TD Ameritrade 2Q14 Earnings Call Notes

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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.”