CNBC news anchor Amanda “Mandy” Drury sat with TD Ameritrade president and CEO Fred Tomczyk for a revealing interview about the state of the global economy and where it’s headed, as well as the state of TD Ameritrade and its plans for the future.
Drury began the question and answer session, which took place at the company’s annual conference in Orlando, Fla. on Thursday morning, with what she sarcastically called an easy question.
“What is the market outlook for 2012,” she asked Tomczyk.
Tomczyk responded by noting he feels better about the economy than he did six months ago, and signs are pointing in the right direction. However, he said it he expects the “long, slow recovery” to continue, coupled with the possibility of more so-called “Black Swan,” or uncertain, events.
When Drury followed up by asking what those Black Swans might be, Tomczyk responded that they would most likely be driven by events in the European and U.S. markets.
“In Europe, the day to day headlines are, ‘Do we have a deal; do we not have a deal; who is visiting whom,” he said. “I’m encouraged by the [debt and bailout] deals recently passed, but that doesn’t solve the problem, it only delays the problem.”
Drury then noted that it is frustrating that the Dow is at a four-year high and the Nasdaq is at a 10-year high, yet trading volumes are low. What will it take to bring investors back, she asked?
“One way is to help educate investors on new ways to mitigate risk and volatility,” he responded, referring to Bradley’s explanation of options in the previous speech.
When asked about the company’s growth strategy, Tomczyk said it will “continue to do what we’ve been doing. We’ve been gathering assets in double-digit figures in each of the last three years. We will protect our balance sheet and continue to streamline and be more efficient. It’s not so much about cutting as it is about keeping our run-rate expenses down.”
Noting TD’s strong balance sheet, Drury asked Tomczyk what he plans to do with the large amount of cash on hand.
“We’ll continue with buybacks and regular–as well as special–dividends,” he answered. “We’ll also continue with acquisitions if they make sense. We certainly don’t want to acquire other people’s problems.”
Noting the low interest rate environment, Drury then asked about how it affects company performance.
“Half of our revenue is interest-rate sensitive,” he said. “To make it less so, we’re moving assets from money markets to bank deposits. Also, our acquisitions help with this sensitivity. Short-term rates aren’t going anywhere for the next two years. The uncertainty in Europe is acting as a weight on the yield curve. If we settle some of those problems, hopefully long-term rates will begin to rise.”
Turning to regulation, Tomczyk said the company has been relatively insulated from what Drury called “regulators sniffing around.”
As to the possibility of a France-style transaction tax implemented in this country, he said “Never say never; but the unintended consequences of such a tax are enormous. You’ll begin to see financial services companies move out of [France].The tax will equal two-to-three times our trading commissions, so that’s a significant tax. But the people I speak with tell me it has no legs in this country.”
When asked what he would do differently if given the opportunity, Tomczyk said “not a lot” and that the company has done well.
“We went for market share when others pulled back,” he said. “It paid off very well to target Morgan Stanley and Merrill Lynch. I probably would have made certain investments that I didn’t and not made certain investments that I did.”
As for the advice he would offer RIAs, Tomczyk said simple, effective strategies work well. He also advised them to surround themselves with great people and to communicate more, not less, with clients.
“Focus on what you can control,” he concluded. “As the leader of a company, have a healthy balance sheet and cash on hand to deal with what may come at you. Pounce on opportunities that come from volatility.”
Read full coverage of TD Ameritrade’s conference at AdvisorOne.