in such a fragmented market that I'm looking at wirehouses, I'm looking at fintechs, I'm looking at fidelity, TD, E-Trade, Vanguard, banks and who am I missing? And it puts me in a pretty lucky position because rather than having to focus on one individual competitor and how we are going to win against them, it's much simpler to focus on what the client's looking for and what the client need is and serve that. So, I would say, we watched the fintechs, how their growth has been, some of them had a lot of accounts, question a little bit how value of those – how valuable those accounts are, but they've certainly publicly announced some account growth. And we've watched it, but nothing material changed since the commission move.

Hi, there.

Hi, Rich.

So the question – thank you for breaking out the under a hundred million advisor segments, so 153 billion in assets, still small, but when you compare Ameritrade as I – overall I think somewhere around 650 advisor assets. So I guess the question here is Bernie is how we – this is still small to you, but you’re taking on a big, might double the size of whatever and how you – and you said you want to grow services or at least keep the same amount of – or grow the services. So what can you do? You've done a great job already I guess sort of putting this sort of the news flow about the small advisors segment to rest, but a little bit more how are you going to service this segment when there will be a big increase for you?

Yes, I think it's a great question, but when you look at the segment itself, we have already begun to do so many things for that group of client that as you bring them together and we add digitalization and more scale to that, I think the opportunity there is, is helping them to grow, which is what advisors always ask us to do in reality is to help them grow. And there'll be a lot of competition within that space because what you're seeing really is, is that the space is getting a little more crowded by that those other rent me platforms, so I hate to call it that kind of thing, but the LPLs and the Raymond James wanting to have custodial platforms that can retain those assets quite honestly that had been being a one into the independent space. So we will have fierce competition there. And so, our service level will have to remain extremely high, safety and security of course will be of paramount importance to that group of clients. But one of the things that I touched on, which I think is really, really important to consider, we've spent a lot of time on intellectual capital over the past years. And when I talk about that I can talk about competitive things and growth things like benchmarking, but we have a consultative program for cybersecurity awareness. And I think those are going to be the things that I get excited about bringing to that group of clients and then allowing for the digitization really to take care of the scale of executions and those kinds of things. We've got a lot more smart technology coming quite honestly and we think about digital assistants and chatbots. And these are not things that necessarily people look at and understand upfront what that benefit will be or that scale will be. But I will tell you, I sit with a lot of these small clients and if they've got to call you, they're really kind of unhappy because there's only two or three people in the office. What they really want to be able to do is go out and check digitally their status and just understand what's happening with it and save the questions and the interactions for different times, so they could stay focused on their clients. I think we're going to net a lot from that as well.

And just one follow-up for Jonathan on the retail side. So now with the zero commissions, we've seen a big uptick in activity, I guess strongly what you'd expect in December and then big upticks in January. So I guess the question is can you give us more color and insight on what's dry? Or these just – it appears that trades aren't just being broken up, there's more order flow behind it as well. So what does it do? Can you give us more insight into who is trading? And then how's it impacted other Schwab products that these people may…

Sure. Let me just answer – Craig, I was thinking about your question. I thought you were asking me what are they doing different as a result of the zero commission? I think you might have been also asking what are seeing differently. And I just want to close that. We certainly saw some wins from the folks who are out there offering zero commissions. Right after we went to zero, we saw significant numbers of clients coming to Schwab from those firms. It just doesn't add up because they're still small firms. They're still small accounts and we operate in a very complex, fragmented, competitive environment. So I want to be clear, when we went to zero, we definitely took away an advantage of some of those fintechs and started to see some volume coming our way. In terms of, the activity that we've seen post zero commissions, it's hard – the analyst and me, it's hard to analyze this early. There's lots of factors at play, investor sentiment, some of the market movements that we've seen. There's lots of factors at play beyond just the zero commissions that drive client fundamentals, but we did see really strong client fundamentals in a fourth quarter, continue to see strong numbers in January. In our case, it's not huge amounts of incremental trading. That's not our client base, but it's significant new engagement. What we've learned over and over, I think, at Schwab is when we do something disruptive in the industry, clients and prospects tend to lean forward. They tend to engage, they want to ask what's going on, they engage with their portfolio and that causes us to have meaningful conversations, that causes them to do something different. We've seen significant upticks in advise flows. We've seen good flows into our automated solutions. So I would say, the zero commission move was a significant move that created news in the marketplace place position Schwab as a leader that caused people to lean forward and engage at the right time when the markets were moving positively. And some total of that created some strong numbers.

And I don't think the advisors change trading patterns, but they thanked this for removing an obstacle that had existed and they’re trying to win individual relationships from models that didn't necessarily follow.

A question for Bernie. On the RIA, it's Brian Bedell from Deutsche Bank by the way. On the RIA, the concern from some RIA is that they prefer to use two separate platforms, just from a risk control perspective from two different owners, let's say. So what do you – how are you assessing that that concern right now? And what other major concerns are you hearing from the RIAs about the combination? And how are you addressing those concerns?

I think the key thing is there was a point in my history many years back where we're having multiple custodians felt like it was – it insured something, created some – perhaps a relative – a surety that that perhaps they had a backup plan, if you will. It's just – I hate to say it, but it's just – it didn't make sense then it really doesn't make sense now. Having a single provider and having the scale and efficiency that comes along with a single provider coupled with the fact that having someone who's so serious about safety and security and what they're doing is – I think it's going to be a huge benefit for clients to do that. Advisors, if I'm hearing things, we're actually hearing a lot of positivity from our clients. We're not obviously talking to all of the TD clients, but we are talking to some of the dual clients, is they want to know that the technologies will be there to bear. And we're committed to making sure that that heavily used APIs that exist within the models or use that we're incorporating them in. It go as far as saying things like RIA bell, which we think is an incredibly good product in making sure that that comes across. These are the kinds of specifics that we will get into and they would really like us to get into. And the message we want to be out there is we're not going to take away anything that would limit small advisor from continuing to do business. It would make no sense for us to do that. It has to be as good or better or exacting to what they're doing now.

And then on the cash offer side, that was obviously a topic in Walt's presentation. Are you seeing any type of that activity on the RIA side from other competitor – competitive RIA firms? Or is it a different sort of angle from the other firms in terms of trying to attract the Schwab and Ameritrade customers…

I think we're well documented on our cash strategy and making sure that there's a great cash options available to advisors that can extend the yield on the products that they're dealing with and purchase funds are one way to get there. Obviously, we have a bank sweep product. And so, I have actually heard less and less from advisors on that front.

I think Brian the question is around cash offers…

Yes, cash…

Like in retail, we have competitors buying our business with cash. Are you seeing the same?

I went down the cash path.

It's so interesting.

We see a little bit of that competition typically on a transition on someone who is coming out from a captive model and there's a little bit of deal time, but we compete well within that space. And in the same way, I think you've heard explained by Walt and Jonathan, we try and make sure that it makes sense to do the business with the – in the way that it's being represented. We're not – and we won't see, I think you know this, but we won't see advisors being bought away with their moving assets. It just – it doesn't happen because, let's remember, this is a third party payer model, right? And so in effect, the clients of advisors are paying us and there's no way that they're going to want to transition those. So it's really all in that space of what we call going independent where you would see some competition on really deal sourcing and perhaps a monetization of the transfer, which is a competitive market that we've been in and we win a significant share in.

Thank you.

Mike Cyprys from Morgan Stanley. I just have a question for each of you, so maybe just starting off with Bernie. When you think about the Ameritrade transaction, I guess, how does it allow you, in your view to better serve the smaller end of the RIA marketplace in a way that perhaps you couldn't in the past?

Well, I think we have a huge opportunity to scale in this space and I think that's part of the opportunity, but I also mentioned some of the services that we've been building. I always refer to them as intellectual capital. It really has to do a lot with consulting and virtual consulting and making sure that we're educating the marketplace and making sure we're building strength. I talked about succession planning. I think it's incredibly important on the smaller end of the space that we're building good succession models that exist for these firms and making sure that we're scaling into the regulatory and compliance space as well. And I think all of those things we can help at the collection of our clients. One of the things that we've learned with advisors is they grow faster when they network with each other. They grow faster when they get to know each other. We do things and this is just one example of things, but we have many advisory boards and groups that we bring together, communities that we bring together. We so often find that those communities end up coming together and after some period of time we find that they're doing deals with each other or they're joining each other and they’re creating stronger organizations. So really, I think one of the opportunities here is, is strengthening sort of the independent space.

Great. And just a quick question for Jonathan. You mentioned around the organic growth opportunity. You mentioned financial wellness. I was hoping you could talk a little bit about more about that new initiative there. How you're thinking about that? And then just on the stock plan and 401k if you could maybe help to flush out kind of how large that business is today? How that perhaps has grown? And how you're thinking about increasing the size of that funnel?

Yes. So around financial wellness, it's we're in a great position where employers are increasingly asking for us to help their end participants beyond the 401k or beyond the stock plan. And I think those are sort of the ideal relationships to have. And so, we're doing a couple of things. There's certainly – there's product development. There's digital development. There's people. Those are sort of three things you'd expect. We also built an organization around it. So I mentioned all those teams were putting up to Catherine Golladay, EVP in charge of all three, but also within my – within my world I established a team that is focused entirely on that retail prospect conversion, of which the B2B channel, the B2B channels are a significant part of it. So, we're putting resources against it. We're building digital capability against it. In some cases, we're putting people on site and some of the locations where particularly in the stock plan services businesses where the corporate parent is willing wants us on site. And then we're bringing everything that Schwab has to bear to those conversations. I mean, financial wellness is an overused word. It's what Schwab does every day for our clients is financial wellness. And we have an incredible set of capabilities to bring to bear to those participants to help them beyond the plan. I'll narrow in on a couple, but we're much bigger than that. But just Schwab Intelligent Portfolios and Schwab Intelligent Portfolios premium, what an incredible way to help somebody getting started in their career. If they have a stock plan account with us, they invest restricted shares, don't know what to do with that money, we're there. We can put it in an automated portfolio with no advisory fee. We can give them a comprehensive financial plan with a simple small setup fee and $30 a month thereafter. That's a pretty compelling solution for clients. And so we're putting a full court press on bringing that to the participant – for the corporate plans who want it and increasingly they more and more do.

Thanks. Brennan Hawken, UBS. Bernie, a couple questions for you and also maybe a request. When you were talking about the multi-custodian use, you expressed your view about how it's simpler and what have you. What I think might be really interesting to see eventually or if you have some statistics around it, like how much of your customer base actually does use multiple custodians? Is there a size threshold or above a certain size? That would be really helpful. I appreciate that it's operationally more simplistic and maybe the risk of a counterparty is lower than it used to be or what have you. Thanks to the resiliency of the financial system. But it would be helpful to see some of those stats I think.

Yes. And we certainly can get more public with those, but a high number of small clients tend to use a single custodian. But the thing you can never forget, and it's been said many times here is the end client, the client of the advisor really chooses the custodian and they always give them the option of who they'd like to choose. And so sometimes you find advisors, who have a very small position with several custodians because their clients have come from there and they'd rather stay with them. But I would say that in the under a hundred space, which we really have there is probably 80% to 90% of those clients are single custodial. And then as you grow up into the higher end space, people tend to think of this as a one, two, three kind of thing. We have large relationships that have upwards of 40 or 50 custodial relationships simply because they've begun to advise on the wealth management and yet the assets may never move. We have – if you look at our clients, you will see LPL looking like one of our largest clients because they have bifurcated relationships, the hybrid relationships. So it's an area where clearly it becomes a bit more complicated than just thinking about it as one of these – this small space of purpose-built.

Okay, that's fair. There was some reference before from Walt and we heard about some chatter on lending and that opportunity in your business. Love to hear some more about that directly from you. What kind of demand are we talking about? What sort of loans do you imagine this is going to – what sort of loan growth are we going to end up seeing? What kind of loans do you expect will drive a lot of the growth? And when we're thinking about this opportunity over the next few years, could you help us size it?

Yeah, no, it's, advisors have long talked to us about the fact that they would like to have more banking capability and mostly because they either are using smaller regional banks. And that may or may not satisfy their needs, but they certainly don't want their clients going out to larger banks and alternative as we've seen more enter into the space alternative platforms for their wealth management services. So, we're working closely with them. We're going to our advisory board soon. One of the biggest – bigger challenges I would throw out there for you is the fact that they have a high net worth group of clients by and large that don't necessarily have income. And so, nontraditional or adjustable or mortgages that in effect can handle that type of client. We've had tremendous success with our pledged asset lines. We think going into the space of making sure that there are credit lines available to clients from a bank perspective on a high net worth side is incredibly important. They all can have margin now, but some prefer to go down the banking path. We think that's opportunistic as well. And this is all on the client side. One day, we also want to sort of broach another side of the relationship in how we potentially lend into advisors and what we might do there. We do a very, very small bit of lending on the crossover on the on the transition side for advisors that are turning independent startup costs kind of thing. In fact, we do that through the broker dealer, but they clearly have an interest adjustables of varying rates. We talk a lot about. They are extremely interested to drift a little off the lending side in our trust offerings and trying to make sure that they can work with us through those. Many of them have businesses that could be supported by trust offers. We actually see it as an additional asset opportunity, so that they can consolidate more again with us and, of course, administrative trustee where we in fact connect as the administrator on their behalf and they know that we are a friendly influence in that relationship and that we're not going to come trying to take the assets away from the advisor themselves. So there's a lot of banking opportunity built into all of that. Opportunistically, you have to build these things and understand what market you can make from them. And that will take some time, but Paul Woolway and Steve Anderson, myself, Jonathan, we're working hard and we're working again – almost as we talked about digitization, we're working hard cross organizationally to make sure we're building single solutions that make sense for a wealth management client of retail, wealth management client of an advisor that they have to be different.

I was going to say a lot of the stuff you referenced is the same product that a very affluent sort of likely self-directed type client in our retail business that's interested in. So having taken a one Schwab view is critical. I mean, I would just say on the retail side, we've seen – I said we've seen our client's willingness to do more than core investing with us or do more investing with us and even do lending with us. We just need – we need the product to serve the need. And we've also seen on the flip side of that competitors go after our assets with very aggressive lending offers and we need to have it both to serve the client need, but also to protect that – protect us from that strong competitive force that we feel.

I don't think we can yet sort of put a number around it.

Mike Carrier from BofA. Jonathan, maybe just on the competitive side you have some of the bigger banks, they've been gaining some, I would say, wallet share from clients, not necessarily from the wealth side, but just from the banking industry. Some of that has been driven by the reward programs. I just wanted to get your take on when you think about that type of a competitive environment, is it something that like Schwab can go after or can institute?

The wirehouse competition – the wirehouse bank, I mean the major banks?

Yes, the bigger banks, yes.

Yes. I mean they – they have made significant investments over the last several years in digital and bringing pricing down and leveraging their distribution networks and leveraging their rewards programs. And they clearly are going after – among other things that affluent, mass affluent target with that. And we see that competition every day, definitely. Yes, I would say that we continue to win. And when we win, I think we're winning largely because a couple of reasons. One is I think the sum total of the value proposition that we bring to the table with no trade offs is still a very strong relative to what they're putting in front of their – in front of clients. I think our singular focus resonates quite a bit. I mean, we go to market with one goal, 20,000 employees come to work every day to help individual investors achieve great outcomes either directly or through an intermediary. That singular focus I think is powerful and I think our clients see it. They hear us say it, but more importantly, they see it and experience it. And I think that's been helpful, but there's no doubt the major banks have, over the last several years, made significant investments to bring some of their pricing down, to invest in digital, to leverage their distribution and to go after our clients. And I think that's why a lot of the messaging that certainly I meant to communicate and I know Walt and all of us is despite the very competitive environment we were staying on offense. So the moves we made from zero commissions to subscription based pricing to intelligent income to fractional shares, to more franchisees, I mean these are all examples of staying on offense in the face of strong competitors.

Thanks. Firstly, Bernie, thank for that presentation. It was a pretty insightful going through the industry value chain. My question is how do you think about competition see from the likes of LPL who are trying to do more for smaller advisors? They're trying to take away a lot of the operational complexities that they have by offering the virtual services. I think of it as more of almost like a dynasty financial type service for smaller advisors. Is that something that's used as a risk to some of the flows you're getting from the IBD channel? Or do you see yourself as doing more for advisors than pure custody over time?

They are very, very motivated and the price of entry into the custodial space has never been cheaper and easier. The ecosystem has grown up aggressively in the marketplace and we will see a continuation of those firms getting better at what they're doing. And we will see a continuation of new names trying to come into this space and new combinations of names as you're highlighting, when you start to think about bringing in what we consider to be in the industry, a turnkey asset manager coming in and joining perhaps with an independent broker dealer model. We know that the wires, I mean, I'll go back to the Goldman example I've used. Clearly, they want to be in this space at a different level. Obviously, they're a little focused at a higher entry point for their clients, but they will be in the space. Raymond James continues to evolve and look for what they're doing. We know that they're out there in some cases and to get back to the cash question again. We know that some of those firms are out there buying teams and buying cash flow of teams in order to be competitive in the space and trying to prove that they're not just transferring assets, which has been the LPL challenge, right. LPL has been transferring assets from their captive over to their independent. They need to show growth that's outside growth coming in. So I think that that will continue. I think about the Commonwealth's, the Wells Fargo's all of these firms are going to need to look for solutions or they are going to continue to attrit assets, which again is why I did – a little bit more I think on the landscape of the industry and how it will continue to evolve in technology capital and more providers are going to keep pushing in that direction. And to kind of answer the last part of your question is, and our intent is to be on the offensive and staying ahead of all of that and trying to make sure that we're driving the best possible experience that we can creating – I will go back to the word scale, but our size is going to help us. I know that. And being known for being in all sizes of the marketplace, I mean, one thing somebody does want to do is necessarily find themselves in the under a hundred million dollar space at an LPL and realize that they can't grow up there, a couple of firms have done that. And then when they can't grow up there, they have to change platforms. They have to move clients. They have to do something completely different. And so, that's – our objective is to make sure that we're attractive from day one all the way through the life cycle of the firm.

I think Jeff has really hard one for you.

A couple of web based questions for – one for each. Let's start with Jonathan actually. Can you elaborate on the segmentation initiative? Perhaps talking about what will be different than what Schwab is doing today and perhaps any insight on ultimate goals or targets?

Yes, I would keep it pretty general at this point. I just would say, we have a history at Schwab of delivering every single client a great experience. And I think that's core to what we do. Our service levels in the call centers are how we treat clients and branches. How we've priced historically, even before we eliminated the commissions, everyone paid 4.95. So the most important message I would say is we have a sort of enduring commitment to delivering to all of our clients a great experience. And we do that because we think it's right and it's the right thing to do. We also do it because our clients and many of our affluent clients really respect that that approach to the market. So I think that that is still – that’s sort of – that's a permanent commitment. But that doesn't mean that we can't do a little bit more segmentation and we've started a little bit. We have a Chairman Circle program that we don't wildly publicize, but we – in New York and California and in some across the country where some of our very high net worth clients are in what we call Chairman Circle. And with that are some added benefits and some events and things like that. So we're looking to sort of go from that that step to a little bit more segmentation of service models, potentially access to certain products to some of our high net worth clients. And the goal there being again to make it clear to them how much we value that business, to protect that business from a non-slotted competitors, who certainly want it. But we won't go so far as to sacrifice the core experience. Many of our clients, many of our affluent clients at Schwab started as small business owners or started as small clients and a lot of the reasons why they're still here. One of the reasons is, is they saw us as there for them when they were just getting started. So segmentation doesn't mean walking away from that commitment. It means adding some service models and product that maybe from a scale standpoint only makes sense at certain asset tiers and you'll hear more about that as we unfolded.

Thank you. And then one more question here from the web. And perhaps Bernie, you can start and Jonathan you might want to weigh in as well. Can you speak a little bit about the current referral program as well as and how Schwab manages any perceived conflicts of interest with its proprietary retail offerings?

Well, I think, we've had a tremendous amount of success in the marketplace and referring assets to advisors that were individuals, who needed something more customized and perhaps more sophisticated. We've probably the highest flow in the industry going into that model and we've done it for 20 years, quite honestly. And some of our competitors have built programs like that, but not a ton of them. And it's a highly thought of program, but more importantly, I think it speaks to the point I had just made that you can come to Schwab as Jonathan was just saying as well as a client, maybe at the beginning of your investing career and make your way all the way through and ultimately end up with an advisor and still be part of slot of your same Schwab account number in effect. I think that's pretty cool to be able to go through that process.

Yes, I mean I think the [indiscernible] advisor program has been working really well. Flows continue, so advisers who are in it are very happy with it and we continue to make enhancements. So the program is working well. And the question of conflict, Bernie and I have – we talk to each other every day. If anything ever comes up, we're on the phone and we resolve it, but it rarely to things come up. And I think it's partly because we have – we do have a different approach, RIAs have a different approach to who they're serving and how they're serving clients than retail. And also just honestly, it's go back to the chart about the massive market opportunity that's out there. We're not the RIA space and the retail space is not – it only adds up to less than 10% market. So, we do hear that much less and less.

Thanks. Brian Bedell [Deutsche Bank] again. Just go back to the USAA referral agreement, 13 million members, can you just talk about maybe some expectations about the potential when after that closes to convert some of those users that are not currently on the Schwab platform over to Schwab?

Yes, I don't know that we've shared or have specific numbers, but I can tell you is we are the exclusive referral partner for USAA. And what I can tell you is with that we have a common interest financially and just in terms of serving their members to get their members to Charles Schwab if they're looking for wealth management or brokerage/investing services. The values that’s – working with USAA has just been a fantastic experience. We've had a lot of work with them. And I've complete confidence. They said to us early in the relationship that in their words didn't really want to exit the business. They wanted to find a partner who could support them in their business. And that that's a pretty compelling statement, many times of someone wants to exit, they just want to sell it, that was not the case with USAA. They were truly looking for a partner who shared their values, who had great products and services that they would be feel proud about putting in front of their members. So, we'll have to deliver. I don't have numbers that I can share with you today, but I think it's teed up for us to be a pretty significant opportunity just based on the size of the membership, the number of new members add every year and the strength of, I think, the Schwab offer for those members.

I think is the staffing going to be increased, I guess, for the opportunity right after the deal close or is that…

Yes, so I mentioned – so from a deal standpoint, we're bringing over some of their staffing, some of their relationship managers who manage their important relationships. So, certainly, they will come over and we're managing, we'll bring over some service folks to maintain the service levels. But also on our side, I mentioned we're building in retail – a retail prospect conversion team that is solely focused on driving new to retail accounts from the B2B businesses, but also the referral relationships with folks like USAA. So a vertically integrated structure around, our goal everyday is to optimize that that opportunity. So I think, we'll – I think the traction will be significant, I don't have numbers to share, but it will be significant.

Thank you.

I could tell by the brown bags in the back that we're getting the hook. So, thank you.

Thank you. [Break]

Welcome back everyone from lunch. Hopefully, you're enjoying your San Francisco – fine San Francisco cuisine here. I am sitting in the audience as my colleagues have been sharing the story and I guess, I really enjoyed it. Although, every time they’ve mentioned the word going on offense or offensive or something like that as a lifelong San Francisco 49ers fan, a little part of me, I felt little pain in my back every time that was mentioned, making it back to the – our Super Bowl on our come from a head loss on the Super Bowl two days ago. So but you heard it, certainly a number of themes through the course of the day to day. You heard about the strong momentum we have in the marketplace. You heard about some of the challenges that we’re facing across our different businesses and how we’re working hard to overcome those challenges. And you also heard about the opportunities we have, opportunities to add to our scale and add to our efficiency across our businesses. Opportunities to better monetize the assets that we oversee, as well as, opportunities to create a more of a differentiated experience for key segments of our clients’ base. So my time today, I’m going to talk about how that strong business moment and help us navigate through relatively mixed macro environment in 2019, helping us to produce strong financial performance. Also share our views on 2020. And I think, it’s safe to say that our story, our financial story this year is going to be a little bit more complicated than usual given the integration expenses related to USAA and TD Ameritrade, the partial year impact of USAA and TD Ameritrade later in the year. The lingering impacts of the three fed cuts in…

Thanks Peter. You may have covered this and I missed it. But on the NIM, the NIM guidance, if we are ending the year in the low 230s, flat rates in the assumptions, extending duration to fix there, trying to see where the pressure is in the year on the NIM getting it into high, the mid-to-high 220’s, I guess.

The exciting thing, there is something happening gradually over the time, so I wouldn’t expect that to have a big impact in the NIM in the near-term, couple of dynamics, that impact NIM in the first quarter, I’d say couple of things. So, one is we are entering Q1 with lower rates, really across the curve that we entered Q4, so both on the floating rate side and the fixed rate side. Second, is with the year-end build-up in cash that we saw, we built up more liquidity in the investment portfolio. Just to make sure, we are ready for potential seasonal related outflows that we see in April, typically we see outflows in the month of April, so down a little bit of actual liquidity as well for that. And then reinvestment rates on some of the securities buyer, like 20 basis points lower than where they are average over the portfolio that’s we have to look.

Craig Siegenthaler with Credit Suisse. So, Peter as you look at the 2020 projections for negative operating leverage, I just want to hear, how you think about, because it is transformational year, how do you think about operating leverage on much longer-term basis, as you bounce investing or sort of revenue growth.

Yes, thank you, Craig. So when I think about operating leverage on an ongoing basis, I go back to our financial formula that we’ve shared previously. And for those of you who are maybe newer to the name, let me recap. If we can continue to grow organically our assets at 5% to 7% a year as Walt demonstrated, we’ve been able to do that consistently and even as we become larger, we’ve continued to be able to do that and have in fact three of the best years we’ve ever had. So you take that 5% to 7% organic asset growth, layer on top of that, some degree of market appreciation that gets you to probably high-single digit growth in total client assets. I feel very confident about our ability to convert that high-single digit asset growth to a high-single digit revenue growth as well. Particularly given the fact that we’ve now eliminated the single, biggest ROCA impediment that we’ve had for the last 45 years, which is equity commissions. So our ability to convert, to translate that asset growth into revenue growth, I think, there’s a lot more straight forward now. And yes, there are some revenue pressures in some parts of our business, but there’s also a lot of monetization opportunities as Walt talked about and Jonathan talked about as well in other parts of our business. So that gets you the high-single digit revenue growth. I think we can feel very good about our ability to maintain expense growth in that mid-single digit level, especially with all the opportunities that we’ve been talking about around efficiency, and leveraging scale, and the application monetization work, and so forth. And that when you do the math on that that creates a several 100 basis points of operating leverage on an ongoing basis and allows us to expand margins over time. And by the way, at the same time, allows us to return a few points to stockholders via opportunities to buybacks and convert even that level of earnings growth and even a higher level of EPS growth. So I think the financial formula I feel really, really good about. I think again with the elimination of equity commission, we’re feeling better about that now than I did. We shared that just a year ago. Go ahead.

Very gentlemanly display here. So two quick ones, Peter. Expense growth, you’ve spoken in the past about getting to an eventual low-to-mid single digit growth rate. When we look at your core expense growth outlook in 2020, which is a noisy year, but the core is like 4% to 5%, is that how we should think about the translation of that low-to-mid single digit is that roughly in line with where you’d expect you’d land in the long run?

I mean, I think 4% to 5% is pretty close to low-to-mid single digit. That’s also an environment where the equity markets are appreciated. So third-party expenses related to assets – our total client assets were up 20 something percent year-over-year. So that drives some expense growth in third-party expenses. So, I think, I feel pretty good about that level. Where can it end up? I can’t say, I can’t be possibly be that precise, whether it’s 3%, 4% or 5%, but I think sort of it’s in the zone of somewhere around there. And again, I think next year we’re showing our ability to do that.

Great. And then my second one, can you remind us, did you embed, when you talked about USAA, a lot of that revenue is cash and the yields and the deposit. What were the assumptions around cash sorting on those USAA balances that came in? And now that we’re not far from that actually probably happening, is it still midyear and how should we think about that?

Yes, so we’re still – so to answer your second question first, we’re still targeting midyear, doing everything more precise to say on that. The team is working very, very hard to make that happen as soon as possible while ensuring a great experience for the USAA members as they come over. In terms of the assumptions around the cash balance, yes, we did assume that some of those balances do end up going through a sorting process when they come over here. Some of them are in money funds today. Some of them are on the balance sheet. Actually, most of them are on the – I’m trying to run with mixes, I think, it’s probably a two thirds, one third, but we did some degree of sorting as the balance has come over.

Hi, Peter. Brian Bedell of Deutsche Bank. On the expense growth forecast for this year is there any assumption of paying to compete on those cash offers that everyone else is talking about? And if not how much of a delta could that be and would that come through the advertising line – advertising marketing line maybe start with that.

So yes and yes is the answer to your question. So, yes, that does contemplate what we have to do from a cash standpoint to be competitive. And those do show up in the – you see those show up in the marketing line.

Okay. So I guess you can't say what assumption of cash offers are baked in there.

I mean, it's – we talk about the cash offers. And I mean, it's certainly a really important dynamic and it's a very competitive business, but in aggregate, in the context of spending $5-ish billion, I mean, it's not a ton of money necessarily, right? So it's definitely meaningful. It's something that's important. It's something we are definitely committed to doing and we want to make sure the field is equipped to combat that competition. But if it's – if we're off by 10% on that, it's not a huge difference necessarily.

And then just, are you seeing any attrition yet so far? I know the December NNA metrics are really strong. Maybe carrying into January. Are you seeing any evidence of attrition that you're having to compete with at this stage?

Yes, I don't want to – if I tell you the next – month January NNA, you won't read our SMART report when we release it next week. So I will have to leave you in suspense for another few days until we release the SMART on that one. But I would say in general, we have always faced a lot of competition from a lot of different sources. Ever since this company has started and at different points in time there has been different competitors that have been more or less aggressive. And so we're constantly fighting this battle on multiple fronts. And I think we feel pretty good about our ability to do that. And at various points in time, some people try to leverage some advantage or another and where we work really hard and have to work really hard and stay really focused on clients to make sure we don't let that show up in the metrics.

Fair enough. Thank you.

William Nance of Goldman. Maybe one on the net interest margin. So I heard the – thanks for the color on just the change in reinvestment rates versus the fourth quarter. I guess one of the questions we get, longer term given where the long end of the curve is like now when you did your planning, however you want to kind of frame the answer, could you give us a sense for, with 80% of the reinvestments going into fixed rate securities, just roughly where is the reinvestment rate relative to the kind of 250 blended yield that we're at today and that might help kind of frame where the margin would settle out longer term?

Yes. I mean, I think I mentioned, I mean, I’d say the reinvestment rates on the whole are probably about 20-ish basis points lower than the overall portfolio. You'll really see that on the floating and the fixed and we're not frankly putting a lot of new investments into floating right now as we shift that mixed towards a heavier allocation to fixed.

Got it. Thanks. And then on the cash balance side, I guess, the expectations have been moving around quite a bit as we got through the year. I guess one takeaway from today is that, there's still some sorting underlying the net selling that we saw in the back half of last year. I guess, are you surprised that we're still talking about sorting a year later? And I guess, what are you seeing when you look at the data that gives you – that at least makes you want us to consider the possibility that sorting continues for another year given the Feds kind of been on hold now for a while?

Well, I think I mean – I think it just – I’d say it depends. I think if interest rates continue to be lower, we expect that sorting process to end sooner than that. Otherwise, if interest rates go back up, you might see that pick up a little bit. We just don't want to – we don't want to – we certainly are seeing it slow and I think the numbers I shared demonstrate that. Remember, we are just doing – it was second quarter of last year that we executed last of the sweep transfers. I mentioned the USA cash balances that we're migrating over, those will go through a little bit of a sorting process as well. So again, you may see a little bit of that about that this year. But it could be that it stops and it's over. I just don't want to – I don't want to predict that it's going to be over in January 12 or something like that because I think that would be presumptuous. But we do think that it will reach it's – it will reach its equilibrium point. And then again, I would emphasize that our cash balances will grow again and that could very well happen in 2020.

Thanks. Mike Cyprys from Morgan Stanley. Just wanted to come back on the Ameritrade deal. If we look out over the next couple of years, it sounds like the expectation is that you would look to, I guess, draw down on the $10 billion of year of deposits bringing them over. I guess, just how are you thinking about the potential of retaining some flexibility there that maybe not just bringing cash over, but maybe actually sending cash over to TD Bank and having some sort of off ramp when you think about balance sheet optimization and differences in the yield curve potentially over time? What scenario could you see yourself looking for that sort of flexibility and arrangement?

Yes. So I would say, the nice thing about the agreement that we have with the – as part of the transaction that we struck with TD Bank is it does give us the option, but not the obligation to reduce those balances over time. I would say in the current interest of rate environment, it's definitely accretive from a capital standpoint, from EPS standpoint, we're bringing those balances over to our balance sheet and be investing in them as we see fit. I'm trying to think about hypothetical. I'm not sure I want to go to a hypothetical around where we might not do that, but certainly if we see an environment with whatever reason that doesn't make sense, then we have the flexibility not to do that and to not to take those balances on. But it's nice to be at least have that as an option and then we can think about from managing the investment portfolio. It's awfully nice for our treasury team to know that, that as they're thinking about managing investment portfolio, you've got this potential $10 billion a year, every year that can come over and you think about that from as you're managing liquidity for example, I talked about building up liquidity in the fourth quarter of this year. Oh gosh, if we know that we're going to have a certain amount of money coming over from through the IDA onto our balance sheet, that gives us more flexibility to invest in that portfolio. So it's nice having that that option, but again, it's an option, not an obligation. Other questions? Jeff, anything from the web?

Not yet.

Not yet. Okay, well...

How are you doing? Chris Allen, Compass Point. You talked about 41% margins for 2020. Maybe you could just give us some color like what do you think longer term margin are achievable post the America and USA deals?

All right. So we share some numbers in the announcement deck around the margins. If you sort of just assume a simple merging of the two businesses and where those margins cadet up, I think the important point is that we see the opportunity to continue to grow those margins over time. We see the opportunity for continued operating leverage. We have no plans to artificially cap the margin somewhere. And we think that those opportunities can continue to trend North, North here. And that's why we're really focused on doing everything we can to bend that cost curve to drive down the expense on client assets, but do so in a way that doesn't come at the expense of our clients or an investment in the longer term. And if we do that and we continue to focus on the other things and growing organically and monetizing assets, we bring on, those margins will expand over time. So I think I can't put a number out there because I think there's no – there's no upper necessarily no upper limit that I can, I can necessarily place on it, at least certainly not in the near term that I would, makes sense.

Okay. Well I think maybe that is after 4.5 hours or so for almost five hours or so. So first I want to thank you all. Thank you. I think Barry said it really well in his opening around we really appreciate hearing your questions and we’re having a chance to interact with you directly and tell our story through our own words. I think he's exactly right. And that's certainly what we try to do here in a, in a way that is very transparent and very candid. I'd also say that I think we're going to look back, I've said this to folks on my team, I've said that to employees that shot, I think we're going to look back on 2019 is a truly historic year. We've clearly with the actions that we've taken, we've created a lot of opportunities for ourselves, but we know we need to work hard to, to capitalize on those opportunities. The opportunity is created by our decision to eliminate equity commissions, the opportunity created by the USA acquisition, by the TD Ameritrade acquisition. And we're certainly very, very focused on making sure that we capitalize on those. We feel like we've got the right strategy, the right position in the market, and the right team to do just that. We'll look forward to having a chance to give you an update in a few months at our, because that would be spring business update. Thank you all and have a safe, safe travels back. Cheers.