TD Ameritrade FY 3Q15 Earnings Call Notes

No signs of breakaway broker trend slowing down

” We don’t see any signs of the breakaway broker trend slowing down. These advisors are attracted to our open-access technology model. We make it easy for them to move assets because they don’t have to worry about changing vendors, and we have the flexibility to add new technology as trends evolve.”

Margin loans at record levels and client cash at historic lows. People are increasingly turning to derivatives

“Margin loans are also at record levels and client cash as a percentage of total client assets remains near historic lows. In light of this low volatility in the equity markets, clients are increasingly turning to trading derivatives which were a record 44% of trades per day in the quarter and up 15% year over year.”

In a low volatility environment with most people fully invested, active traders are a higher percentage of volume

“Well, first off, I think we are in an environment where I think the retail investor is pretty fully invested and we’re having pretty low volatility in a narrow range market. So the market really is staying inside a very tight range. And so, when you have that kind of market, it’s really going to be your active traders trading certain symbols or names and using derivatives that are going to make-up a higher and higher percentage of your trade volume.”

We were surprised at how strong trading was given the low volatility. It’s picked up with the Greece resolution

“Now, to be quite honest, I mean, we were surprised at how strong trading was given how low volatility was during the quarter. And you can see so far in July, trading has been pretty strong with some resolution with respect to the Greece items, what’s happening with Greece and then it’s earnings season. So we’ve seen trading pick up a bit.”

Amerivest is robo-like but not robo

“we have Amerivest today which we would call robo-like but not a robo. And we believe in the best combination of digital and the human experience. We are investing to improve the investing experience, taking some things from the robo-advisors in terms of the ease of use, the leveraging of technology and newer technologies. And so, we think there’s lots of opportunity to improve the on-boarding experience and the post-sale experience, leveraging things that we’ve learned from the robo-advisors and in fact enhancing on those.”

Brokerage clients are not as sensitive to interest rate changes on cash yield

“our clients are just not as sensitive to interest rates on cash yield. That’s not to say that they are not sensitive to interest rates on margin loans or commission rates, but they are less sensitive on cash rates. And that’s been – we’ve had that – we’ve looked at it a number of times and continue to see that.”

Vs. robos, we think a combo of a person with a digital channel is the best way to target people who have money

“when we look at what the robos have done, I mean, you always look at new competitors and say is there something you can learn on it. We still believe that using the combination of a person with a digital channel which I think Vanguard is using and doing pretty well is the right combination and so we believe that’s the right model for the broadest part of the market for people that have money.”

Good luck on September’s potential rate hike

“Macrae Sykes – Gabelli & Company, Inc.
Great. And thank you. Best wishes for September’s potential rate hike.

Fredric J. Tomczyk – President, Chief Executive Officer & Director
Okay, well, thanks, Mac.

William J. Gerber – Chief Financial Officer & Executive Vice President
We’re hopeful.

Fredric J. Tomczyk – President, Chief Executive Officer & Director
We’re all hopeful.”