And we are live. Good morning everyone, welcome to Schwab's Fall 2020 Business Update. This is Rich Fowler, Head of Investor Relations coming to you from a still sparsely populated 211 Main Street in San Francisco. Well I want to extend a particular welcome to those of you attending this session as new owners or followers of Schwab, due to our recent acquisition of TD Ameritrade, we certainly hope everyone on the call and your families remain safe and well in this environment. And we thank you for spending time with us today. There's a full lineup of earnings reports for many of you to deal with. And we certainly have a full agenda here. So we're going to get things underway quickly. Joining me today, both virtually and literally are Walt Bettinger, our President and CEO; Joe Martinetto, Senior EVP and COO, and Chief Financial Officer Peter Crawford. Now those of you experienced with our interim updates will immediately recognize that Joe's participation signals, that we're not following traditional practice today. And we are indeed planning to spend a longer than normal session, say around an hour and a quarter with these three, bringing you up to date on life at Schwab right now, starting off with some prepared comments and following up with Q&A until it's time to wrap up. Our goal is always is to keep you current regarding management's thinking as efficiently as possible. We will follow tradition on questions. So we'll do so via the webcast console, as well as the dial in and as always, to help us get to as many folks as possible, we very much appreciate your sticking to one plus follow on in the approach to questions. Walt will start us off today to discuss our strategic picture, which includes both the continuing story of the company's performance during the pandemic and the implications of closing the Ameritrade acquisition. And then Joe is here to share an update on the integration process as we dig in on this front. Peter will review the recent financial performance of both firms on a standalone basis and then move to discussing the current outlook for the combined company before taking us into Q&A. Before that, let's spend a second on the wonderful wall of words, holding steady at a single riveting page, the main point of which is to remind everyone that outcomes can differ from expectations. So please keep an eye on our disclosures. Finally, the slides will be posted on the IR side during Peters prepared remarks. I think that's it administratively. So Walt, I think we're ready to get going over to you.

Thank you, Rich and good morning, everyone. Thanks for joining us. During certainly what continues to be extraordinary times we all recognize that we're living in a unique and challenging time for everyone. And my best wishes for good health and safety go out to all of you who are joining us on the call. It's really times to like these that have focused and consistent strategy means more than ever, the noise around us from a struggling economy a record low interest rates, a degree of political turmoil can shake those less committed to a sound long term approach. At Schwab, we remain as committed as ever to our two client side strategy and our key strategic initiatives, scale monetization and segmentation. Our approach is winning in the market. And we believe that our combination with TD Ameritrade will deliver outstanding financial results along with furthering our competitive position in key client segments. As I've said before, we are on offense. And the response from our clients with record and near record metrics supports the efforts that we're making to offer world class value service advice and transparency. Now as of October 6, we have successfully completed the four acquisitions that were announced in the past 15 months. Each of these transactions are strategically important for us, but of course in different ways and each slots in perfectly with those key strategic initiatives I mentioned previously of scale monetization and segmentation. USAA adds to our scale of existing clients. And our exclusive Wealth Management referral arrangement that we have with USAA continues, adding scale for us and should be effective for years to come. Motive delivers highly talented technologists along with a platform that is helping accelerate our efforts to deliver thematic investing, as well as direct indexing to…

Great, thanks Walt and good morning, everybody. So today, I would characterize my presentation as more of a cameo than a full update. I'd remind everybody that we just closed the transaction a couple of weeks ago. And we were able to do a fair amount of integration planning prior to close. But there are a lot of details that we've just recently been able to share, while we feel very good about the work we've done, and what we're seeing, we're going to need a little time to firm up the executional plans and financial implications before we can provide you with that fuller update. That said, we've already made a number of decisions about platforms and client experience that we'll share today. And we've also moved quickly to recognize some of the closer in synergies; I'll update you on those activities as well. So let's start with the expense synergies first. Just a reminder, our targets at the time of announcement called for us to realize between $1.8 billion and $2 billion in expense reduction synergies. We spent the last 10 plus months developing plans to achieve this level of savings. And by close we had high level plans at the business unit level to achieve it. We still believe it will take 18 to 36 months to get through broker dealer consolidation, account conversion, and the shutdown of all the redundant systems and functions that are necessary to achieve this level of savings. I'll have more to say about the timeline in a couple of slides. I'm also focused today on expense synergies as those are likely to occur in a more material way more quickly than revenue synergies. As we've discussed before, the bigger revenue synergies come from the repatriation of the BDA balances, but we…

All right. Well, thank you very much, Joe. It's certainly great to have you back here at the business update. Well, even if it is in your words, a cameo appearance. So Walt and Joe talked about the excitement we feel about the TD Ameritrade acquisition and our confidence in how it will benefit clients, stockholders and our combined team of employees. They talked about the strong momentum we continue to enjoy in the marketplace in spite of the challenging conditions in which we operate, and the progress we're making in executing on our strategy around leveraging our scale, capturing monetization opportunities to benefit clients and creating leading experiences for key segments of our client base. In my time today, I'll talk about how that momentum helped to partially offset the current challenging market environment and especially the pressure from low interest rates. I'll also share with you the operating and financial results for TD Ameritrade for the quarter ended September 30, which demonstrate that we are joining forces with a very, very healthy business, whose continued momentum in this environment leads both to stronger financial performance and an even more resilient business model. And finally, I'll provide an update on our Q4 outlook, incorporating TD Ameritrade for the first time and I'll also provide some initial thoughts on 2021. I think the overall message you'll hear is that we're clearly well-aware of the environmental challenges we face, some of which are clearly impacting our financial results. And we recognize there may be some difficult weeks and months ahead. But at the same time, we couldn't be more optimistic and more confident about the future for this company. And feel like we have crossed a bit of an inflection point, given our strong momentum in the market, our early experience…

All right. Thank you all. We'll go to Q&A now, Operator. Would like to start us off on how to pose questions?

Thank you. We will now begin the question and answer session. [Operator Instructions] Our first question comes from Dan Fannon with Jefferies. Your line is open. You may ask your question.

Thanks. Good morning. So a lot of factors have changed since the deal was announced or you think about rates, client engagement, asset levels, things like you're reiterating the expense, synergies that you've outlined or originally outlined, but I assume some of the areas of potential revenue and/or expense reduction have changed given all given the external factors that have that have happened between announcement and close. So if you could talk about that, and ultimately, accretion from how you originally stated it to where it sits now.

Dan, so let me take that. This is Peter. Let me take that in a couple ways. First, the near term accretion math has gotten better, frankly in the last year given the relative earnings trajectory of both TD Ameritrade and Schwab. In terms of the synergy realization, I would say that if anything, the synergy opportunity has increased. On the cost synergy side, despite the environmental changes, if you will, I don't think our thinking around the cost synergy opportunity has fundamentally shifted. We still think that those numbers are very achievable and largely are to be derived in the similar places that we had expected a year ago. On the revenue side, Joe mentioned that a large portion of the revenue synergies are coming from rebanking the balances in the IDA. Those balances at the time of the acquisition were I think roughly $115 billion. And today they're over $150 billion. So that benefits us in a couple of ways: one, as you may recall, we got a 10 basis point improvement in the net fee there. So that's now applied over a larger base of balances immediately; and then second is that more cash that we can bring onto the balance sheet and every time we do that, we're picking up incremental spread revenue as we do so. So I think that has been at the positive as well. I also think that as we've dug in and spent more time looking at the business and understanding more about the business, we see other -- other opportunities, others or maybe smaller revenue opportunities where we can -- we can leverage both firms being together to capture incremental revenue, probably more to talk about those in the future. But we -- but I would say anything, our confidence, our excitement, our enthusiasm about this is only increasing last year.

Thank you.

Thank you. Our next question comes from Will Nance with Goldman Sachs, you may ask your question.

Hi, everyone. Good morning. Maybe I could start off with a quick question on balance sheet growth from here. If I think about pro forma for Ameritrade, and this is rough math, but it seems like the percentage of your client cash that is now on balance sheet is in kind of the 50%. ballpark, and that's kind of in the backdrop of that being below the long term average, all time low rate, loss of liquidity, money markets being kind of flat to even shrinking. So when we think about the tailwind of BDA sweeps going forward, as well as what you could call reverse sorting and the lower rate environment, do you think we could be talking about something like double digit balance sheet growth for the next couple of years, as we kind of rebase the allocation of cash between on and off balance sheet?

It sounds like repeated question,

That does sound like repeated question. So, Will, the two things that tend - or the three -- I guess the three dynamics that tend to drive the balance sheet growth organically, and I'll -- we'll be looking at Legacy Schwab. One is the interest rate environment and then a lower interest rate environment as I mentioned, our clients are less apt to avail themselves of the purchase money funds and CDs, there's just not as much of a yield pickup and not as much of a benefit for them to do that. So they're more likely to leave that cash sitting in their account on our balance sheet. Second, of course is organic growth, because a certain portion of the net new assets we bring every -- every quarter, every year comes in the form of cash. And then third is client relative sentiment about the equity markets, whether they are buying more equities or selling equities. Of course, that is, you know, that's harder to predict, going forward than perhaps those first two items. So, you know, you can imagine, certainly in this low interest rate environment, you can imagine, as we've seen, our balance sheet has grown at a sequence -- at a pace post the end of the first quarter, when we obviously saw that huge surge, at an annualized pace and in the double digit, you certainly can imagine a scenario where that would continue into the next -- as long as those interest rates remain low. Now, if interest rates were increased, one would expect at that pace, a balance sheet growth would -- would come down, and if clients get more bullish on the equity markets that would on the margin tend to slow the pace of balance sheet growth as well.

Got it. That's very helpful. And then, secondly, kind of on the same topic, I'll keep asking few other questions. As we think about the continued growth in the securities portfolio, you've had a big opportunity over the past year or so to continue to shift the mix towards fixed rate securities and away from the floating rate allocations, just maybe looking for an update on how long that can kind of continue, when you would kind of need to start keeping that balance in line and what the rates on those sorts of securities look like in today's environments, I guess, from a credit perspective.

So we're at about -- we're about at 85/15 now fixed to floating on our investment portfolio. And we feel like that's probably about the -- about the right place to be. So I would say that you'd see us look to probably maintain that pretty close. That leads us to a duration in the upper threes. In terms of the rates, reinvestment rates on the fixed portion are in the 90 to 105 basis point range today, and of course that varies on a daily -- weekly if not daily basis, but sort of in that -- in that general range.

That's helpful. Thanks for taking my questions.

Thank you. Your question comes from Mike Carrier with Bank of America, you may ask your question.

Good morning, thanks for taking the questions. What -- it seems like you guys offer great value in many areas, and you've been innovative in the different offerings. But one of the things you mentioned is kind of on the higher wall side, the RIAs, and when you think about the more holistic and full service types of offerings, how do you think about Schwab offering you say lending, insurance, or other offerings that can be increasingly in demand meaning, you think about that on a proprietary basis, third parties, but wanted to get your thoughts there?

You're referring on the retail side or on the RIA side or both?

Yeah, both, but I would say probably you're going to see more demand through the RIAs.

Yeah. So we -- we certainly see growth on both sides. Of course, the RIA business continues to have exceptional organic growth. But also on the retail side, as I mentioned, the fastest growing segment of clients for us is high net worth and ultra high net worth clients. Now, they tend to be a little bit of a different kind of client, if you were trying to categorize them, in that the ones who come to us on the retail side tend to maybe be a bit more self-directed, maybe -- they come from the financial world and they're accustomed to managing money or managing their own money whereas on the RIA side, they tend to be more of relying on a professional investment advisor to help them manage their money. But both are growing fairly rapidly. And our plan is to continue to add the services and capabilities that the high net worth and ultra high net worth investor wants even with, again, the different approach to managing money that generally occurs on the retail side and RIA side. Segment services, dedicated relationship capabilities, access to the type of products that both of those types of high net worth and ultra high net worth investors want. Interestingly enough, when we talk to the ones on the retail side, they made a specific decision to come to Schwab. And they would like to stay at Schwab and consolidate assets at Schwab. But we have to make sure that we can deliver for them the type of service experience that they expect, given their significant level of asset. So we will continue to expand those capabilities to meet their needs, the retails ones that are at Schwab, because they want to be at Schwab. The ones served by RIAs are there because that's the best fit for them.

Great. Okay. And then, Peter, just one clarification. I think that you mentioned that the NIM for the fourth quarter around the 150, and I don't know if you had to break out between Schwab and Ameritrade and not looking for that going forward, but just given the moving pieces this quarter. I don't know if you can provide some context, you know, on the moving pieces. Thanks.

Yeah, so we did on that page, you'll see the incremental benefit on NIM of the TD Ameritrade acquisition. I think we said it's [indiscernible] 19 basis points. So I would imply kind of low 130s for the legacy Schwab business. Again, that's a -- that's a function -- if you look -- if you -- if you think back to the factors that have impacted NIM over the last couple of quarters, it's been the declining short term rates, it's been an increase in premium and amortization. It's been declining credit spreads, and then it's been a huge, huge increase in cash balances that we've reinvested at rates that are lower than our average portfolio yield. Those credit spreads have largely stabilized, short term rates of course have stabilized, less -- right now there's less cash to invest in the spread on between -- the difference between the rates we're investing at versus what were the average portfolio yield that -- that delta has come down. And we wouldn't expect from here a further big step increase in premium amortization. So we think that NIM while it may come down from Q3 to Q4, it seems unlikely to be as big, again, I'm just talking about the legacy Schwab business, not likely to be nearly as big as what it was from Q2 to Q3.

That makes sense. Thanks.

Thank you. Your next question comes from Steven Chubak with Wolfe research. You may ask your question.

Hi, good morning. So I wanted to start with a question just on the election impact. There's some speculation that blue wave could drive steeper yield curve, which will certainly be beneficial, but also could come with the cost of either increase in tax rates and tougher regulation, whether it's DOL, transaction tax, higher capital requirements for banks, which will clearly present some headwinds. And I was hoping you can just provide some perspective on how you're thinking about the different election scenarios and what the potential implications could be?

Okay, maybe, Walt would you like to start us off on that? And then maybe Peter can pick up after?

Sure. I think -- I think most of our emphasis right now is on making sure that we're here for our clients during -- during what could prove to be a volatile election period. It's -- I would say that our capability to speculate on the outcome of this election is no better than anyone else's, and, so I don't think we are planning on strategic changes at this point in time. I think all the things that you mentioned, are accurate if in fact, you get the outcome for the election that you referenced. And we would at that point in time have to figure out how the interplay between a steeper yield curve as well as some of the less favorable things for our business that you mentioned, if they end up occurring. But right now all the emphasis is really around making sure that we have system availability, capacity, service for our clients, as we go into a period that could be very volatile. And it may be an extended period before we know the outcome of the election, at least, for some offices. Peter, I don't know if you have anything you want to add to that?

I think you answered it well, Walt. I'll just say that I think we have shown our ability to prosper in different environments and different administrations over our 40-something years. And as long as we continue to focus on clients, folks at home can do the math on what changes in corporate tax rates might do or changes in the long end of the curve. That's not really any mystery. But for the long term and the way that we manage this business, it's as Walt says, it's really continuing to focus on our clients, continue to execute on our strategy. And we think we will benefit from a lot of the secular trends that are taking shape in our industry. And so we think that'll continue to benefit us, regardless of the administration in the political environment.

Thank you both for that perspective. And just for my follow up, I wanted to ask on capital. Following the deal use or at least with the completion of the deal you spoke to the capital accretion, Peter, and the additional preferred capacity getting you back well above 6%, but just given your target of 6.75% to 7% coupled with the fact that you continue to see really strong organic cash growth, it looks like by the time you can onboard the BDA in July of next year, that you're still going to be below that target level and was hoping you could speak to how you're managing to those capital constraints, how it might impact the decision making to onboard the BDA as quickly and how you're just balancing that pace with a commensurate capital drags?

Yes certainly our intention is to onbring those balances onto our balance sheet, starting in July 1 of next year. We do have various levers at our disposal around capital, we want to make sure we have enough capital to support the organic growth of our balance sheet. I think that's why I think it's reasonable to expect us to access the periphery markets. But I don't think you should assume that if we're not at, , let's say 6.75% and tier one leverage in July 1 of next year, that means we're not going to bring on those balances. We certainly could do that, even if we're short of -- we certainly expect we could do that if we're short of that level.

Thanks for clarifying that Peter, much appreciated.

Thank you. Our next question comes from Brian Bedell with Deutsche Bank, you may ask your question.

Great. Thanks. Good morning, folks. Let me just start with the interest rate, headwind dynamic. Peter, you mentioned the 90 to 105 basis points, fixed reinvestment rates, maybe you could share the floating reinvestment rates if you continue to keep that at 15%. And then any commentary on money market fee waivers into 4Q, given the exit run rate was higher than the entry run rate and tricky.

So on the money find fee waivers, it wouldn't surprise us to see a little -- a bit of a pickup between Q3 and Q4, as you said, we're exiting a little bit of a higher pace. Of course, it depends on how much -- what the balances are in money fund. And as we continue to see balances, the balances into most purchase money funds go down. That would obviously reduce the amount of fee waivers. But I think an increase between Q3 and Q4 is reasonably expected. That's based -- that's built into that full year revenue outlook that we provided earlier. In terms of floating rate yields, it's somewhere to say it's in the 40 somewhere in that range right now. For what we're buying, of course that depends on whether it's -- a lot of the credit that we tend to purchase is floating rate and so the yields there tend to be a lot higher, of course, than when we're buying some agencies. So we're doing a pretty wide spread there.

Okay, got it. And then a question for Walt. Longer term on the interest rate dynamic, if we are in a lower rate environment for much longer than anyone thinks, what are your thoughts on globally migrating the revenue mix away from interest rate sensitive types of areas? And how would you -- how are you thinking it's possible to build those more sustainable fee revenue areas and maybe that weaves into some of the revenue synergies that I'm sure we'll talk about more in February? But how are you thinking about trying to change that mix, if at all?

I think we do have a longer term goal of striving for a balance between spread income and other forms of revenue. And of course, that plays out in two of our three strategic initiatives, very clearly in monetization and segmentation. And the thing that I would just emphasize is that all of our monetization efforts are -- we want to ensure are done in terms of them being good for clients. But you can see them unfolding before you whether it's the acquisition of the technology and the talent from Motif, the acquisition of Wasmer, Schroeder, the negotiations that we are having with firms, who effectively capitalize on our platform and we provide services that they would otherwise have to provide, but yet don't provide any offsetting compensation for those services. These are all in line with actions that we're taking as well as continue to build our advisory solution. But again, the overriding in all of those moves will be to ensure that anything we do is the right thing for our clients. But we are confident that we can drive toward a more balanced scenario in the world you described, where rates stay lower for longer. Of course, if rates do turn and go up with the yield curve steepens, our spread income can increase quite dramatically, quite quickly. And of course, that would make it more challenging. But we're fairly confident in our plans to get to a more balanced approach within a reasonable period of time and are taking all prudent actions to get there.

Okay, thanks for your color. Thank you.

Thank you. Our next question comes from Devin Ryan with JMP Securities, you may ask your question.

Great. Good morning. First question here just on expenses. And I know we're going to find our point on this. But if we think beyond the immediate $250 million to $300 million synergies here, if you can just help us maybe bridge a bit to the to $1.8 billion to $2 billion, and just remind us of some of the key milestones that are going to be required to hit those types of levels. And just also, if you can, whether you're feeling the same around the timing here because obviously, the range is the same, but a lot has changed. It was previously stated to just try to think about the timing of expense synergies relative to what you guys were thinking when the deal was announced.

Sure, this is Joe again. So I'd say there's very little that's changed in our thinking around how to recognize the synergies and clearly the company's continued to operate and to the extent that we've had some very active service level requirements and those kinds of things this year, both companies have added some staff to take advantage of that. But those kinds of changes haven't had a material impact on the way we've been thinking about actually achieving the synergies. So the first pass through was dominantly focused on senior and executive level management and branches. Over the nearer term, there will be a series of other functions as we look to continue to consolidate predominantly in headquarters types of roles, as you get through things like converting to a single HR platform, there's savings both on the technology and on the people side that they come with those kinds of activities. And those will occur over the course of the next couple of years. A little further out is when you actually get another opportunity to get a bigger bang and expense synergies when you get to that point or we get to that point of being able to do the account conversion. There are a lot of synergies tied up in moving to a single broker dealer from two broker dealers. And there's a material amount of reduction, summon staff to support for a lot across things like technology platforms, real estate footprint that come down once we get to the place where we can really get to a single broker-dealer and run on a single platform. Then I would say there's a little bit of cleanup that goes on past that big bang date as we move to full retirement of some of those platforms and systems and just the cleanup work that doesn't come immediately upon conversion. You get a couple of big events in there that will drive some bigger reductions so we do expect over the course of the next 36 months that you will see continuous recognition of synergies over time, maybe not completely evenly over that window but you should see.

[Technical Difficulty] through some of the account growth metrics and just terrific momentum here in the business. I'm curious, just with the deal closing, whether there's been any change in trajectory within either business in the retail side or institutional side. Also just with the RA custody, whether or I guess more what you're telling advisors, especially your advisors that have assets and accounts custody on both platforms, and just some curious kind of whether it's just business as usual, or if there's anything else that's going to change just with the deal formally closing here.

Thanks, I'll step in there on that one. I think we've seen business as usual with maybe one adjustment, and that is that there are a number of TD Ameritrade service advisors who would like to go ahead and make this switch over to the Schwab platform at this point in time rather than wait for us to do that as part of the integration. But the notion that there is some significant movement, if you're getting it that of RA's unhappy with the combination and therefore making moves elsewhere is simply not being backed up by the facts. If they were they would have shown up in the TOA metrics that I shared with you. So that was part of why I showed you those numbers. The clients are excited. They know that we are committed to ending up with a winning platform for them that integrates the best of Schwab and the best of Ameritrade as Bernie Clarke likes to say that it's not going to be one platform or another winning, it's going to be a new platform that combines the best of all. The RA that we talk with are really excited about being a part of that, being part of an organization with our scale and size, the ability to help them grow and as well as protect their clients' assets. So it's been all business as usual to positive if I were to try to summarize it.

Okay, terrific. Thank you very much.

Thank you. The next question comes from Chris Sadler with William Blair. You may ask your question.

Good morning. Any early update on the revenue synergies which you would outline particularly payment for overflow? I'm sure you've had a chance to kind of at least get an early look at the extent to which Ameritrade's greater order routing revenues due to product mix technology or just different philosophies.

I'd say that's one of those areas where we weren't able to get into a lot of detail prior to close for competitive purposes. So we are parsing that data today. If anything, I'd say we probably feel a little bit more optimistic about our ability to maintain the majority of that revenue than we did prior to close. But it's still a little early for us to get into a lot of detail on exactly how that's going to play out.

Okay, thanks, Joe. Then just one other one on the pricing landscape or marketing landscape. Well, you noted a few quarters ago that you had seen some increased competition around some of the offers that some larger banks were offering to try to drive client acquisition. Just any update on that front will be great.

Sure. It remains a highly competitive market and there is some activity around paying cash in order to get balances so that is still an activity that exists and continues to be an activity that we have questions about its long term logic for companies that intend to be independent and staying in the market over time. I would just say that I guess I would add, I remain optimistic that rational business leadership moves to rational and economically rational decision making over time.

Okay, thank you.

Thank you. Next question comes from Brennan Hawken with UBS. You may ask your question.

Hey, good afternoon now, I guess. Thanks for taking my question. At least good afternoon on the east coast. So it seems as though near term accretion from the deal is better but it didn't sound like you were changing the long term. In fact, it sounded like from an expense perspective, you specifically didn't change the long term. But is it right for us to assume that the experience that you're having here in the early days is clickable and that the better than expected accretion off the bat, therefore, would also translate into better accretion in total? Or is it just that things are happening maybe a little sooner than expected and it's just timing? Sorry, if you touched on it, that just wasn't completely clear to me.

I'll try to answer that and maybe Joe would be ready to add on to that. I guess, I would say is we are very, very excited about this deal. We're excited about this deal from an accretion standpoint. But I think even more importantly than that, we're excited about this deal, what this means for us long term, and our ability, or the position we have in the market, and the way that we can serve clients. Certainly, the math is compelling again, in the near term because of the accretion and over the longer term because of the revenue and expense synergies that Joe has talked about and I've talked about on previous calls. I think those numbers have on the revenue side, as I mentioned, have gotten bigger on the cost side probably similar, but it's really nothing to suggest they've gotten any smaller, and maybe over time, perhaps we'll discover more there. But I think also one of the things we've discovered is just the compatibility between the two organizations and over the last several months and bringing these two teams together and the alignment that we have around our focus on clients and that cultural compatibility is so very, very important on a complex integration like this. So that's also made us very, very enthusiastic and excited about the future as well. So I think on every dimension, we're feeling very, very enthusiastic about the acquisition.

Thank you. Next question comes from Craig Siegenthaler with Credit Suisse, you may ask your question.

Thank you hope you're all doing well. Just following your June acquisition of motif, we wanted to see if we get an update on the timing behind it direct indexing launch and also, do you have plans to launch the capability first to the RAA channel or potentially both to return advisors at the same time?

Craig, I'll take that. Unfortunately, this is going to be one of those questions. So I'll just say upfront, I'm not going to answer to your satisfaction. We're not going to discuss timing on the introduction for competitive reasons nor are we going to discuss which organizations might go first, but we certainly have every intention of making it available to both. That'll be used slightly differently by retail and by the RAA and so the determinant will be not trying to benefit one segment of our business over another, it'll just be which one we can get it to quicker because of the way they'll utilize the product.

Thank you.

Thank you. Next question comes from Chris Harris with Wells Fargo. You may ask your question.

Just a couple of clarifying questions on the synergies. Should we be assuming the account conversion is a year to event? Then the $250 million to $300 million you guys are unveiling today, are those going to be realized very quickly, like in a few months or is that more of a gradual thing to be realized to the year?

Is it $250 million to $300 million we talked about today or already accomplished? They will show up in the run rate beginning in Q4. A little bit of timing there and that some of the staff reductions here have happened through October, but they will start to show in Q4 before embedded in Q1, those are done and executed on. And we're not, at this point, providing target dates for account conversion, but you start thinking to some of the other comments here around the 18 to 36 months and you got to get the accounts conversion in that window, with the time to be able to do some of the clean-up at the back end, to be able to get to the full synergy number. Then you can start to back into what some of our thinking is probably around the conversion date.

Okay, thank you.

Thank you. Next question comes from Kyle Voigt with KBW. You may ask your question.

Hi, thank you. Wondering if you can give us an update on the strategy around pricing at clearing conversion? And specifically, I think Joe mentioned that there will be some revenue synergies realized at the conversion date. I just want to get some more details on those. And then secondly, I'm wondering whether Ameritrade margin book [ph] which is much higher yielding right now, will that migrate towards Schwab's blended rate after conversion? Or will pricing be maintained for that book thereafter? Thank you.

So my guess is, we will be in a position at that winter business update to write more details on all of these components. From a revenue perspective, I would echo some of Peter's earlier comments to say that we were pretty enthusiastic about what we're finding. And today thinking through some of the pricing and recognition, implications of decisions that we're going to have to face around how we bring these organizations together. But I would say, we're feeling optimistic about what we're seeing and what some of the recognition opportunities might look like. As you look forward to post conversion, I'd say that a couple of big buckets that we're going to have to dimensionalize here are around being able to provide some of the better trading opportunity in the systems, the TD Ameritrade has built to the Schwab client base, as well as being able to provide some of the more extensive wealth management capabilities the Schwab has built, as the TD Ameritrade existing client base. And if I had to guess a little bit today, I would say, we might see those trading benefits happen a little bit faster than wealth management. Wealth management has to be more of a relationship-type activity that we expect to build over time. We do think that those opportunities are significant, that may take a little longer recognize post conversion.

That's great color. Thank you very much.

Thank you. And this question comes from Michael Cypryss with Morgan Stanley, you may ask your question.

Hey, good afternoon. Thanks for taking the question. I was just hoping for a little bit more color on the net new assets and new customers that are coming over to Schwab here. What portion would you say are new households coming over to Schwab for the first time, versus a wallet share from existing customers? And then, for those new customers that are coming in the door, where would you say they're coming from? And as others are also reporting growth and seeing growth in accounts and customers, how do you think about the profile and where those customers are coming from and the profile of them? Thank you.

Walt, do you want to start us off on new customers?

Sure. So there's no question there are new entrants into the space. And that is leading to some of the new household formation, it's probably why we tried to share both net new assets figures, which of course, are a very broad definition, right? That net number is made up of new-to-firm households, as well as existing clients, as well as transfers from other financial services or investment services providers. So I don't know that we historically want to break down the components of that net new assets, but we try to give you enough metrics to give you a solid understanding. We report the total net new assets. We give you the new-to-firm household growth, which I think was on one of the pages that Peter shared. And of course, we give you the transfer numbers, which gives you an idea of whether we are winning or losing on a net basis relative to competitors with existing clients who may be residing at Schwab and residing at our competitor. I think we're having success with all three of those, as evidenced by our net new assets, including the record September, and the TOA numbers speak for themselves.

And just maybe a follow up on the lending side, just hoping you could just give a little bit more color around some of the initiatives there, and how meaningful could this be as you look out over the next couple of years? On the lending side, more pledged asset lines among other lending products that you have, that you're prioritizing or even thinking about bringing to the marketplace?

Peter, do you want to draw to that, and then you can close this out?

Yes, I can take that. We're quite pleased with the momentum we have on the lending side, if you look at -- I think our overall bank loans are up 30% year over year. Of course, that's during obviously a refinancing wave. But with our investor advantage pricing, that has been a huge win with our clients and our client-facing employees and just exceptional, exceptional pricing, while still offering an attractive economic benefit to us and helping us to cement those relationships with our key clients. Some of them was other firms that would like to do business with them at bay. I think there's certainly more opportunity there. And there's also more opportunity with the pledged asset line and having greater penetration there. If you look at where we are with pals [ph], we're certainly underpenetrated relative to what you see at the wirehouse firms. And I would say that's true both of our legacy Schwab clients and even more true with the TD Ameritrade clients, and the opportunity there is very, very fertile. So we're very, very excited, very enthusiastic about our ability to continue to grow that in a way that is very consistent with our strategy. I think we're out a time and I just thought I should just close with that. And just thank all of you for your questions today. I just want to close with a couple of thoughts and really reinforce something Walt said earlier, clearly we know that interest rates move in cycles, and this low rate environment will end at some point in the future. And we'll see the return to more normalized rates. But we're certainly not just waiting around for that to happen. And I'll say, while we're quite pleased by the near-term EPS benefit, and the acquisition supports that 25% to 35% number I referenced earlier. It's really the long term prospects that make us even more excited. And that's why we're really pressing ahead very, very aggressively, but in a way that's entirely consistent with our strategy, our purpose and our DNA. As those actions begin to bear fruit, in some cases quickly and other cases more gradually over time, it just reinforces our confidence and our enthusiasm. We'll look forward to seeing all of you virtually most likely, possibly some in person at the February business update. Stay safe everyone and thank you for your time today.

Thank you, that does conclude today's call.