Charles Schwab's Fatherly Advice: Have a Passion for What You Do -- and Diversify

Schwab book
Schwab book

Discount brokerage king Charles Schwab and his eldest daughter Carrie Schwab-Pomerantz got a chance to rewrite a little family history when they co-authored a personal finance book in 2002: It Pays to Talk: How to Have the Essential Conversations with Your Family about Money and Investing.

The title says it all -- but Schwab hadn't actually had those chats with his daughter when she was a youngster.

"My parents never sat me down to discuss the birds and bees of savings," says Pomerantz, now 51 and living near San Francisco.

But that didn't stop her from opening a savings account with the help of her mother at age 9, nor later from soliciting fatherly investment advice about her retirement account as a young adult. Ultimately, she chose to join her father's company as a broker. Today, she's a senior vice president of the Charles Schwab Corporation (SCHW) and president of the Charles Schwab Foundation.

Gallery: Father and Daughter: Charles Schwab and Carrie Schwab-Pomerantz

Thumbnails Charles Schwab
Thumbnails Charles Schwab

"What I learned from him is that you should have a passion for whatever it is you do, and that you should do what is right for the people," says Pomerantz. "He democratized investing for Americans, and I'm an advocate of teaching women and the under-served about finances. Having savings and assets can make a difference in their lives. In a way, I've mirrored his advocacy for the people."

An Independent-Minded Daughter

Back in 1975, her father launched his discount brokerage after the Securities and Exchange Commission deregulated brokerage commission rates. While most brokerages saw deregulation as an opportunity to raise commission rates, Schwab ran in the other direction and lowered them, a move that made investing more affordable. Pomerantz notes that her father stressed that when you do the right thing for the customer, profits are apt to follow.

Profits and expansion did follow, but initially Pomerantz wasn't interesting in following her father into the business.

"I wanted to be independent of him and wanted to do my own thing," says Pomerantz, who received her bachelor's degree in political science at the University of California at Berkeley and then later a master's degree in business at George Washington University. "I was interested in shipping and did that for a couple years, but I was bored. I decided to go back into investing."

As a teenager, Pomerantz had received exposure to the industry while helping out with odd jobs at her father's company. When she decided to dip back into the investing world after her stint with the shipping industry, she initially considered joining Schwab competitor Merrill Lynch, which offered a training program. But after talking with an acquaintance in Schwab's human resources department, she changed those plans.

"She said 'That's ridiculous. Why go to a competitor?'" recalled Pomerantz. The woman explained that Schwab was offering a new training program aimed at college graduates.

The Return on a Father's Investment

Carrie Schwab
Carrie Schwab

After joining Schwab full time in 1983 as a broker, she asked her father for advice on how to best allocate her money in an individual retirement account (IRA), which was just then becoming a more widely used investment vehicle.

"He impressed upon me the importance of diversification and taught me about mutual funds achieving that diversification," says Pomerantz.

In addition to diversification via mutual funds, Schwab also shared this investment philosophy tidbit with his daughter -- that a gambler is someone who jumps in and out of a particular stock. Schwab believes more in a buy-and-hold approach, given that companies are inherently designed for growth.

"It's in the DNA of companies to grow," Pomerantz says.

Schwab has taken his buy-and-hold advice to heart, remaining the largest individual investor in Charles Schwab. But Pomerantz notes her father could also do well to follow his other advice about diversification.

Pomerantz, a certified financial planner, considers herself a more conservative investor than her father and primarily holds index funds. Schwab, meanwhile, characterizes himself as a calculated risk-taker, says Pomerantz. Back in the 1970s when Schwab was starting his brokerage business, the economy was tanking and her parents were undergoing a divorce.

The risk, however, paid off. Schwab, still chairman of the company he founded, has an estimated net worth of $4.7 billion and is ranked No. 223 on Forbes' list of the world's billionaires.

Schwab's wealth extends beyond material things to his five children. Pomerantz, the eldest of three kids from his marriage to his first wife, says her father's investment in her has paid off -- she's healthy, happy, and a high-achiever who, like him, believes she has a higher purpose in helping others.

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