research assignment fidelity investments.pdf

8/10/2019 Research Assignment Fidelity Investments.pdf

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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

research assignment fidelity investments.pdf

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