Charles Schwab runs one of the largest investment services businesses in the United States. Clients park their money at Schwab through brokerage accounts, retirement plans, and bank accounts. Schwab then earns money in three main ways: it collects interest on loans and bonds it holds, it charges fees to manage funds and investment portfolios, and it earns commissions and payments when clients trade stocks and other securities. At the end of 2025, Schwab held $11.90 trillion in client assets across 38.5 million active brokerage accounts. The bigger that pile of client money grows, the more Schwab earns from all three streams at once. The diagram below traces where the money goes.
How Charles Schwab Makes Money
flowchart TD
A["Client Assets
11.90 trillion"] --> B["Net Interest Revenue
From cash balances"]
A --> C["Asset Management Fees
Mutual funds, ETFs: 3.7B"]
A --> D["Trading Revenue
Commissions: 1.8B
Order flow: 1.9B"]
B --> E["Total Revenue
23.9 billion"]
C --> E
D --> E
F["Banking Services
Deposits, mortgages"] --> B
F --> G["Bank Deposit Fees"]
G --> E
E --> H["Operating Cash Flow
9.3 billion"]
H --> I["Investment in Scale
Technology, platforms"]
I --> A
H --> J["Capital Management
Dividends, buybacks"]
J --> A
Five years of financial data tell a story with a clear dip and a sharp recovery. Revenue climbed from $18.5 billion in 2021 to $20.8 billion in 2022, then fell back to $18.8 billion in 2023. That drop happened because rising interest rates caused clients to pull cash out of Schwab's low-yielding sweep accounts and move it into higher-paying investments elsewhere. When clients do that, Schwab earns less interest and has to borrow more expensive money to fill the gap. By 2025, that pressure had eased considerably, and revenue reached $23.9 billion, the highest in this five-year window.
Total Net Revenue 2021 to 2025 ($ Billions)
Revenue dipped in 2023 as clients moved cash away from Schwab's sweep accounts, then rebounded sharply in 2025 as that pressure reversed and client assets hit record levels.
The profit picture is even more striking than the revenue line. Net income was $8.9 billion in 2025, up 49% from 2024. The pre-tax profit margin reached 47.9% in 2025, compared to 33.9% in 2023. That improvement came from two directions at once: revenue growing fast while expense growth stayed modest, with total expenses rising just 5% in 2025 even as revenue jumped 22%. The completion of the TD Ameritrade integration helped here. Schwab spent roughly $2.5 billion total on that integration and extracted about $2.0 billion in annualized cost savings from it.
$8.9B
Net income in 2025, up 49% from 2024 and the highest in the five-year period
Free cash flow tells a more complicated story. It was $1.2 billion in 2021, held roughly flat in 2022, then jumped to $18.9 billion in 2023 before falling back to $2.0 billion in 2024 and recovering to $8.8 billion in 2025. The 2023 spike looks unusual because of how the company managed large securities portfolios and funding balances during the interest rate crisis. The 2024 drop reflects ongoing costs to wind down expensive emergency borrowing. By 2025, that cleanup was largely done. Schwab reduced what it calls bank supplemental funding by 90% during 2025, cutting it from $49.9 billion at the end of 2024 down to $5.1 billion.
2022
crisis
The Cash Drain That Squeezed Profits
When the Federal Reserve raised interest rates sharply in 2022 and 2023, Schwab clients moved billions of dollars out of low-interest sweep accounts into money market funds and other higher-paying options. Schwab had to replace that cheap funding with expensive borrowed money. This is called client cash realignment, and it directly reduced Schwab's net interest revenue in 2023. It took until 2025 for the company to work through most of this expensive borrowing and return to a cleaner funding structure.
Client growth remains the engine underneath all of this. Net new client assets were $498.6 billion in 2025, up 38% from $361.6 billion in 2024. Clients opened 4.7 million new brokerage accounts in 2025. Daily average trades hit 7.7 million for the full year and 8.3 million in the fourth quarter alone, up 31% from the same periods in 2024. More clients trading more often, with more assets on the platform, is exactly the kind of compounding that feeds all three of Schwab's revenue streams simultaneously.
$11.90T
Total client assets at end of 2025, up 18% from 2024, giving Schwab the base from which all three revenue streams flow
Several specific risks are worth watching closely. First, regulators proposed new capital rules in 2023 that would force Schwab to include something called AOCI in its capital calculations. AOCI captures the paper losses on bonds that lost value when interest rates rose. If those losses count against Schwab's capital, the company may have less room to pay dividends or grow. Second, Schwab's deal with TD Bank controls where a large chunk of client cash goes. That agreement limits how Schwab can respond if rates shift again and clients once more start chasing higher yields. Third, Schwab plans to let clients trade cryptocurrency directly starting in 2026. Crypto regulations are still being written, and a hack, fraud event, or sudden regulatory ban could expose Schwab to lawsuits and damage to its reputation.
What Is AOCI and Why Does It Matter for Schwab?
AOCI stands for Accumulated Other Comprehensive Income. When Schwab buys bonds that later lose value because interest rates rise, those paper losses sit in AOCI on the balance sheet. Right now Schwab is allowed to exclude most of those losses from its capital calculations. If regulators change that rule, those losses would shrink Schwab's official capital cushion, which could limit dividends and growth spending.
Cybersecurity is a fourth risk the company names explicitly. Schwab processes enormous volumes of sensitive financial data and is a constant target for hackers using increasingly sophisticated tools, including artificial intelligence. If attackers breach Schwab's systems or those of its cloud providers, clients could lose access to accounts and Schwab could face regulatory penalties, lawsuits, and lasting damage to the trust that its entire business model depends on. Finally, Schwab relies on outside companies for critical services including cloud computing and custody of client assets. When those providers fail, clients cannot trade or access their money.
In 2022, Schwab paid $187 million to settle government charges that it had not been transparent about how its robo-advisor service made money from client cash. Trust is the core asset of any custodian, and that settlement is a reminder of how quickly hidden fee structures can become an existential reputational problem.
$11.90 trillion
Client assets Schwab holds today
$80+ trillion
Estimated total investable wealth in the U.S.
Schwab estimates U.S. investable wealth exceeds $80 trillion, meaning the company currently holds roughly 15 cents of every available dollar. The question is whether it can capture more of the rest.
The planned acquisition of Forge Global, a private market trading platform, for $660 million is the newest strategic move. Schwab anticipates closing that deal around March 2026. Private market investing has historically been available only to very large institutional investors. If Schwab can open that access to its 38.5 million brokerage account holders, it could deepen client relationships and add a new revenue stream. But Forge is small relative to Schwab's existing business, and it is not yet clear how many retail clients will actually use private market investing.
$519.4B
Core net new client assets gathered in 2025, up 42% from 2024, representing an annualized organic growth rate of 5.1%
The Bet
Schwab keeps growing because clients keep bringing more of their money to a single platform, attracted by low costs and broad services. That flywheel only keeps spinning if client cash stays on the platform in large enough quantities and at low enough cost for Schwab to earn a meaningful spread. The 2022 and 2023 episode proved that when interest rates move fast, clients will chase better yields elsewhere, and Schwab's funding costs spike. The bet is that clients will not repeat that behavior at a scale large enough to matter, either because rates stay stable or because Schwab's platform is sticky enough to keep cash in place even when outside options briefly look more attractive.
Open question
Schwab's 2025 results were the strongest in the five-year window, driven by record client assets, recovering interest income, and a cleanup of expensive emergency borrowing. The platform is bigger than it has ever been, and the TD Ameritrade integration is finally complete. But the core tension remains: Schwab's profitability depends on clients leaving cash on the platform at rates Schwab controls. If interest rates shift again and clients once more move cash to higher-yielding alternatives, how much of the 2025 recovery was a permanent structural improvement, and how much was simply the calm after the storm?
Compiled · 10-K · FY2025
Regulatory Capital Requirements
After several U.S. banks failed in 2023, federal regulators proposed new rules that would make Schwab hold more capital. The company would have to include something called AOCI in its capital calculations and maintain minimum levels of long-term debt. These stricter requirements could limit the company's ability to pay dividends, buy back stock, or grow the business.
Interest Rate Risk and Deposit Flows
When interest rates change, Schwab's profits get hit hard because it earns money on loans and investments while paying depositors. When rates rose in 2022 and 2023, customers moved cash out of Schwab's sweep accounts into higher-paying investments, forcing the company to use expensive funding sources that reduced profits. The new agreement with TD Bank limits Schwab's flexibility to respond to future rate changes.
Digital Assets and Cryptocurrency
Schwab plans to offer cryptocurrency trading starting in 2026, but crypto regulations are still being written and could change dramatically. Digital assets can be permanently lost if security keys are stolen, and the company relies on new third-party service providers that might fail or go out of business. If regulations prohibit crypto trading or if customers lose money due to hacks or fraud, Schwab could face major lawsuits and reputational damage.
Cybersecurity and Fraud
Schwab processes huge volumes of sensitive customer financial data and is a constant target for hackers, ransomware attacks, and organized crime using increasingly sophisticated artificial intelligence tools. If hackers breach the company's systems or those of third-party cloud providers, customer data could be stolen, accounts could be compromised, or operations could be disrupted. The company may have to pay ransoms, spend heavily on repairs, and could face lawsuits and regulatory penalties.
Third-Party Service Provider Failures
Schwab depends on outside companies for critical functions like cloud computing, website hosting, and custody of customer assets. When these providers experience outages or failures, as happened with recent cloud platform problems, customers cannot access their accounts or trade. If a custody provider goes bankrupt or refuses to return customer collateral, Schwab could lose money and damage customer trust.
10-K Item 1A · Risk Factors
