TD Ameritrade FY 2Q15 Earnings Call Notes

Probably not going to get higher rates in 2H

“the tailwinds with higher rates that we were expecting in the latter half of the year appear to have been delayed. At the beginning of the year, the expectation from economists was that the Fed would begin raising rates in June of 2015. Today, it appears unlikely that that increase will take place within our fiscal year.”

Going to have to take down guidance

“The yield curve has also flattened. The forecast at the start of 2015 was for the seven-year swap rate in March to be 256 basis points; instead, it’s at 179 basis points. If these new revised macroeconomic expectations hold true over the next six months, we would expect earnings per share to come in within the lower half of our guidance range for the year.”

Clients remain invested. Cash at 13.6%

“Cash as a percentage of total client assets ended at 13.6% for the quarter as our clients remained invested in the markets. ”

Entering a historically slow trading period

“we are now entering the time of year where historically trading has tended to slow. So, we will see how this year shapes up.”

We set an algorithm for share buybacks each quarter

“At the beginning of each quarter, we set an algorithm. Bill and I sit down and decide what that is. And then, the shares either get bought or they don’t. And in the past quarter when we set it – I forget what the stock was, but it was obviously lower, and just the algorithm didn’t go off this quarter. As we come into the third quarter, the June quarter here, we’ll revisit that algorithm for the June quarter.”

Liquidity is more important than collateral

“all the clearing organizations, the central clearing organizations are starting to put in what I would call more pro-cyclical liquidity and collateral call provisions. And so, we just want to make sure we’ve got plenty of liquidity. I think when financial institutions have issues, usually if you have capital shortage you can get through it provided you can get through the short-term liquidity is the important thing.”

We’re planning for next year. The plan is to invest in technology

“where we are as a management team at this point will go into its planning cycle now for next year. And we’ve been pretty consistent that any of our investments all go into – basically it’s going to be technology initiatives, because we do believe the world’s changing, basically due to cloud computing, mobile computing, social media, data and analytics and we’re investing into all – three of those four trends. The cloud we’re not using as much, but the other three we’re using heavily, and developing things to use them heavily.”

Other option is to invest in sales and marketing

“second, has been either marketing and/or salespeople, and we will look at both of those. And we continue to see good opportunities.”

International is an opportunity, but a lot of people have failed at it

“We continue right now, as we work through our strategy, look for what we call dealing with our opportunities. We see International as an opportunity, but there’s a lot of people that have failed at it. So, we want to make sure we’ve thought it through and we see it and we take baby steps before we take any major steps.’

Which way is the yield curve going to flatten long end down or short end up

“The hard part with this is which way the yield curve going to flatten, is the short end coming up or is the long end coming down, and worst of those two is the long end coming down. We certainly are more sensitive to the shorter end of the yield curve. So, worst-case scenario, longer end comes down, yeah, that’s going to be difficul”

Everybody’s in right now

“we’re at six-and-a-half years of an up market. You’re seeing margin balances at record levels. You’re seeing lots of net buying activity. You’re seeing client cash as a percentage of assets down. You’ve seen the IMX basically arise. It’s a little softer right now. It’s just we’ve never had seven years of up markets. It has been my personal opinion, it’s much more – it’s just everybody’s in right now. We’ve got a lot of monetary stimulus in the system. Everybody is in the equity markets. And I just hope as this all comes out, I’ve said this is going to be volatile and it’s going to be choppy and we’ll see how this plays out. But it’s a little bit mixed, but it’s more just, because we’re low points on both retail and institutional in terms cash as a percentage of clients assets, it’s mix a bit, but it’s both channels are the same. They’re at lows we haven’t seen for a long time.”

A correction plus increased rates is a great environment for us

“the best scenario right here would be to see a modest correction and some volatility with interest rates rising. Would be – if you had a 5% or 10% correction and then basically the markets were choppy because the Fed was going to change the Fed funds and it did, in fact, after six-and-a-half years increase Fed funds, with a generally underlying bullish trend, like if it went down and then started to come back up, that’s a perfect environment for us.”

We’re in the latter stages of a very strong bull market

“We haven’t seen client cash as a percentage of assets at these levels in a long time. As I said, I think this is more just we’re at the end of a six-and-a-half year up market. Margin loans are at records, client cash is at low levels. Net buying activity is at levels we haven’t seen. And so, you just – I think you’re in the latter stages of a very strong bull market here from after a pretty severe financial crisis. So, it is what it is here and you’ve got a lot of monetary stimulus in the system. I think most investors don’t know where to go right now, but they’re going into U.S. equities, viewed as the best risk/reward right now. One day that’ll change. Anybody that can predict that when that is, let me know.”

TD Ameritrade FY 1Q15 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

RIAs growing much faster than wirehouse

“the move towards the independent channel shows no sign of slowing or abating. In the last five years, asset growth for RIAs has outpaced wirehouses by more than two to one.”

Increased volatility drives increased interest

“while typically a slower trading period, investors were highly engaged in the market as volatility spiked and the S&P 500 hit record highs in the December quarter. We expect this volatility to sustain as the VIX is now hovering around 20, nearly double the six month average of 12 to 13.”

Clients holding 14% cash on average

“Client cash balances ended the quarter at 14.4% as our clients remained invested in the markets. Given that the mix of our client assets are now essentially 50-50 between the retail and institutional, the expected firm-wide cash percentage range needs to be reset based on the relative historic portions of cash.”

Retail clients tend to carry more cash than institutions

“retail clients typically carry 19% to 24% in cash and institutional clients typically carry 7% to 12% in cash.”

Manage expectations

“You sound like my Board. Every year I tell them that we’re going to be 7% to 11% and they say you’re at 10% to 12% every year and I say yes but this year is going to be harder and we put up those kind of numbers this quarter, so it’s a nice problem to have.”

Retail investors are generally bullish

“retail investors right now are generally bullish. You’ve got volatility and whenever there’s this kind of volatility and noise in the market whether it’s people having financial troubles or big events, people are much more in tune to their investing and their trading. And when you do that in our experience we tend to do well.”

Our clients are engaged and bullish

“I would say it’s really hanging in there. The logins are up regardless of which segment you look at, trades are up and logins are up. So, it’s pretty broad based.

Investor movement index is up in the month of December, and it continues to be bullish. And you’re looking at whether it’s margin loans, net buying, everything continues to say our client base is pretty A, engaged and B relatively bullish.

I think again as I think about it all – where else would you rather be than U.S. equities, right now. And if you are nervous person then you’re going to be in U.S. treasuries.”

Clients are heavy into tech and growth and have moved into oil too

“Our client base – we’ll have an orientation towards the tech and growth stocks, but also there’s been a huge – they tend to be contrarians and they moved into the oil and gas stocks with the big dividend yields and lots of capital to do dividends and buyback shares, they moved into them pretty good.”

ETF usage peaked at 12% of assets a few years ago

“t peaked a few years ago at about 12%. It’s sitting in that probably closer to 10% range now. So I would say it’s relatively flat. Certainly it add a big move and zero to 10 to 12, but it is going to settle into that low double digit range for us.”

TD Ameritrade FY 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Fed funds movement has a much greater impact than a shift in yield curve

“It is important to note that a severe drop in the yield curve, like what happened in mid-October, would have a minimal impact to our overall results next year. Since the movement of the yield curve only impacts new extensions, only balance growth prior extensions rolling off the ladder and being re-extended would be impacted. Based on the timing of balances rolling off the ladder in the next 12 months, a 30 basis point drop in the yield curve would drive an approximate $0.01 downside impact to our earnings per share next year.

Remember though, fed funds changes would have a material immediate impact to the next 12 months. For fiscal 2015, we do expect balances to grow 5% to 10% with a potential to see a slight lift in yield. The overall result should be an increase of 5% to 15% in revenue. Finally, the overall extension strategy is unchanged.”

Looking to earn 1.45-1-70 in FY 15

“Our earnings per share range for fiscal 2015 is $1.45 to $1.70 with a pretax margin of 41% to 43%. The variability of results will primarily be driven by trading volumes, balanced growth and interest rates in that order.”

Not sure who came up with the term robo advisers, but it’s out there

“The robo-advisers has certainly got a lot of media coverage. There is no question about that. I am not sure who came up with the term robo-advisers, but anyways it is there.”

There is no way that the Fed pulls out and everything stays calm

“I have said before that basically when the fed starts to pull out, there is no way that they do that and everything is nice and calm.”

The wirehouses have gotten a little better at retaining their people, but there’s always someone who is unhappy

“I do think the wirehouse has gotten better at retaining their better brokers and producers and having said that, our experience is that there continues to be lots of opportunity. And there is always one player, whether it be one of the big wirehouses or one of the independent broker-dealers that is doing something, whether it’s on their payment grids or compliance or something else that causes some people to be dissatisfied and whenever they are dissatisfied they will consider that opportunity.”

TD Ameritrade at Barclays Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Run a conservative balance sheet

” we do run a unique and differentiated business model. We are an online broker and agency broker. We really don’t carry much on our balance sheet. All you’ll see in our balance sheet is margin loans and securities lending and intangibles for the most part.”

most trades per day of anyone in the sector

“we’ve been the leader in the trading side of the business. We have the most trades per day of anyone in our sector.’

We like derivatives

“Derivatives, we like for a couple of reasons. Number one, on options in particular they tend to have a richer commission per trade. Number two, is they expire, which means that you have to continuously [ph] re-put (03:35) on your position or adjust your position. So, it has a resiliency to it that basically you don’t see in a lot of equity traders. And number three, an option trader or a futures trader can trade in almost any market.”

Unique relationship with TD Bank

“The unique relationship with TD. TD Bank owns 40% of us, and there is a shareholders’ agreement between them and the company. And the Ricketts family, who are the founders of the company, who own about 10% or 11% of the company. And so, there is an agreement there that explains how the two parties will work together, certain governance rights on the board.

But it does – we have a big relationship with them in terms of how we do our client cash strategy. So, we allocate much of our client cash to a bank deposit account on TD’s balance sheet and when it return, we do the asset liability management and we invest of to – basically, on synthetic bond letter [indiscernible] (07:03) LIBOR swap curve.

That allows us to take much of the economics of deposit banking”

Well positioned for higher rates

“we’re very well-positioned for rising rates. We gave you the disclosures in our statements here. You can see that we’re up 100 basis point parallel shift in the yield curve. In the first 12 months, that would add about $0.36 per share in earnings to our earnings level. In the second year it will be $0.44, and in the third year it’d be $0.50 as the bond ladder rolls over at higher rates.”

It would be nice to have rising rates as a tailwind

“We’ve been in a near-zero interest rate environment here for almost six years. It’d be nice to have a – it has a tailwind. It’s not a headwind anymore, but it’d be nice to see it as a tailwind”

If you want to be a big asset gatherer, you’ve got to be independent

” In the RIA channel, which is say, the fastest growth channel in wealth management. So, I think, if you want to be a premier asset gatherer in today’s world, you’ve got to be in to be independent whether as a broker, dealer or RIA. We’re purely the RIA model.”

There are really four competitors in this channel

“In that channel, [indiscernible] (18:42) really is the big vendor or ourselves, Schwab, Fidelity and Pershing”

On the RIA side our technology sets us apart

“I’d tell you in the RIA space, our value proposition has probably had more sophistication and support tools for the derivative side for overlay strategies and technology that’s more, we would call it client friendly and more advanced.”

Differences between us and Schwab

“I think I’d say, Schwab is much more of a discount full service model. So very much push you into an adviser. I’m not saying that’s wrong. I think that’s their approach to the market. And they’ve moved up market, we’re a much more online-centric, and technology and education-based. And so, it’s just different.

We will appeal to – more to self-directed investors and active traders and people that want to be engaged and want to do it themselves. I think they will appeal more to people that may have been with the wirehouse today. But we both pick up a lot of our business from the wirehouses and independent broker-dealers, because we do what they do, but in a much less expensive way”

Can’t take anything for granted on a bank transaction

“being a bank transaction, you have to get the approval of federal reserve and anybody in banking will know that basically you’re watching M&T and [indiscernible] (25:50) Hudson or whatever the one they do, but it’s sitting out there for two years, waiting for approval. So, I think there’s nothing that we’re aware of that will get in the way from an approval point of view. But I think in today’s world, getting a bank transaction approved I think you can take nothing for granted.”

We need a little bit more volatility for engagement

“You know I think we definitely saw the slowdown, particularly I’d say the last two weeks of August. And so, we will release our DARTs Wednesday. So, definitely it did slow down and it was a slower summer. I would say since then we’ve seen people come back, which is, again, not abnormal. [indiscernible] (30:11) see after the Labor Day weekend people start to get back and engage in the markets.

There’s lots of different views right now on whether the market is going to rise or something else is going on. There’s a lot of geopolitical risk. But for whatever reasons, the equity market seems to have fought through all the geopolitical risk. I’m surprised there’s not more volatility in the market personally. And if we’ve seen – relatively, I think you’ll see trading go even faster. But I think sentiment is pretty good. It’s just – we now – we need a little bit of volatility.”

TD Ameritrade 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

650B in client assets

“Client assets totaled $650 billion, up 24% year-over-year. Net new client assets were $13.4 billion, a 9% annualized growth rate.”

60% of retail flows to come through discount brokers or RIAs

“A recent McKinsey report predicts that nearly 60% of net flows into the $15 trillion U.S. wealth management market, over the next four years will come through the discount brokers channel or the RIA channel.”

Clients who were trading were taking bullish positions

“clients who were trading, were still taking bullish positions, and yet, even as the markets approach new highs, volatility has been relatively non-existent.”

RIAs showing strong growth

“The institutional channel had a particularly strong quarter and they’ve got very good momentum going into the fourth quarter.”

Definitely seeing an improvement in the attitude of our clients

“So we haven’t seen any change in the new clients coming in, but what we are seeing is our existing clients are definitely moving into the market with the improvement in the market and their attitudes”

People are engaged, just not trading as much

“So they’re definitely engaged, and in fact one of the things we’ve seen quarter-over-quarter, even though we’ve seen trades come down…retail logins are essentially flat, and so people are still engaged, but they just haven’t been trading as much. But on the client cache we are seeing net buys almost double year-over-year. So there’s no question people have moved into this market and remained relatively bullish based on what they are doing.”

RIA channel is definitely fully invested

“On the institutional side, I would say the same dynamics, they are even lower and so there’s no question that the RIA’s have their client’s investments pretty much fully invested here and are keeping very little in cash. So we are definitely seeing and I would say relative to history, the RIA channel is more fully invested than the retail channel on a relative basis, even though retail will normally keep a lot more in cash.”

People are bullish but it’s not obvious that they should change anything, so activity is low

“I think the people are bullish based on what they are actually doing, and the markets are at record highs. It’s not obvious what to do, where else to go…I think the thing that will be the catalyst to trading here is whether we see increased volatility or not.”

Mutual funds are still in demand

“anybody that thinks mutual funds are going away and everything’s shifting to ETFs, there’s some of that, but mutual funds are still in demand and we continue to work at making sure we are getting our fair share of the shareholder services for the work that we do for the various mutual fund platforms.”

Meeting RIA needs with technology

“I think the RIA channel is clearly the fastest growing channel in Wealth Management today, and I think we’ve done a great job at leveraging, innovative in different technology, and is being met with open arms, and some of our peers will catch up with that, and in fact that probably all of them will redesign their technology to make sure they meet that competitive advantage that we’ve had, so it won’t last forever.”

Invest here rather than maximize pretax margins

for the long-term interest of my shareholders, we should be investing here as opposed to maximizing pretax margins, so we do think there’s still some up.”

Apple is our clients’ largest holding

“Apple is the largest holding of all of our clients and the most frequently traded symbol’

It’s hard for me to believe there wont be volatility around QE exit

“I think we are in an environment where there’s a lot of monetary stimulus around the world in the market. And sooner or later one would assume that that has to start to come out, and whenever that starts to come out, I have a hard time believing we are not going to see volatility, given how much stimulus we’ve had and the longer-term nature of it”

I’ve got to believe that volatility comes back at some point

“I have to believe that my own experience in this business is that that’s going to cause some bumpiness and I would expect activity levels to pick up over time, but it’s highly dependent on when the Fed’s, the various Federal Reserve type institutions around the world start to fall back a bit and the global flow start to adjust’

RIAs seeing an increase in SEC audits and audit questionnaires

I’m not sure when any resolution is going to come, but they are definitely seeing an increase in SEC audits and SEC audit questionnaires, and I definitely heard that at our elite conference, last couple of months ago.”

TD Ameritrade 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Strong asset gathering in both retail and institutional channels

“Both our retail and institutional channels continue to exhibit strength in asset gathering.”

Continued retail reengagement

“Our retail channel had its best quarter for net new client assets in three years continued retail reengagement combined with heavier media spend for the Olympics and retirement season yielded a significant increase in traffic to our Web site. This combined with improvements we made to our online account opening process have resulted in strong new client acquisition.”

Volatile markets drive engagement

“The S&P 500 moved 1% or more 25 days within the quarter compared to 12 days in the same quarter last year. Nearly every client engagement metric from logins to number of accounts that traded was up for the quarter. More clients were logging in; more clients were logged in were trading, and more of the clients trading where trading more. Engagement was up across all four of our key platforms with mobile leading the way.”

Retail investors are increasingly bullish

“Retail investor behavior continues to suggest an increasingly bullish sentiment.”

More investors reengaging with the market who need education tools

“as investors continue to reengage with the markets, we’re seeing more client interest in tools and education.”

1Q is retirement season

“We’ve just come out of retirement season, our busiest time of the year with strong results as we finish the first half of fiscal 2014 with 27 billion and net new client assets at 10% annualized growth rate”

Client cash at lowest levels since September 2007

“client cash as a percentage of total client assets ended at 14.8% in the quarter, slightly below our historical range of 15% to 20% and the lowest we’ve seen since September 2007.”

Most high frequency trading has helped retail investors

“Take for instance high frequency trading. This is a term with no agreed upon definition. That means different things to different people. But based on our analysis, there is no question that the regulatory changes and the electronification of the markets, including most high-frequency trading techniques have been good for retail investors.”

There are some bad techniques, which should be addressed

“With that said, there are some techniques that may be harmful and undermine the credibility of the markets. These are areas that should be addressed, but we encourage a thoughtful fact-based review to get at the heart of the issue and the root causes and if predatory practices exist, they should be addressed.”

High frequency trading is technological advancement

“to broadly say that all high-frequency trading is bad is like saying that the advancement of technology big data and analytics is bad. The fact is that the retail investor has never had better access to the markets or better execution quality. 10 years ago, 10 second executions were the norm. Now they happen in less than a second.”

TD doesn’t internalize orders

“we do not internalize orders. We believe that turning all client orders back to the market is more transparent and better aligned with the needs of our clients. Instead we work with multiple market participants which are selected after an extensive due diligence where best execution is our top priority as well as financial strength and stability.”

Margin and short interest both higher

“margin lending has increased again. So it’s higher now than it was at the end of the quarter…And two, the market did have a lot more shorting going on in the quarter and those two elements is what drove the revenue.”

Don’t know if there will be regulation around payment for order flow

“Payment for order flow has been around for a long time, it’s been looked at before. So this isn’t the first time this has come up for a discussion. So, we don’t have any particular inside knowledge, but we’re not anticipating because of books been written, but all of a sudden payment for order flow is going away.”

We’re going to look for ways to get paid for our volume though

“in any situation where something changes…Our flow has value, that’s been proven out, and we’re going to look to whatever variety of ways and alternatives are available to us to make sure that we extract some of that value, but after we’ve looked after our best execution responsibilities.”

Our clients don’t care about Michael Lewis’ book

“trading did not change after Michael Lewis’s book. And just to give you some statistics we don’t pay attention to what certain media people say as much and we don’t pay attention to what some our peers say as much. We pay attention to what our clients say. And we have had, I think it’s — let me get them here for you, 70 phone calls and 112 emails on this. So, this is from our perspective not a hot issue with our customers, that’s not to say we don’t take it seriously, but it’s not a hot issue with our customers. And our perspective on this is, this is a Wall Street issue, not a Main Street issue and we’re on Main Street front.”

Toronto Dominion more focused on going after HNW private banking clients, we’re more mass affluent

“they’re more interested in the high end of the wealth business what you would typically call our A-type of market, and more of a private banking type high end that’s part of the market. We are much more on our retail side, a mass — mass affluent type marketing firm obviously we bump into each other a bit, but that’s common of all wealth models.”

Bullish sentiment plus volatility equals the perfect mix

“anytime you have the kind of increasingly bullish sentiment that we’ve had over the last 6 to 9 months, and you have increase in volatility, our trading is going to be strong than it was this past quarter.”

No discussions with anyone at the SEC over market structure

“I can say, I have had no discussions with anyone at the SEC in the last two or three weeks.”

SEC is really good at listening to all sides

“the SEC has always done this in a very thoughtful way, a very fact based way from our perspective, that’s all you can ask for. They weigh every participant’s views which I think they should — we can all also ask for, but it’s not like lobbying the government, the Federal politics. They’re a very different organization with a very different mandate.”

A lot of people on vacation recently

“We just had a mini correction but we have also had a series of vacations, anybody that lives in New York knows that. New York hasn’t been the normal New York the last week or two.”

Tax harvesting also probably drove activity

“But when the market was up 30% last year people had capital gains and a lot of people did harvest them and if they did basically they’re going to have tax liabilities.”

nearly doubled the ad budget five years ago

“when I first came down we were spending about $140 million a year in advertising in my memory, and now we’re spending about $250 million. So we definitely upped it, because we saw the opportunity in the market and we wanted to broaden out our offer and we made the shift from being just a trading shop — equity trading shop to an equity and option trading shop, but also to an asset gatherer.”

Investing in marketing, view technology as a marketing expense

“marketing is a little bit more dynamic and a bit of a call on the market environment that you’re in. There is certain market environments where it works really well and other ones where it doesn’t work so well. We have been — the hard part is predicting those. But if I had to say, where would we invest right now if we wanted to invest, marketing would be on the list. We have always had sales people on the list, but if I had to pick one right now it would be technology because I do think we’re going through a fair bit of change in technology whether it’s mobile, the trend to mobile to social media, data analytics all those types of techniques that which are pervasive in almost any business and so I have seen quite a shift and we’re investing in each of those areas rather significantly. And the question we keep asking ourselves, are we investing enough in those areas. Because we do see it shifting and normally these shifts start, they pick up momentum and then they get stronger. We have been at the front edge of that but just got to make sure you can stay at the front edge and keep up with the volumes as it continues to grow”

Probably at the trailing end of the cycle

“The — oh geez, good question actually. I would say to you that in terms of the cyclical change I think we are at the high-end here or the trailing end of the cycle, unless the economy, if we do come out the economy turn stronger here and I’d say April, May, June or even in the fall and the market starts to — the economy starts to grow faster. I think you’ll see it go again, then we would be — tend to be bullish. But that’s very much a function of the economy and I’m optimistic, but I have been optimistic for a bit and this has been a long tough slog. But I think that where we are in the cycle is largely a function of the economy. And right now I think we paused. We had a good run last year, we’ve had a positive quarter, we’ve been sideways, we had the weather, we’ve had a few events here and there we’ve got events in Russia and Ukraine. So a lot of it is going to depend on the economy and macroeconomic geopolitical events here I think where we go in terms of the cycle.”

TD Ameritrade 4Q13 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Retail investors making their way back into markets

“With less uncertainty in Washington, an improving macroeconomic environment and the beginning of Fed tapering, retail investors are making their way back to the markets, leaving us with a lot to feel good about.”

Seeing more risk tolerance among retail clients

“As investors re-engage more broadly with the markets, we’re seeing a rotation and interest with respect to our Amerivest portfolios. For several quarters, the Amerivest supplemental income portfolios were the most popular. Now, we’re seeing increased interest in the opportunistic portfolios which are more actively managed based on what’s happening in the markets.”

Less uncertainty leading to improved trading environment

“there is less uncertainty for investors to worry about, and as we all know, investors do not like uncertainty. As a result, the trading environment has improved. Our broader base of investors has re-engaged, boosting trading activity and contributing to the strength of our quarter

Everything trending in the right direction

“we feel good about how the year is shaping up. Virtually ever metric we measure and manage is trending in the right direction so far this year.”

Washington out of the way made a huge difference in confidence

“I do think not having an event out of Washington has made a big difference in terms of people’s confidence, and there’s no question whether you’re listening to the banks or other players in the market or companies, I think you’re seeing some consumer spending come back.”

Hopefully no more price wars on commissions. Five players left, should compete in other dimensions

“It’s hard for me—you know, whether we’re going to have another round of commission price wars, who knows? I would hope the industries all learned from the last one that basically it’s a zero sum game, and we are down now to five players in the industry and we should all just focus on competing in other dimensions, which will be much more marketing, incentive base, technology platforms, new investment products, whatever it may be. It’s a very competitive business, but to start on price any more, I think—you know, hopefully everybody recognizes it’s a zero sum game at this point of the industry maturation.”

Not surprisingly most margin growth came from most active traders

“I think that you can take away from it there’s no question in the quarter we saw the biggest percentage growth in margin balances from the more active traders.”

RIAs trading more too

“there’s no question the activity rate in the institutional channel is lower than the activity rate in the retail channel. Having said that, if you look year-over-year at increase in trades, both are up nicely year-over year, but actually the institutional channel trades per day are actually up higher—a higher percentage year-over-year than the retail side.”

Analyst Comment: Client cash at 15-20% level, lowest since financial crisis

“Client cash to total assets, it’s still within the normal 15 to 20% range but it looks like it ticked down to the lowest level since the financial crisis, which I guess makes sense just as sentiment is improving here.”

RIAs are pretty bullish

“If you went to the RIA side, they have been fully invested all the way through. They’re very low—they’re sort of the lowest client cash—allocation to client cash that we’ve seen, and again they would be fairly bullish on equities.”

It’s not raw account growth that matters, it’s quality of account

“We don’t report new accounts anymore; we just don’t think it’s as meaningful a metric as it was early in the history of the industry, and today it’s much more about getting the right type of accounts, making sure they’re either active or they have better assets—or not better assets but bigger assets. So in our view, it’s as much if not more so about the quality of the account than just raw accounts.”

TD Ameritrade 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Average client trades per day were 382,000, an activity rate of 6.4%. Net new client assets of $10 billion, an 8% annualized growth rate. Record total client assets of $556 billion were up 18% year-over-year. The record interest sensitive assets of $96 billion were up 16% year-over-year”

“we returned 107% of our earnings to our shareholders via cash dividends and debt repayments.”

“Yes. I think more recently, the wire houses have made some moves, which have made it a little bit more difficult in the breakaway brokers. But what we always find is, in the market, it could be an independent broker/dealer is 1 year on their wire house. The next year, it could be 1 wire house to 1 independent broker/dealer. There always seems to be someone who’s making some changes that upset their advisors. And that always means there’s opportunity and people looking. And I do think in this market, with the — where the markets are at and how well the markets have gotten, this is a good market if you want to move to the independent channel and move to a fee-based model off of the commission-based model. This has actually been a pretty good environment to do that. We’ve seen that in spades in our results.”

“we don’t normally — don’t comment too much on M&A. But I think it’s suffice it to say, we’ve always kept an eye open for entering the mix in strategic and financial sense. And I think, as evidenced by our returning capital as aggressively as we can, we really don’t see anything on the near-term horizon that would make financial sense.”

TD Ameritrade 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Total client assets ended the quarter at $524 billion, up 18% year-over-year.”

“There are signs we are in the early stages of a rotation, with investors moving out of bond funds and into equities. But I would call it a mini rotation, as opposed to the great rotation at this point”

“I think we’ve hit a point where I think we’ve gone from worried about the economy and whatnot, and I think we all have to keep those in front of us here. But I think we’ve hit a point where people are now starting to think about a rising rate environment.”

“We do have a view on when rates start to rise and that’s based on — the current forecast would be late ’15, early ’16, in that range when — or particularly, when Fed funds is up around 75 to 100 points, and to us, is when it’s sensitive, that you have that plan for. That’s probably not until early ’16. And so we have time to make — track to where we want to be. But to be in the right position at that time, you would want to shorten duration from where it is today and you want to build up your float balances such that you have lots of flexibility to manage through a rising rate environment and take advantage and build your earning power at that point. And when we talk to our bigger investors, they’re really focused on that. And they’ve been quite clear not to give away our long-term upside here.”

“if you take our margin accounts, the buying power has not gone up as the market, in general. And the reason for that is our most widely held stock, our most actively traded stock and our most margin stock is Apple, and — which has not participated in the rally, which has drawn in the buying power. So I don’t think there’s anything, as I call it, secular going on other than — a very large company that makes a big part of our margin book has not participated in this rally over the last year.”

“We did see, in the RIA channel, a little bit of a shift back to cash towards the end of the month. They were — if you went back to May and previous quarters, where they were at all-time lows in terms of cash and as a percentage of client assets, so they were fully in the market, and I think they took some profits off the table and put it back in cash ”

“up until very recently, even in products, people were — they were very conservative. And so I think that you are seeing a shift now”