Charles Schwab Will Continue to Shrink Office Footprint

Charles Schwab Corp. disclosed this week in an SEC filing that the company is planning to further downsize its office footprint as part of an ongoing cost-cutting campaign, which includes layoffs.

Charles Schwab said in the filing that it is aiming to realize $500M in “incremental annual run-rate costs savings” as a result of the reductions, with costs associated with the cuts representing a one-time expense of $400M to $500M.

The company said it expects most of the costs related to staffing cuts, including severance, to be incurred this year, while the costs due to the downsizing of its real estate footprint will be incurred this year and in 2024.

“The company is currently assessing its real estate footprint and plans to close or downsize certain corporate offices. In addition, the company plans to reduce its operating costs primarily through lower headcount and professional services,” the firm said in the SEC filing.

The reductions are a continuation of the cuts Charles Schwab announced in July, when it said it was closing offices in Atlanta, San Diego, St. Louis, San Antonio and Tampa this year, as well as downsizing offices in Boston, Chicago and San Francisco.

Charles Schwab acquired TD Ameritrade for $22B in 2020 and moved the combined headquarters from San Francisco to Westlake, TX, a suburb of Dallas-Fort Worth.

In an earnings call with investors last month, Walt Bettinger, Charles Schwab’s CEO, indicated that the cost-cutting effort is part of the ongoing effort to integrate TD Ameritrade and Charles Schwab.

“We anticipate the realization of expense savings to be substantial. In addition to the remaining $500 million of synergy savings that we originally committed to as part of the Ameritrade acquisition, we now anticipate achieving at least an additional $500 million in future expense savings,” Bettinger said, during the call.

“These savings will come from a variety of areas: real estate savings, lower headcount from efficiencies gained via automation built and implemented as part of the integration work, streamlining our organization to ensure we are set up to operate most efficiently post integration,” the CEO added.

Charles Schwab President Rick Wurster reported that, over Memorial Day weekend, the company completed the largest brokerage conversion in the industry, moving more than 5M client accounts from TD Ameritrade to Schwab.

“We are on track to migrate the remaining Ameritrade clients in three additional transition groups in September, November and in the first half of 2024,” Wurster said, according to the transcript.

According to Wurster, more than $280M in net flows into the company’s managed investing solutions year-to-date came from legacy Ameritrade clients who migrated to Schwab.