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TD Ameritrade CEO Points to Soft Trading in 20% Profit Drop

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Earnings Season 2012, AdvisorOne TD Ameritrade (AMTD) on Tuesday reported a 20% decline in profits this quarter compared with a year ago, when it saw a record-breaking trading quarter. The Omaha-based firm’s earnings per share totaled $0.25 for the second fiscal quarter versus $0.30 a year ago, meeting analysts’ expectations.

Net income stood at $137 million for the quarter compared with $172 million a year ago and $152 million in the prior quarter. Revenues totaled $673 million, down 6% from $718 million a year ago.

President and Chief Executive Fred Tomczyk, in a phone interview with AdvisorOne, said earnings and revenue were “right on consensus,” though he did acknowledge that TD Ameritrade’s trades were down at a rate of 51,000 per day.

“While trading right now is a little bit soft, it’s not terrible, where last year was the highest trading quarter in the history of our firm,” Tomczyk said. “You’re comparing the highest peak with a more subdued market right now. But other than that, we continue to gather assets at a good clip.”

TD Ameritrade’s asset gathering has been in excess of 10% for three and a half years in a row, he noted, adding that the firm gathered $10.8 billion in the quarter. That nearly 11% growth rate is double what it was three years ago, Tomczyk said.

TD Ameritrade Institutional President Tom NallyAlso on the call was newly named TD Ameritrade Institutional President Tom Nally, who replaced Tom Bradley as head of TDAI in February.

TDAI does not break out quarterly results separately from the larger online brokerage’s business, but Nally did say that TDAI continues to see strong asset gathering momentum both on the breakaway broker front and the existing registered investment advisor front.

“The RIA business continues to be the fastest growing segment in financial services, and we’re well positioned there to be a leader,” Nally said. “So far in the first six months of our fiscal year, we’ve brought in 204 breakaway brokers, which is up 11% year over year, and we don’t see any sign of that slowing down. We think it’s the model of the future.”

Tomczyk noted that of TD Ameritrade’s asset gathering historically, between 50% and 60% of net new assets are from the institutional side of the house.

As for Nally’s replacing Bradley at TDAI, Tomczyk said: “Tom Nally has been in this business for quite a while, and with Tom Bradley has built that strategy up. He has run the service side, the support side and the sales side, so he’s well suited to step up into the role and not skip a beat. Our head of retail left us to lead another firm, and so we had an opening on the retail side. We thought Tom Bradley was the best executive we had to step into that role, and we knew that behind him we had very capable leadership in Tom Nally, so we made the move.”

John Bunch, prior president of retail distribution who had been with the company since 2004, resigned his position in February to become the CEO of The Mutual Fund Store, based in Overland Park, Kan.

Read TD Ameritrade’s Sales Chief Vows to Keep Pounding Fiduciary ‘Advocacy Drum’ at AdvisorOne.