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Investment Products Contribution Rises for TD Ameritrade in Fiscal 3Q16

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Jul. 22 2016, Updated 5:12 p.m. ET

Investment Products division

TD Ameritrade (AMTD) reported an average balance of $162 billion for its Investment Products division in fiscal 3Q16. This reflected a 1% rise compared to the prior year’s balance and 6% sequentially. The rise was driven primarily by mutual fund balances, which reflected an increased activity.

Investment product

TD Ameritrade’s (AMTD) Investment Products division’s revenue rose by 12% to $96 million in fiscal 3Q16, compared to the same quarter in the previous year. Its revenue formed 12% of TD Ameritrade’s net revenue for the quarter. The division is an important part of the company’s long-term growth strategy.

Advice-based investments

TD Ameritrade (AMTD) continues to see a healthy appetite for guidance and advice. This is evident in the growth of both Amerivest and Advisor Direct. Its sales teams are focused on helping retail investors to find guidance and advice solutions.

In the current quarter, Amerivest’s average balance of $11.7 billion for the quarter is up by 6% from the prior year. Advisor Direct had average balances of $32 billion for the quarter, up by 3% from the prior year.

This growth was partially aided by money market fund balances benefiting from the December Fed funds increase, as well as a $4 million revenue deferral for the Amerivest rebate that the company logged in the same quarter a year ago.

Here’s how three of TD Ameritrade’s peers in the brokerage industry are doing in terms of gross margins:

  • Interactive Brokers Group (IBKR): 93.5%
  • E*TRADE (ETFC): 94.8%
  • Charles Schwab (SCHW): 98.3%

Together, these companies form 0.26% of the iShares Core S&P 500 ETF (IVV).

Trend going forward

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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