Schwab embraces the Internet

In a recent interview with freelance writer Mary Brandel, Geoff Penney, CIO at Charles Schwab & Co., talked about the early days of the Internet.

What did technology mean to Schwab, pre-Internet? The first important technology decision we made, in 1979, was to acquire our own back-office system and bring it in-house. Since then, we've been trying to find a way to bring technology to bear on what the firm is doing in a way that gives the customer value.

Some may say Schwab.com was the most important thing to hit the financial services industry, but that was 1996. We'd been at this for over 10 years. Streetsmart [a Windows-based stock trading system released in 1993] and the Equalizer [DOS-based investing software released in 1984] were steps along the path. We had already learned how to manage [technology] and what the security issues were through early experimentation.

What compelled Schwab to embrace the Internet? We were doing some work on adapting our trading system, fooling around with using it on Unix. In the lab, one of the guys put together a browser application, through which he could access the trading system. Our CIO at the time, Dawn Lepore, saw this demonstration and was so impressed, she called Chuck Schwab in, and he loved it. He could see how easy it was for customers to use.

What are the technology challenges you're facing right now? Even before the market began its troubles, as clients acquired more assets, they increasingly needed advice. We've offered a whole spectrum of that kind of service, including doing it on a value basis, through technology. Instead of individual researchers making judgment calls, we're using computers, algorithms and models to grade stocks from A to F.

We're also focusing on making sure everything we deliver is done consistently throughout all of our channels. Clients interact with us in all different ways -- wireless, the Web, PC, touch-tone phone, voice recognition, talking to someone live, walking into a branch. So if someone can use Web tools to do their retirement plan, in the branch, we will use the same tools. We're striving for consistency and breadth of channels.

Brandel is a freelance writer in Newton, Mass. Contact her at brandels@attbi.com.

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