The leader and visionary of Charles Schwab & Co.’s retail advice revamp unloaded 15,459 shares of Schwab stock worth $448,511.02.
Terri Kallsen, who took on the job as executive vice president of investor services in November 2014, sold her shares Nov. 4, 2015, according to filings with the Securities and Exchange Commission.
The shares were sold at an average price of $31.58. Kallsen now owns 12,662 shares in the company valued at about $320,000. Shortly after she sold, the shares went up staying around $33 a share through the end of December. By January, the shares teetered then declined to about $25 a share. Schwab’s share prices were as high as $35 a share in the summer of 2015. Pretty solid.The move took some observers aback because of how instrumental Kallsen is to helping Schwab bridge to a future as a high-end wealth manager earning high-margin fee-based revenues.
Sell a vision short – “It is atypical for someone who is thinking about their long-term opportunity at a company to sell that vision short by means of selling half their stake in that opportunity,” says James Lowell, chief investment officer, of Adviser Investments and editor of Fidelity Investor. “There could be many factors, but it raises the question of her longevity there – a question that she should be able to answer.”
James Lowell: It raises the question of her longevity there – a question that she should be able to answer.
Kallsen is 46 years old and her job description has depth and breadth:
[She] is responsible for driving profitable, long-term growth and increasing client loyalty in the retail business, serving individual investors. She manages Schwab’s branch network, Independent Branch Services, client service and support, wealth management, financial planning, acquisition delivery, supervision and controls, portfolio consulting and optionsXpress.Kallsen declined to comment for this article but Schwab spokesman Greg Gable framed her decision to sell as likely one of a few options on a menu.
“Executives sell stock from time to time for personal, financial reasons and diversification. Terri Kallsen, who recently relocated to the Bay Area to lead Investor Services maintains substantial investment in the company reflecting her commitment to its future.”
Observers says that Gable’s allusion to Kallsen’s move from Texas, where housing is cheap, to San Francisco, where housing costs are through the roof, may offer a hint about the share-dumping rationale that she offered to her company. It seems likely that she recently purchased a house in San Francisco, according to sources.
Schwab has yet to disclose Kallsen’s compensation for 2015 but it is unlikely that it would be an impediment to taking out a mortgage. Kallsen replaced John Clendening as head of Schwab’s retail business, and his compensation was $2.9 million, $3.2 million and $2.5 million for 2014, 2013 and 2012 respectively. Kallsen’s counterpart of the institutional side of the business at Schwab, Bernie Clark, earned $2.6 million in compensation in 2014.
Clendening’s departure was a ten-fold bigger liquidity event than Kallsen’s sales of shares., according to Reuters Schwab’s He left with a golden parachute worth more than $5.2 million.
Kallsen moved to San Francisco with her family last year. Gable declined to comment on whether Kallsen purchased a house. Though the 15,000-plus share trade may be an affront to corporate piety, it is quite a wise move on a personal level – and one more executives should make, according to Tim Kochis, who co—founded Kochis Fitz Tracy Fitzhugh & Gott Inc. that merged with Quintile Wealth Management LLC to create Aspiriant. He retired in 2012. See: Tim Kochis retires, months earlier than scheduled, but also years later than planned.
“Selling half of one’s holding of long shares means that the other half is still held plus probably lots of options and restricted shares,” he writes in an email. “As I say in my Concentrated Stock book, many corporate execs really do need to diversify their positions and long shares should be the first to dispose of.”
Selling that amount of company stock seems pretty wise, says Susan Reese, an advisor who just joined Robertson Stephens Advisors in November. See: Why a $2 billion advisor bolted Goldman Sachs’ $26 billion, Albany-based RIA and subtracted 12,000 commuting miles. She’s worked with top executives advising them on stock options and their portfolios for years at AYCO, the Goldman Sachs-owed RIA that specializes in executive compensation issues at Fortune 500 coompanies.
Susan Reese: It doesn’t raise an eyebrow to me … She probably has an advisor who is trying to give her a long-term strategic plan and this is part of it.
Susan Reese: It doesn’t raise an
eyebrow to me … She probably
has an advisor who is trying
to give her a long-term strategic
plan and this is part of
it.
Indeed, Reese says it’s likely that Kallsen was offered advice.
“It doesn’t raise an eyebrow to me. It’s more diversification. She probably has an advisor who is trying to give her a long-term strategic plan and this is part of it,” Reese says.
But aside from the size of the Kallsen trade and how soon after she ascended to her high executive perch it came, is the nature of her position — and the rope that her boss, Schwab CEO Walter Bettinger, has given her in setting a bold future for Schwab, is just how central her execution of that vision will be to whether Schwab’s shares break out of a long slump.
She was brought to Schwab’s retail helm to clean up the retail operation in which the branch count had stayed static or declined for 15 years and where initiatives like franchises, 27 sold since 2011 launch, and buying RIAs, like Windhaven, have faltered.
In July, she was central to a Schwab pronouncement to Wall Street that the company will hire 1,800 financial advisors and build 150 more branches in the next 5 or 10 years. Schwab currently has 1,200 branch advisors and its goal is to grow that force to 3,000.
The new installations will be placed in major markets with an emphasis on New York, Washington D.C., Texas, California and Chicago. It costs about $1 million to open each branch.
Kallsen has been at Charles Schwab. & Co. since 2012. Kallsen has already been vocal about the retail developments — a regular contributor during Schwab’s quarterly analyst phone calls.
Big catch-up
“Today, we are working with our recruiting talent and we are building a recruiting pipeline,” she said in July to Wall Street analysts. “We are making sure we have the right people, that they understand our value proposition and as the interest rate opportunity opens up, we will hire and train them.”
After so many years of corporate belt-tightening to avoid an earnings dip, Schwab is also finding itself in catch-up mode, according to Kallsen’s comments last summer.
“We have grown dramatically in the last seven years,” she said at that call. “Seven years ago, we had $1.1 trillion in client assets. Today, we have $2.6 trillion. We have the same number of financial consultants today as we had seven years ago and we’ve added millions more clients.”
Schwab Private Client currently has about $64 billion in assets, according to the latest ADV filing and that is part of Kallsen’s purview.
Kallsen is not new to the financial services arena. She is a former star at USAA and also served as executive vice president of First Command Financial Services.