Despite expectations that interest rates will remain near zero for another year, the interest-sensitive TD Ameritrade Holding Corp. plans to invest $30 million in technology and “client-facing” activities in fiscal 2011.
Despite expectations that interest rates will remain near zero for another year, the interest-sensitive TD Ameritrade Holding Corp. plans to invest $30 million in technology and “client-facing” activities in fiscal 2011, chief executive Fred Tomczyk said today.
The company, the largest discount broker by trading volume, has signed up an average of one new breakaway broker each business day this year on its “institutional” custody platform for registered investment advisers, he said in a conference call with analysts.
TD Ameritrade's technology budget is 2½ times the $12 million that the Securities and Exchange Commission has budgeted for its 2011 fiscal year on information technology improvements.
On Monday night, TD Ameritade reported fiscal third quarter net income of $179 million, or 30 cents a diluted share, flat on a per-share basis with its year-earlier quarter. Earnings rose from the Omaha, Neb.-based firm's fiscal second quarter, when it reported net income of $163 million, or 27 cents a share.
“Low interest rates remain a challenge, but we see no reason to change our strategy,” Mr. Tomczyk said on 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.”
The company's interest-rate-sensitive client cash balances were up 13% from a year earlier to $63.2 billion, money that will add profit to the company's bottom line before it goes to investors when rates begin to rise, said William Gerber, the company's chief financial officer. But he noted that rates continue to be “under a little pressure” at the same time that the economy remains sluggish and typically slow summer trading has been exacerbated by the 12% equity market correction in the June quarter.
Asset gathering among registered investment advisers who use TD Ameritrade was strong last quarter as investors increasingly turn to the independence and objectivity of RIAs, Mr. Tomczyk said.
