Goldman Sachs Group Inc (GS), Morgan Stanley (MS): Should You Invest in the Investment Bank Survivors?

As such, investors might want to look at the firm that helped to get the ball rolling on cheap commissions back in 1975, Charles Schwab Corp (NYSE:SCHW). The company’s mission has always been to empower investors with low costs and innovative tools, like its no-transaction fee OneSource marketplace for mutual funds. While keeping its commissions low, Schwab has also been transitioning into a full-service investment firm, offering portfolio advisory and bank lending products.

In its latest fiscal year, Charles Schwab Corp (NYSE:SCHW) reported marginal growth, with increases in revenues and operating income of 4.1% and 4.2%, respectively, compared to the prior year. While the company’s top line was negatively impacted by lower trading levels, with daily average revenue trades down 7%, it continued to increase its industry market share, with client assets of nearly $2 trillion as of December 2012. Schwab’s asset gathering process, a consequence of its high-tech, high-touch account opening procedure, creates a captive customer base that the company should be able to up-sell on its new advisory fee services.

The bottom line

The investment bank giants are priced at low price to book multiples, despite strong stock price gains over the past twelve months. However, there are potential minefields ahead for Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS), with rising regulations and falling commission prices likely to persist indefinitely. Thus, investors should pass them by and stick with Charles Schwab Corp (NYSE:SCHW), the investment brokerage that continues to challenge the status quo.

The article Should You Invest in the Investment Bank Survivors? originally appeared on Fool.com and is written by Robert Hanley.

Robert Hanley has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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