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Deal Honestly with Customers
His boss rehired him, but Schwab continued to struggle to reconcile the conflict between doing what was good for business and doing what was right for the customer. For him, the ultimate test was whether an offering was something he would have his parents invest in.
Schwab had also come to realize a simple truth: "Clients will pay you money even when things are bad, as long as you tell them the truth."
That determination to deal honestly with customers became Schwab's guiding principle when he started his own discount brokerage business in 1974. He had just four employees and $75,000 in loans from family and friends. To this day, Schwab says, "some of my good friends still say to me, 'When you showed up, I was just wishing you weren't going to ask me for money!' "
Four years later, Schwab made a decision that was critical to the company's growth: He replaced the firm's boring, just-the-facts advertisements with those using his own image. "Putting my picture in the advertising put a face to the business. People felt there was a real person behind the whole thing, someone they could trust."
Results quintupled, then quintupled again. With each development, from the mass marketing of mutual funds in the 1980s to the Internet boom of the 1990s, Schwab's company came up with innovations to further empower individual investors. But the basic impetus stayed the same: "I just wanted to lower the prices and get better outcomes for investors," he says.
"Deep in my heart," Schwab adds, "I knew if I got more people to invest, it would be part of the great American success story and improve democracy. If people don't participate in wealth creation, we lose them as major participants in the body politic. I still feel it today. The more I can do to bring new investors into the success tent, the better off we all will be."
And FYI ...
- The guru speaks. Charles Schwab's New Guide to Financial Independence: Practical Solutions for Busy People is a classic primer.
- Read Make Money, Not Excuses: Build Wealth, Be Happy and Make Sure You're Set for Life. A sassy guide for women by Jean Sherman Chatsky (due out September 2006).
- Track where your money goes with Quicken Deluxe 2006 personal finance software.
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