Conservative streak helped Canada skirt financial crisis: TD's Tomczyk

How did Canada avoid the worst of the banking crisis? "Generally speaking, Canadians are more conservative," Fred Tomczyk, president and chief executive of TD Ameritrade Holding Corp., said in an interview Monday. "The environment in the U.S. is more competitive," he said. "In Canada, there are five big banks, and three big life insurance companies. They go at it, but no one does anything stupid" enough to get in trouble. TD Ameritrade is 45% owned by Toronto-Dominion Bank. Mr. Tomczyk, a Canadian who now resides in New Jersey, said the mortgage interest deduction enjoyed by U.S. homeowners and the ability to prepay mortgages without penalty, has also distorted the real estate markets here. Canadian mortgage holders can prepay, he said, but not without cost. That helps Canadian banks maintain more diversified holdings of mortgages with different terms and rates. Banks need to hold some of the loans they underwrite, he said. "In Canada, they probably hold 60% of what they write" and never engaged in subprime lending, Mr. Tomczyk said. Mr. Tomczyk also commented on the mortgage marked in the U.S., declaring that Fannie Mae and Freddie Mac need to be reformed. "If mortgages are guaranteed by the government, the government should give a hoot about underwriting standards," he said. TD Ameritrade yesterday released operating metrics for August, reporting total client assets of $332 billion, up 15% year over year. About 30% of the firm's assets come from advisers who hold clients' assets in custody at the firm, Mr. Tomczyk said prior to the release, with the rest being its discount-brokerage assets. By contrast, adviser assets held at The Charles Schwab Corp. now amount to just over half that firm's $1.4 trillion asset base. "This year, both sides [of the business] have performed well," Mr. Tomczyk said, "but the custody business has been the fastest growing for some time." Year-to-date, net new assets at TD Ameritrade Institutional, the custody unit, grew 12%, beating competitors, Mr. Tomczyk said.