TD Ameritrade Institutional attracted more breakaway brokers in the last nine months than it did in all of its 2009 fiscal year, company executives said last week.
Over its first three fiscal quarters, through June 30, the registered investment adviser custody unit of the discount broker added 212 former brokers to its independent adviser ranks, compared with 202 who joined during the 12-month period ended Sept. 30. The 212 additions represent a 44% increase over the total added in the first nine months of fiscal 2009, according to Tom Nally, managing director of sales at TD Ameritrade Institutional.
Of the new advisers joining TD Ameritrade in the current fiscal year, 42% joined existing advisory firms, up from 34% last year, Mr. Nally said.
“We're really seeing overall strength [in the] move to independence,” he added, “and the tuck-in trend is really heating up.”
So-called tuck-ins — advisers who join an existing firm versus setting up their own RIA — are seen as a large market for custodial firms. Many advisory firms are actively recruiting from the large population of wirehouse brokers.
“We've got many [recruits] who are not so entrepreneurial joining existing firms,” Mr. Nally said.
EARNINGS
Parent company TD Ameritrade Holding Corp., the third-largest retail brokerage by client assets, last week reported fiscal third-quarter net income of $179 million, or 30 cents a diluted share, flat on a per-share basis with a year earlier. Earnings rose from the firm's fiscal second quarter, when it reported net income of $163 million, or 27 cents a share.
Revenue from earned interest climbed 13% to $111.4 million. That brought total revenue to $691.8 million for the quarter, beating the average estimate of $679.3 million, according to a Bloomberg survey. Ameritrade clients placed an average of 413,461 trades per day, compared with 391,506 a year earlier.
“Ameritrade's gone from a turn-around story to strongly growing assets,” Celeste Mellet Brown, an analyst with Morgan Stanley, wrote in a July 8 note. “The Street underestimates the company's asset growth potential. Net new assets continue to outperform.”
The company's interest-rate-sensitive client cash balances were up 13% from a year earlier to $63.2 billion, money that will add to the company's bottom line before it goes to investors when rates begin to rise, said William Gerber, chief financial officer.
But Mr. Gerber noted that the near-zero interest rates that have plagued revenue at many brokerage firms likely will continue to pressure earnings into 2011 as the economy remains sluggish. Another near-term negative, he said, is that typically slow summer trading by investors has been exacerbated by the 12% equity market correction in the June quarter.
TD Ameritrade chief executive Fred Tomczyk had better news on the institutional front. Asset gathering among RIAs who use TD Ameritrade was strong last quarter, leading the broker to report $8.9 billion of new client assets, up 29% from the third quarter of fiscal 2009.
BIG SPENDING
Mr. Tomcyzk also said that TD Ameritrade plans to invest $30 million in technology and “client-facing” activities in fiscal 2011.
“Low interest rates remain a challenge, but we see no reason to change our strategy,” Mr. Tomczyk said during the call, explaining why the firm is increasing its investments in technology for its large base of online clients. “This is particularly important in light of our growth in the last few years.”
TD Ameritrade's tech budget is two and a half times the $12 million that the Securities and Exchange Commission has budgeted for its 2011 fiscal year on information technology improvements.
E-mail Dan Jamieson at [email protected] Jed Horowitz at [email protected]. Bloomberg contributed reporting to this story.
