TD Ameritrade 4Q13 Earnings Call Notes

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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.”