| 21 October 2009

We’ve noticed a similar refrain emerging from the online brokers as they report their quarterly results: a continued insistence that they have performed well "despite" the tough economic environment. We felt it was time for someone to take them to task on this statement.

Our experience in the financial services industry tells us that the performance of individual companies -- whether you're a broker, banker or just generate financial content -- always tends to mirror the performance of the markets. When the markets go up, so does traffic, volume and activity. When markets tank, so does... well, you get the idea.

If anything, the "troubled economic times" created a well-documented flow of funds out of traditional firms and into self-directed brokerage firms.

Yes, we know unemployment levels remain at all-time highs and danger still looms. We know consumer sentiment is still gloomy and we all haven't exactly rushed to their local retail outlets to boost sales. But financial services companies, by and large, lead well in advance of other firms out of the doldrums of a recession. The markets have rebounded with a healthy puff of Bullish eagerness since March, cranking out gains north of 50% in just seven months. (Actually more than 60% for the S&P.)

"The Crisis Ebbs," says the Wall Street Journal, and record bonuses are back, says MarketWatch. Goldman Sachs (GS) made so much money last quarter that it has decided to launch a "Charm Offensive" to ward off grouchy regulators and grumbly laid-off workers.

So we find it curious to hear David Fisher, the CEO of optionsXpress (OXPS) say, as he did yesterday, "Our customers and our business model continued to display their resilience in the third quarter despite the difficult economic environment."

We find it odd that Joe Martinetto, the CFO at Schwab, said this last week: “Our third quarter revenues were down 19% from the year-earlier period, reflecting the headwinds we’ve been discussing for some time."

Even if the market environment continues to be difficult for brokers (for whatever reason) shouldn't they be capable of managing through the difficulties with a bit more... expectation? We suggest that shareholders be on the lookout for words like "despite" and "in spite of" and start expecting managers to be fully aware of the environment they've been in for over a year now, and managing to those expectations.

And they better do it quick because we also agree with the sentiments shared by a few that these good times may not last long.

TD Ameritrade (AMTD) and E*TRADE Financial (ETFC) report their results next week. You have been warned.