TD Ameritrade Holding Earnings Call Insights: Fee-Based Asset Growth and Trading Margins
Fee-Based Asset Growth
Richard Repetto – Sandler O’Neill: I guess my first question has to do with the fee-based assets and the growth you’re seeing. It looks like the growth is accelerating here and not just the calendar 4Q (indiscernible). I guess the question is what’s driving – I know Amerivest and AdvisorDirect are doing well, but do you see continued 12% sequential growth? Then Fred, you mentioned some connection between the fee-based asset growth and I guess overall client asset or net new asset, I did not quite understand that.
Fred Tomczyk – President and CEO: So let’s back up a second. We separate out the market fee based revenue so most companies in the wealth business will put in there like asset base revenues and they will have money market funds and sort of equity funds and bond funds, balanced funds. We do not include the money market funds in that number so these are all fee based – asset-based fee balances that are sensitive to the market environment. So, first and foremost the market is up and so if you look over the last year or you look over the quarter they are up – that definitely contributing to the number. So, to some extent the ability to grow these kinds of rates is dependent on the market environment. Secondly, yeah, you are right. I mean, no question Amerivest and AdvisorDirect continue to sell well and the net new client assets and the institutional channel that is what we call – I called a trickledown effect because a lot of smaller RIAs will use mutual funds to put in their clients’ portfolios and in some cases those mutual funds have 12b-1s attached to them.
Richard Repetto – Sandler O’Neill: I guess, my follow-up would be this quarter you paid down debt and you had your dividend build we get into the point where I think there might be one more quarter of sort of debt pay down. So, if I am correct – if you are generating somewhere around that 150 million in cash per quarter so what do we do with the cash after next quarter if we are going to – I am assuming we will pay down debt again?
Bill Gerber – EVP and CFO: The plan on the debt – let me just comment on it real quick, the plan on the debt is to pay that down before the end of the fiscal year. So, that is the plan by September 30 it will be at zero. Certainly, we will continue to look at the dividend and we’ll evaluate that again in the September quarter to ascertain if we are going to make any changes to it in the October call and our year end results. But really we’re not outside of buying back any dilution. We are pretty much; we’re at a point right now where TDs ownership is to the buybacks will be limited.
Steve Fullerton – Citi: This is (Steve Fullerton) filling in for Bill. Can you provide some further detail into the slowing trading margin April today versus January and February, the typical seasonality is there anything else at play?
Fred Tomczyk – President and CEO: Are you talking about trading or margin loans?
Bill Gerber – EVP and CFO: Trading.
Steve Fullerton – Citi: Trading, yes.
Fred Tomczyk – President and CEO: What I would say is, you can calculate it from our statistics and our press releases each month. January and February were better months. March definitely slowed down. We gave you that numbers month-to-date at 367 so far and it did — note that, that was through Friday. Yesterday was a much bigger trading day obviously with the volatility. So I think what we saw is in January and February after the tax deal and the fiscal cliff, people started to reenter the markets, but then Europe started to become uncertain here again and it feels a bit like Groundhog Day. But we’re having one of those markets where there’s that uncertainty, but there’s not much volatility till yesterday. I think that’s really what’s driving the markets here. Well, our people — a lot of our clients are getting increasingly bullish here, the people that are active, there’s just not a lot of volatility.
Steve Fullerton – Citi: How would you characterize the trend of the cost of FA acquisitions and how would increase disclosure that might get imposed by regulators around signing bonuses, how would that alter the dynamics in the industry?
Fred Tomczyk – President and CEO: To be quite honest, that’s new news that you are talking about the broker pay disclosures or what not. I don’t think that would impact us much because of the way we pay people and in the RIA space we really don’t give people bonuses or forgive with the loans as a matter of principal. So, we don’t think it bothers us much. If anything it might be in that benefit from my perspective.
A Closer Look: TD Ameritrade Holding Earnings Cheat Sheet>>