Charles Schwab’s war on fees has come home to roost, as rising interest rates sour the largest US broker’s big bet on customer cash.

Under pressure from low-cost start-ups such as Robinhood, Schwab shook its industry in 2019 by eliminating trading fees, then one of its big revenue streams. The move seemed decisive in a long industry-wide price war, letting it outflank low-cost competitors such as ETrade and TD Ameritrade and become the largest retail brokerage in the US with $7.4tn in client assets.

The bet that Schwab could win customers with low fees and profit by investing the cash that they kept on its platform initially proved to be an extremely lucrative one. But interest rates have risen at speeds not seen for decades and Schwab’s cash play has unravelled, sending its shares down almost 40 per cent this year.