SCHWCharles Schwab Corporation (The)

Charles Schwab is a broker that earns not from trading commissions but from interest on its clients' cash.

Cutting equity trading commissions to zero changed the market entirely, and a broker of this size doing it settled the question for the whole industry. The economics since rest on something else: cash balances in brokerage accounts move to its own bank and fund loans and bonds, while the client is credited a lower rate. The spread is the main income.

Hence a rate sensitivity unlike a bank's. When rates rise quickly, clients move cash out of accounts into money-market funds chasing yield — the cheap funding base shrinks, and profit falls exactly when banks' profit rises. That outflow was the central storyline around the company.

The second pillar is servicing independent financial advisers and custodying their assets: fees there scale with assets and are largely rate-independent. Schwab pays a dividend; its scale after the TD Ameritrade acquisition makes it the country's largest retail broker.