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TD Ameritrade chief calls RIA growth a significant factor in 44% 4Q surge

Improved technology geared at recruiting more RIAs and offering a greater breadth of products to long-term investors were cited as growth engines

Tuesday, October 25, 2011 – 7:26 PM by Brooke Southall and Lisa Shidler and Brooke Southall
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Fred Tomczyk: My main message to [TD Ameritrade Institutional president] Tom Bradley is: keep it up.

TD Ameritrade Holding Corp. attributed volatile markets and growth in its RIA business as factors resulting in the company’s 44% rise in profits in its latest quarter.

The Omaha, Neb.-based company earned $163.7 million, or 29 cents per share, in its fourth quarter ended Sept. 30. That compares with $114 million, or 20 cents per share, in the year-earlier period.

Net new assets

Particularly pleasing to Fred Tomczyk, chief executive of TD Ameritrade, was the company’s asset gathering. “We had a record quarter of $12 billion of net new assets in what is typically the slowest quarter of the year,” he said in an interview.

That result can be attributed to an uptick in the revenue realized from registered investment advisors who keep their assets in custody with TD Ameritrade. “It grows at two times the rate of our retail business,” Tomczyk said. See: Once good for a few million, TD Ameritrade’s foot-in-the-door strategy is starting to net billions

TD Ameritrade Institutional attracted a record 348 breakaway brokers in 2011, up nearly 20% from the previous fiscal year, the company added in a second release.

In recent years, TD has stated that its RIAs account for about 33% of its total assets. Tomczyk says that that percentage can be now upped to between 35% and 40%, and that 60% of TD’s new assets are coming through its RIAs.

Revenue rose 16% to $703.5 million from $608.8 million last year.

For the fiscal year 2011, TD reported net income of new client assets of $41.5 billion, an annual growth rate of 12% of beginning- client assets and net revenue of $2.8 billion, 51% of which was asset-based.

“Despite operating in a challenging economic environment for the past three years we have continued to deliver strong results in those areas within our control, and 2011 was no exception,” Tomczyk said in a conference call with investors this morning. “We’re gathering assets at a faster rate than anyone in our space.”

Leveraging technology

Tomczyk attributes the company’s growth to its improved technology geared at recruiting more RIAs, and to its offering a greater breadth of products to long-term investors.See: Third-party vendors vouch for TD Ameritrade’s API at first general session.

TD’s open-architecture initiative gives advisors the opportunity to leverage technology by using third-party vendors for financial planning and portfolio management. See: TD Ameritrade paves the way for breakaway books of business to transfer intact.

“We’re going to continue to push the envelope” with service, technology and advocacy,” Tomczyk said. “My main message to [TD Ameritrade Institutional president] Tom Bradley is: keep it up.”

Scary stuff

Tomczyk believes that TD’s position in the industry is secure despite unprecedented market volatility and a host of economic unknowns.

“There’s enough uncertainty to keep people up at night,” he said in the call. “One thing that doesn’t keep me up at night is our position in the market. We’ve proven we can deliver on our goals and objectives in the face of a difficult environment.”

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