Running a retail brokerage business has to be tough. When the market booms, you can't add phone jockeys, IT infrastructure, and support staff fast enough. But when the market inevitably takes a dive, you can't cut fixed costs as quickly as trading volumes are dropping. Charles Schwab has cut about 9,000 jobs over the last couple of years (wiping out over a third of their peak work force), but without a jump in retail trading activity, their business will continue to flounder.

Schwab has always been in kind of an awkward strategic spot... it's not a deep discount broker like Ameritrade, but it isn't a full-service broker either. I guess they mainly cater to half-affluent Baby Boomers who are unwilling to pay full price for having their hand held.

For Schwab to recast themselves as a more full-service brokerage will contradict the trumpeting of the independent individual investor which they did for so long. But change is the only constant, and all the retail brokers have to figure out a way to win back those once rugged, now devastated, individual investors who are wailing their way through a bear market.

Previous Entry >>> Thursday, October 24