The big traditional brokerages are in danger of losing relevance in a world where more investors want independent and unbiased advice, TD Ameritrade Chief Executive Fred Tomczyk said on Thursday.
TD Ameritrade operates one of the largest online brokerages in the world, catering to middle-class households and self-directed investors. It also is affiliated with 4,400 registered investment advisers managing nearly $140 billion in client assets, a corner of the market growing rapidly by meeting the demand for independent, fee-based advice.
I've seen too many financial services companies get stuck in a business model. That's where we see the full commission brokers today, said Tomczyk, speaking to nearly 1,400 investment advisers and 1,100 other industry executives at TD Ameritrade Institutional's national conference.
Wall Street brokers make their living by charging commissions on transactions and selling funds and securities held by their firms, as well as fees based on client assets.
The world changes. The customer changes. The technology changes. You have to adapt and never get stuck in that one model so you can be relevant for today's investor, he said.
As an example, Tomczyk said his firm would roll out in April the first brokerage application designed specifically for Apple's popular iPad tablet.
Like Charles Schwab Corp and Fidelity Investments, TD Ameritrade competes both as a discount online brokerage and a custodian to registered investment advisers (RIAs) -- small firms that help people manage their investments for a fee.
RIAs have been one of the fastest growing corners of the financial services world, attracting customers and advisers from the big Wall Street brokerages.
TD Ameritrade's efforts to attract RIAs and their assets have paid off with accelerating growth, adding $34 billion in net new assets in fiscal 2010, or 11 percent growth, he said.
So far in fiscal 2011, TD Ameritrade added $10 billion of client assets, nearly as much as the $12 billion added in one full year in 2007. The target this year is $24 billion to $38 billion.
Other initiatives at TD Ameritrade, 45 percent-owned by Canada's Toronto Dominion Bank , include better cash management services that will be unveiled this fall, allowing brokerage clients to do many of the same things they currently do at consumer banks.
Tomczyk says TD Ameritrade's network of brokers also will begin working more closely with Toronto Dominion's 1,300 U.S. commercial bank branches, with a goal of increasing referrals. It will be the first time anyone has married up a major online broker and a major retail bank in the United States, he said.
TD Ameritrade also will start originating more loans, he said.
As for the mainstay online brokerage business, Tomczyk said trading volume has been rising, suggesting investor optimism has improved since the market's 2008 nadir.
TD Ameritrade handled an average of 372,000 trades per day in the December quarter, up 54,000 trades a day from the September quarter. In the current quarter to date, he said, the firm is processing 439,000 trades a day, up 67,000.
We're not all the way back. The more active investors are back, they're more aggressive and more optimistic in the market, he said. The long-term investor is still conservative.
He said Ameritrade's earnings have been held back by near-zero interest rates in the United States, which has gutted the firm's net interest income. For a firm that earned a dollar a share last year, he said, every 25 basis point increase in benchmark rates would boost earnings by 7 cents a share.
(Reporting by Joseph A. Giannone, editing by Matthew Lewis, Gary Hill, Dave Zimmerman)