Past CFO Commentary

I wanted to share some perspective around an item in this month’s SMART report related to the number of active brokerage accounts. As you may have noticed, despite another very strong month in new account openings the number of active brokerage accounts actually declined month over month. Rest assured that this is not due to a surge in attrition of our longstanding clients, but rather a natural outcome from the combination of unprecedented volume of new accounts we opened in the first quarter and the methodology we use to screen for active accounts.

Let me first provide some background. As part of our standard practice, we regularly review brokerage accounts to ensure they meet our definition of an active account. In the event those requirements are not fulfilled, the account is removed, or “scrubbed”, from the reported total.

While new accounts are included in the active account base beginning in the month they’re opened, those that haven’t funded within 60 days of opening are routinely removed from the reported total. So, if the proportion of new accounts that don’t fund, or otherwise open properly, is generally consistent, then a big increase in new account openings in a given month is likely to lead to a related increase in the number of accounts that get scrubbed two months later.

And that is exactly what we’re seeing right now. Over any given period, it’s typical for a limited percentage of accounts opened at TD Ameritrade and Schwab to end up not funding. And despite the huge surge in new account openings in 2021, we haven’t seen any evidence to date of the unfunded ratio moving outside our range of recent years. So the heightened implied attrition in April 2021 simply reflects a consistent proportion of recent new account activity dropping out of active status due to funding or other issues, nothing more. And if the trends continue, you might see a similar level of scrubbed accounts over the next several months.

As you review today’s SMART release, I think you’ll agree it’s evident that even when factoring in our ongoing account scrubbing, our strong business momentum continued through April with new accounts in excess of 600,000 and robust net asset gathering – including a record for the month of $37 billion which brought year-to-date core net new assets up to $185 billion (an 8%+ annualized organic growth rate). These results further reinforce that our “Through Clients’ Eyes” strategy is resonating in the marketplace, helping keep us well-positioned for long-term success.

Forward-Looking Statements

This commentary contains forward-looking statements relating to the ratio of unfunded brokerage accounts to opened brokerage accounts; the level of scrubbed accounts; business momentum; and long-term positioning that reflect management’s expectations as of the date hereof. Achievement of these expectations is subject to risks and uncertainties that could cause actual results to differ materially from the expressed expectations.

Important factors that may cause such differences include, but are not limited to, a person’s behavior and intent when opening a new brokerage account, including funding; the company’s ability to attract and retain clients and grow those relationships and associated client assets; competitive pressures on pricing; the company’s ability to develop and launch new and enhanced products, services, and capabilities, as well as enhance its infrastructure, in a timely and successful manner; the company’s ability to support client activity levels; digital transformation; general market conditions, including equity valuations, trading activity, and the level of interest rates; the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities to contain the spread of the virus and the economic impact; and other factors set forth in the company’s filings with the Securities and Exchange Commission, including the company’s most recent report on Form 10-K.