Dear Mr. Berko: I’m 83 and a conservative investor. My stockbroker of 21 years retired from his six-man firm, and my $166,000 individual retirement account isn’t big enough for Merrill Lynch or Morgan Stanley. I’m sharp enough to manage my account. And I won’t make any big changes, because I own quality electric, natural gas and telecommunications stocks. Is Charles Schwab a safe, inexpensive and honest place to handle my account? Is this a good brokerage for my IRA — a place where I can mail checks, make minor changes in my account and put my trust? — TM, Detroit
Dear TM: Charles Schwab is an honest firm, with fine, delightful, well-trained people who always have smiles in their voices and are happy to help you — if you can get one on the phone. And unlike many brokerages, Schwab has easy-to-read statements, though I think Edward Jones has the best monthly statements in the industry.
But if quick, dependable people-service is important, don’t open an account at Schwab (SCHW-$39.94). SCHW is the largest retail discount broker in the world — with 10.3 million active accounts, nearly $3 trillion in client assets and 16,000 employees, 99.2 percent of whom are wonderful, kind, caring and friendly people — but the phone service sphinx!
It’s true that SCHW executes trades efficiently, posts checks on time, has good tech support (when the employees have time to answer the phone), does fine research, has knowledgeable bond people and has good access to foreign markets. Revenues should nearly double from 2012’s numbers, to $8.6 billion, this year. Earnings should more than double, from 69 cents a share in 2012 to $1.65 a share this year, and the stingy dividend has improved from 24 cents to 36 cents. Best of all, in the past five years, SCHW’s net profit margin has exploded, from 18 percent to a projected 26 percent, and CEO Walter Bettinger II believes that it will exceed 27 percent in 2018. That’s awesome! However, always be wary of men who emphasize their family name by adding a Roman numeral after it — a wealthy man’s tattoo; it’s a precursor for chest-thumping narcissism and vanity.
What’s disappointing is Bettinger’s snub of SCHW’s retail base. It can also be said of Joe Martinetto, Bernie Clark, Marie Chandoha and David Garfield, big shots in SCHW’s executive suite who make over $100,000 a week and conceal themselves from SCHW’s customer base.
SCHW’s prodigious profit margin is the result of stinky customer service. If you call to place an order, question an account balance, request a check or get tech support, you’re placed on hold for agonizing minutes, minutes and minutes. Then a recorded voice instructs you to input your account number and press pound. Then another disembodied voice commands you to press 1, 2, 3 or 4, and each of those presses demands a series of more options, so you press 1, 2, 3 or 4 again. Finally, a recorded voice intones, “Due to high call volume, there may be a delay in answering your call, but someone will be with you shortly.” You can bet your sweet bippy there will be a delay, a frustrating delay; however, no one “will be with you shortly.” That’s a baldfaced lie. Then, after holding for eight minutes, you may get disconnected and forced to fumble through those frustrating prompts again. And the headache begins. I know because I have an account with SCHW and it happens to me.
The problem is that Walt “I Love Me” Bettinger II has refused to add new employees, even as revenues and earnings have doubled. Earning higher revenues without increasing costs has inordinately improved SCHW’s splendid net profit margin, but the poor working schnooks are overextended and underpaid, and customers are left rubbing sore ears.
Don’t change brokers. Sometimes changes at age 83 are difficult to your mental health, so don’t move to SCHW. Leave your account where it is, where you know the people, the ropes and what to expect. SCHW’s delays could cause you agita. This great company needs to replace top management and improve its customer service.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at firstname.lastname@example.org.