Schwab’s Gen X Marketing Initiative

Jonathan Craig
Vice President
Schwab Investor Services


Jonathan M. Craig leads Schwab’s Gen X initiative, responsible for creating the products, services and client experiences that will help Schwab attract and retain younger clients.

Craig has held a variety of marketing roles at Schwab. Previously, he worked in Client Experience with responsibility for products, pricing and service model for smaller-asset clients. He was also responsible for marketing and advertising support for Schwab's entry into banking and its re-launch into the mass active trader market. He has also managed Schwab’s corporate sponsorship portfolio and sports marketing programs, and he was instrumental in building Schwab’s original wireless business plan in 2000.

Prior to joining Schwab, Craig was employed with AT&T.

He received an MBA in Marketing and Finance from the University of California, Berkeley, and has an undergraduate degree in Economics and Political Science from McGill University in Montreal, Canada. He has also completed Executive Education courses at the University of Virginia Graduate School of Business.

April 20, 2007

Charles Schwab & Co. has reduced its account minimums for clients opening brokerage and retirement accounts, while at the same time eliminating minimums for clients who agree to automatic monthly deposits of more than $100. The company is aggressively courting less-affluent investors, hoping that smaller fees and account minimums will help the company develop lifelong clients from those rank-and-file Americans looking to get serious about personal retirement savings. The move marks the tenth time that CEO and founder Charles Schwab has slashed the company's fees since he re-emerged from retirement to lead the firm in May 2004.

Schwab vice president Jonathan Craig said in statement that younger investors "want fewer barriers like high initial investment requirements and fees preventing them from starting early on saving investing." After Schwab's latest reductions in fees, consumers can open account with an initial investment of $1,000, far less than the $2,500 that the company previously required. For customers lacking a lump sum to start an account, minimums are waived entirely if they agree to make automatic monthly deposits of at least $100. Schwab also announced that it has eliminated the penalties charged to accounts that fall below the minimum balance requirements.

HARNESSING THE WEB

For Charles Schwab, online forums gave product development teams insight into the demands of existing clients--and more recently, an entire generation of prospective clients.

Schwab set out to better understand generation X's financial concerns and saw the Web as the way to reach them.

Along with Communispace, which builds private online communities, Schwab created a Money and More Web site and invited 1,000 people in their 30s and 40s--none of them current Schwab customers--to participate in surveys and discussion groups. Four hundred accepted the invitation, spurred in part by incentives from Communispace. Over five months, Schwab used the site to survey participants about their investment, savings, and other financial habits and attitudes. But the richest information came from the free-form online discussions. Even without Schwab's asking about debt, for instance, the conversation revealed people's worries and desire to eliminate debt.

Craig described the conversations "an epiphany that drove a lot of our marketing." Among the new products launched as a result is a checking account that earns 4% interest, offering free checks and no ATM fees. Since launching in April 2007, Schwab has opened 60,000 new accounts, increasing its base of customers in their 30s and 40s by 40% this year compared with a year ago. Some of those are becoming brokerage clients for Schwab. "This is a gateway to investing" for some who were too overwhelmed or intimidated to open brokerage and other accounts, Craig says. The site is down now, but Schwab plans to launch a new Money and More site with more features.

People express more openly anonymously online. But don't conclude that you are finally hearing the truth. It might just as well be that people exaggerate their feelings for effect. Allen Weiss, a marketing professor at the University of Southern California business school and founder of the MarketingProfs Web site gives warning.


Charles Schwab's Gen X Money Mindsets Study
(media release dated 11th February 2008)


Charles Schwab's Gen X Money Mindsets Study, a segmentation study
of more than 5,000 Americans aged 25-40 found that younger investors
generally fall into six distinct categories based on their mindsets
and attitudes toward money.

According to Jonathan Craig "One of Schwab's primary goals is to better understand and serve Gen Xers, who are facing some real financial challenges," "The generation is challenged by rising costs of healthcare and education, diminishing
defined benefits through employers, and uncertainty around the future
of Social Security. We wanted to dig deeper to uncover this group's
attitudes when it comes to money, and better understand how these
attitudes guide their behaviors."



The Schwab Gen X Money Mindsets Study identified six distinct
Money Mindsets, each with its own lifestyle goals and financial
attitudes:

Money Mindset One: Paycheck to Paychecks

By far the largest group representing 25 percent of Gen Xers,
members of this predominately female group are extremely stressed
about their personal and professional lives. They are less confident
than any other group about having a bright future, and are twice as
likely to be unsettled and pessimistic about their financial
situations.

-- More than any other Gen Xers, "Paycheck to Paychecks" live on
a strict budget with nothing left over to save (85 percent vs.
47 percent for all Gen Xers).

-- More than the other groups, 48 percent report
financially-induced anxiety (vs. 18 percent of all Gen Xers).

-- Eighty-one percent stress about the direction of their
personal lives and 67 percent are worried about the direction
of their professional lives.

Money Mindset Two: Spend Now, Pay Laters

Seventeen percent of Gen Xers fall into this category of
predominately city dwellers that tend to be optimistic, yet somewhat
unrealistic about their futures. Overwhelmingly male (77 percent),
this group is incurring significant debt, and believes that Social
Security will be there for them when they retire.

-- While almost half (48 percent) say they have enough money and
don't worry about saving for the future, 67 percent say they
have too much debt to think about investing.

-- This group is almost twice as likely as any other segment to
believe Social Security will be a big part of their retirement
income (57 percent vs. 26 percent of all Gen Xers).

-- Sixty-one percent -- more than any other segment -- don't
worry much about money and think "it's all going to work out."

Money Mindset Three: Confident and Risk-Tolerants

Representing 15 percent of the overall Gen X population, members
of this group have high incomes, active lifestyles and high levels of
engagement in their financial future. They are more likely to be
married, and believe that by taking risks they can reach lofty
financial and lifestyle goals.

-- Almost all (96 percent) are confident their future is bright,
compared with 65 percent of fellow Gen Xers.

-- More than three quarters (76 percent) are confident that
someday most of their income will come from investments,
versus 36 percent of Gen Xers overall.

-- Nearly eight in ten (79 percent) say that many of their
successes have come because they have been willing to take
risks, compared with 55 percent of fellow Gen Xers.

Money Mindset Four: No Money, No Worries

This group represents 15 percent of the Gen X population. They are at the bottom of the earnings spectrum yet are very optimistic about life. They are more likely to be single, consider investing risky, and have the fewest number of credit cards. This group also has very little trust in financial firms or advisors.

While 57 percent make less than $50,000 per year, this group doesn’t worry much about money.
On a typical day, nearly seven in ten (69 percent) spend more time thinking about their weekend plans than the state of their finances (vs. 45 percent for all Gen Xers).
This group is more likely than any other group to say they don’t have a financial advisor because “you can’t trust them” -- four in ten (41 percent) won’t trust a broker to take care of their financial needs.

Money Mindset Five: Cautious Savers

Approximately 14 percent of the Gen X population, this group tends to be financially conservative and concerned about money, highly educated and financially secure, yet is late to adopt new products. They are also more likely focused on home and family than they are on having active social lives.

More than eight in ten (82 percent) say they plan for the future rather than live for today.
Nearly seven in ten (69 percent) try to minimize risk and uncertainty in their lives (vs. 59 percent of all Gen Xers).
Only 16 percent think they will be in debt for the rest of their lives, compared with 35 percent of Gen Xers overall.

Money Mindset Six: Overwhelmed but Optimistics

Predominately female, these Gen Xers have significant debt, adjustable rate mortgages, and high rates of financially-induced irritability or anxiety. Despite this, they manage to stay positive about their futures. This group represents 13 percent of the Gen X population.

Eighty percent live on very strict budgets with nothing left over to save. More than any other group, they think about their finances daily (87 percent, compared with 66 percent of all Gen Xers).

More than a quarter (26 percent) report financially-induced anxiety (vs. 18 percent of all Gen Xers).
This group is future-focused, with three quarters (75 percent) saying they have a vision of where they want to be in ten years (vs. 59 percent of all Gen Xers)

Some Common Traits

In addition to the six mindsets, the Schwab Gen X Money Mindsets Study identified several key characteristics that are held by the majority of Gen Xers. The study reveals that many Gen Xers are not characterized by skeptical attitudes, and instead favor a more traditional outlook on life and financial aspirations.

American Dreams: Gen Xers have often been labeled as “slackers” and were assumed to have rejected the traditional working-class lifestyle. However, almost two in three (64 percent) say they are focused on attaining the American Dream of family, homeownership, and financial security. Almost two in five (39 percent) would like to attain the lifestyle enjoyed by the financially successful people who surround them.
Drowning in Debt: Gen Xers are saddled with debt. Almost 45 percent say they have too much debt to even think about saving or investing, and more than a third (35 percent) think they will be in debt for the rest of their lives.

Financial Anxiety: Most Gen Xers are worried about their financial futures. Two-thirds (66 percent) admit to thinking about their finances on a daily basis, and nearly half (46 percent) also worry about the finances of their parents and siblings.

No Savings: Many Gen Xers report an inability to save, with nearly half (47 percent) reporting they live on a very strict budget with nothing left over to save. When asked if they are more proactive in saving for a vacation or retirement, 43 percent say they focus on saving for a big trip.

Little Faith in Financial Firms: Many Gen Xers do not believe financial firms can help them. More than half (51 percent) think that investment firms don’t care about people like them – those who don’t have a lot of money. And 46 percent feel that by turning to firms and advisors, they might end up spending more money than they make.

About the Study

Few generations have been so thoroughly scrutinized and misunderstood as Generation X. The members of the MTV Generation have been consumers almost since birth, but their importance grows as they transition into investors, homeowners and parents. To provide fresh insights into this generation, Charles Schwab conducted The Gen X Money Mindsets Study – it incorporates more than 2,000 online and face-to-face interviews nationally and an additional 3,000 interviews in America’s largest cities. This effort produced six unique profiles of Gen X attitudes and mindsets toward life and money – and toward understanding how those mindsets guide the group’s financial behaviors.

A segmentation study creates profiles of a population by using statistical analysis to define groups of individuals around certain characteristics.

About Kelton Research

Kelton Research is a full service market research consultancy with offices in Los Angeles, New York, and Washington DC. Kelton serves as a strategic partner to both Fortune 500 corporations and smaller companies, utilizing a wide range of qualitative and quantitative methodologies to drive tactical recommendations for clients. For more information about Kelton’s services, please call (310) 479-4040 or visit www.keltonresearch.com.

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.0 million client brokerage accounts, 1.2 million corporate retirement plan participants, 262,000 banking accounts, and $1.4 trillion in client assets. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, http://www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Schwab Institutional division. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products.

Contact for more information:
Matt Hurwitz,Charles Schwab, 415-636-3700
matt.hurwitz@schwab.com



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