The parent company of TD Ameritrade continued to rack up double-digit asset growth in the first quarter ending Dec. 31, the company said today. TD Ameritrade Holding Corp., which has a fiscal year ending Sept. 30, reported $10.2 billion in net new assets for the quarter, up 11 percent on an annualized basis. Chief Executive Officer Fred Tomczyk told analysts on a conference call that 60 percent of those assets came from new advisors on TD’s institutional platform, while the rest come from individuals who use the firm’s discount brokerage platform. TD Ameritrade ended the first quarter with total client assets of $406.3 billion, up 7 percent sequentially; the company doesn’t break out the total share of assets managed by its RIA institutional clients, but has said these account for about a third of the total.
Meanwhile, RIAs appear to be contributing to higher revenues at the custodian. TD said asset-based revenues accounted for 55 percent of last quarter’s $653 million in net revenues; that share is up from 51 percent in the fourth quarter ending Sept. 30. Industry observers say that custodians like asset-based revenues because they are less volatile than revenue derived from trading, particularly in light of last year’s roller coaster markets. Average client trades per day stood at 367,000 last quarter, flat year over year and down nearly 12 percent sequentially.
And the outlook for the market is uncertain at best. The United States appears to have avoided a double-dip recession, Tomczyk said, but it faces “a long slow recovery” ahead. “At the same time, a cloud of uncertainty over Europe remains. It is clearly impacting the markets and, as a result, investor sentiment. … I think we all need to recognize that none of us knows how this is going to play out. In this type of environment, it’s important to focus on what you can control.”
TD continued to see success in attracting breakaway brokers. TD Ameritrade Institutional President Tom Bradley told Registered Rep. recently that a record 341 breakaways joined its ranks in fiscal 2011, up about 20 percent from 2010. Tomczyk told advisors that the start of fiscal 2012 saw an increase in breakaway recruitment of 14 percent year over year.
The parent company reported net income of $152 million, or 27 cents a share, on net revenue of $653.4 million. For the comparable quarter a year earlier, it had net income of $145 million, or 25 cents a share, on net revenue of $656.2 million. Tomczyk said the company was watching expenses; last quarter it laid off 145 employees across the firm, incurring severance costs of $7 million. Charles Schwab Corp. reports on its quarterly earnings tomorrow morning.
“I think if you were looking for reasons to be cautious, you could certainly find reasons to be cautious in the earnings report,” said analyst Gaston Ceron, who follows TD Ameritrade for Morningstar. The good news was the growth in net new assets, he said, while trading continues to face headwinds. “People are uncertain about Europe. It’s hard to see how that situation changes quickly,” Ceron said.