TD Ameritrade FY 1Q15 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

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.”