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    CHARLES SCHWAB INDEPENDENTBRANCH BUSINESS MODEL ASSESMENT

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    OVERVIEW

    Charles Schwab is an American brokerage and

    banking company, based in San Francisco, California

    Manages about $2.3 trillion in assets for 10.5

    million individual investors and institutional clients

    Deals in financial research, advice, and planning;investment management; retirement and employee

    compensation plans

    Provides mortgages and other banking products

    through its subsidiary Charles Schwab Bank

    It recorded sales of $5.54 B and a net operating

    profit of $1.07 B for 2013.

    Charles Schwab Independent Branch Leaders (IBLs) arefranchisees who operate Schwab Independent Branches as peran franchise agreement with Charles Schwab

    IBLs may employ Independent Branch Financial Consultants (IBFCs) who are registered representatives, and/or Independent

    Branch Client Service Specialists (IB CSSs) who may or may notbe registered.

    IB registered personnel are not Schwab employees, but they areregistered representatives of Schwab for purposes of securities

    regulations

    IBLs are generally paid revenue from their business based onthe overall revenue Schwab earns from clients whose accountsare assigned to their independent branch..

    Key Employees

    Independent Branches ( Franchisees)

    Chairman Charles Schwab

    EVP and CFO Joseph Martinetto

    Branch Locations IBLs

    Salem, OR John Smith

    Nashua, NH Mary Murphy

    Windermere, FL Michael Wytiaz

    Dripping Springs, TX Brian Carpenter

    Las Cruces, NM Jackie Edwards

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    SWOT Analysis for the Franchise strategy

    The franchisee model targets specifically focuses

    on cost competitiveness and higher earnings

    Reduces the high cost of maintaining a branchsignificantly for the firm

    Helps in customer retention and generation of newcustomers

    Strengths

    Weakness

    Reliance on external agents to bring in more business

    Earnings are largely dependent on the overall state ofthe economy and on the investors' desire to investtheir cash and trade securities on the capital market

    Client retention becomes difficult as the firm does

    not have a direct relationship with the client

    Opportunities

    Helps to service clients in the non branch locations

    Generation of more clients which in turn helps to driveup assets and revenue growth

    Helps to provide Customized services to clients specific totheir needs

    Threats

    Cyclical nature of economicgrowth affects business &stiff competition from RIAs

    Implications of a tighter control by the firm can lead to aconflict between the firm and the franchisee

    Competitor firms can reduce the viability of model byupscaling there branch numbers and reducing there

    brokerage , charges and minimum fixed deposit to bemaintained

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    Industry Response & Competitive Landscape

    The franchise program seeks to sign upestablished financial advisers who will

    operate independently under the

    Schwab name, plugging into the firmsproduct menu, services and technology

    so as to help the firm gain over itscompetitors

    The asset creation rate as reported by

    Schwab through some of thesefranchisee is impressive

    Competitors like TD Ameritrade ,

    Ameriprise , Fidelity have noimmediate plans for franchisee

    Ameriprise restricts its employees towork for the company for minimum 10years, before becoming a franchisee, or

    face paying high fees

    The possibility of creating a conflictwith company branches or RIAs whouse Schwab Advisor Services keeps

    competitors away from following sucha strategy

    The franchisee strategy is beingwatched closely by the industry thoughthere are no immediate competitors to

    this strategy

    Competitive pricing of the firm sservices and products such as freePersonal guidance, rich selection ofproducts also gives the franchisee

    strategy a lead over its competitors

    The strategy also reduces the cost ofsetting up branches for the firm along

    with increasing the direct customeraccess

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    Recommendations for Fidelity

    Focus on supporting and training the

    independent RIAs to target affluentclients for its business

    Fidelity Investments provides itscustomers with very rich selection of

    investment products, access to

    investment research , However thefirm needs to focus on first time

    investor related support to increaseit client creation and retention

    More focus on making thecompany's online Retirement IncomePlanner more customer friendly andinsightful to counter the franchisee

    strategy

    Focus on better client servicemechanism via improving customer

    care and informatory sessions

    Focus on new products and clientgeneration through community

    involvement and financial awarenesscampaigns

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    Reference :

    Company website Wall Street news Journal

    Forbes

    Financial Advisor IQ

    Reuters