After a summer drought in market activity, investors began trading in larger numbers last quarter, according to earnings reports released today by Charles Schwab Corp. and TD Ameritrade Holding Corp. Both firms also recorded improved asset inflows for the quarter.

Schwab’s average daily trades of 395,500 were up 12.2 percent sequentially (or 2 percent year over year.) TDA’s average client trades per day reached 372,000, up 17.1 percent sequentially, but down 1.8 percent year over year (the January to-date number hit 439,000.)

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Schwab’s Advisor Services RIA division also recorded a huge jump in net new assets for the quarter: after two consecutive quarters of decline, net new assets were an adjusted $14.9 billion, up 86.3 percent sequentially and 15.5 percent year over year. Excluding the effect of its acquisition last quarter of portfolio managers Windward Investment Management, Charles Schwab as a whole reported net new assets of $24.2 billion for the quarter, up 65.6 percent sequentially but down 2.5 percent year over year (Standard & Poor’s cited asset performance as part of its reason yesterday for downgrading the company from Hold to Sell.)

Total client assets at Schwab were $1.57 trillion at year’s end, up 11 percent year over year. That number includes $654.9 billion at Advisor Services, which was up 11 percent year over year and 7 percent sequentially.

TDA reported net new assets of $9.7 billion for the quarter, up 61.7 percent sequentially and 11.5 percent year over year (S&P upgraded TDA from Hold to Buy based on its asset improvements and client trading activity.)

TDA reported a record $386 billion in total client assets; it doesn’t break out assets custodied for its RIA business, although Chief Executive Fred Tomczyk told analysts during a conference call this morning that the retail sector makes up about two-thirds of overall assets, with institutional about one-third. The institutional gross asset gathering rate is about twice that of retail, he added, although both segments are “essentially on plan or ahead of plan.”

“Retail investors seem to be more confident, as the equity markets are now up more than 16 percent since Labor Day and there is more and more news pointing to an improving economy,” Tomczyk said. TDA has seen trading volume grow in both equities and options; derivatives make up 30 percent of trading volume, he said, up from 25 percent a year ago.

Sentiment Shifts

Analysts agreed that investor sentiment is starting to change.

“Preliminarily, it does seem like some of the investors are starting to come back,” Morningstar analyst Michael Wong said. One statistic he tracks at Schwab is total client assets in cash and money market funds. That dropped from 23.5 percent at its peak in the first quarter of 2009 to 15 percent last quarter, he said.

Schwab will discuss its business with analysts on Feb. 3. “There’s no doubt we’ve seen in the latter part of the year an increase in client engagement here. I think some of that is driven by that market environment,” said Schwab spokesman Greg Gable. “But we also feel here at Schwab that the level of client engagement and new clients has strong momentum.”

Aite Group analyst Alois Pirker said that both the RIA and on-line trading segments at both firms have shown steady growth in recent years. “Schwab and TD are both solidly in both of those segments. They’re actually pretty well-positioned,” he said. “I would have thought that slowly the full-service firms would be gaining steam again at the expense of the on-line firms, but I haven’t seen that.”

Headline Earnings Numbers

Schwab reported net income of $119 million, or 10 cents a share, on revenue of $1.13 billion. A year earlier it had net income of $164 billion, or 14 cents a share, on revenue of $986 million. The company took a charge last quarter related to its $119 million settlement with regulators announced last week over its Schwab YieldPlus Fund. The SEC said Schwab made misleading statements regarding the ultra-short bond fund that foundered during the credit crisis of 2007 and 2008.

TDA reported net income of $145 million, or 25 cents a share, on net revenue of $656.2 million. It had net income of $114 million, or 20 cents a share, on net revenue of $608.8 million a year earlier.