TD Ameritrade Expands Client Assets and Trades in Fiscal 2Q16
Investment Products division
TD Ameritrade (AMTD) reported an average balance of $153 billion for its Investment Products division, a marginal decline as compared to the prior year’s balances. The decline was driven primarily by lower mutual fund balances, which reflect the pullback in the markets in January and February. Revenues for the division expanded 4% to $88 million in fiscal 2Q16 compared to the same quarter in the previous year. The revenues formed 10% of the company’s net revenues for the quarter. The division is an important part of the company’s long-term growth strategy.
TD Ameritrade continues to see a healthy appetite for guidance and advice, evident in the growth of both Amerivest and Advisor Direct. Its sales teams are focused on helping retail investors find guidance and advice solutions. However, in the current quarter, net flows into Amerivest and AdvisorDirect slowed down in light of the market environment, similar to what the company saw from its existing advisors.
Here’s how three of TD Ameritrade’s peers in the brokerage industry are doing in terms of gross margins:
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Interactive Brokers Group (IBKR): 93.5%
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E*TRADE (ETFC): 94.8%
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Charles Schwab (SCHW): 98.3%
Together, these companies form 0.26% of the iShares Core S&P 500 ETF (IVV).
Long-term potential
The trend toward guidance and advice has long-term potential for the brokerage industry. TD Ameritrade continues to examine ways to refine its sales process and enhance the client experience for both Amerivest and Advisor Direct. The company’s ability to leverage newer technologies to address simplicity, transparency, convenience, and personalization could be the key drivers of its success.
TD Ameritrade earns investment product fees on client assets invested in money market mutual funds, other mutual funds, and company programs such as Advisor Direct and Amerivest.
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