A decade ago Schwab earned $3 billion from trading; today that's dropped to $830 million because of increased competition and lower-cost, fixed-price trading. In response the company has shifted from a transaction-based retail model to one that derives revenue from asset-based sources -- like mutual fund fees -- and income from interest on its market balances. "In a competitive industry, they were able to adapt and maintain profitability," says Morningstar's Michael Wong.
