| 16 June 2010

TD Ameritrade (AMTD) hit us with May monthly metrics today, showing they are not immune to market dips. The firm shed 5% of its total assets, which is no small clip. But it's important to understand that the S&P 500 lost 9.4% during the same period, and assets are (usually) tightly correlated to the markets.

We don't know yet whether the firm is adding accounts and at what price. TD Ameritrade doesn't report new account figures or advertising spending figures until the quarter-end. There was no further explanation given in the company's press release.

These results shed new light on the now, more stellar-looking results Charles Schwab (SCHW) posted the day before. While Schwab lost $29.5 billion in assets, the loss was due primarily to the loss of a large clearing client. Had they not lost that client, Schwab would have posted a $4.7 billion gain in assets.

Now, we know what you're thinking: assets are assets, regardless where you get them; and we would have to agree. We know that Schwab posted good results in their core brokerage business, but the question remains, will they lose more clearing business?

But back to TD Ameritrade, their losses are more concerning to us because they strike at the core of their business. We have long-opined that the broker price war would decimate commissions to the point that it renders DARTs somewhat meaningless. More important to these firms are assets and, ultimately, fee-based businesses, all of which is driven by new accounts.

Let's take a look at the charts, shall we? DARTs did shoot up for the firm in May. We saw the same thing with Schwab, so we're now expecting most firms to post large increases in trading activity. But for a firm that tells its accounts they can "make money in any market," it's the next chart that is more shocking.



Here you can see the chunk of total assets the firm lost in May. Whil the firm has seen slight dips in October and again in January (which is a typically slow period) none of those dips has come close to the sloughing they took in May. But the story is not complete. We'll have to wait until they release quarterly numbers next month, when new account growth and marketing spend completes the story. 



Next up... E*TRADE Financial Corporation (ETFCD), which reported results this morning. Their CEO says he wants to spend more on marketing. That's a joke, right?