Tools of the Trade
TD Ameritrade CEO Fred Tomczyk didn’t see the downturn as a setback to be feared — but rather, an opportunity to be seized.
The reporter cut right to the chase. “How does it feel to be taking the helm of a financial institution in the midst of the worst financial crisis since the Great Depression?” he asked Fred Tomczyk in October 2008 during his first media interview as president and CEO of TD Ameritrade Holding Corp. (NYSE: AMTD). Tomczyk, who had risen from the positions of COO and member of the board of directors, replied that the online brokerage firm’s strong balance sheet, liquidity and stable funding would help it weather the downturn. What he didn’t add was the fact that he saw the financial crisis as the perfect opportunity to gain market share and accelerate the company’s bold plan to overhaul its business from an active-trader shop dealing mostly in stocks to a full-service firm that would offer an expanded line of mutual funds, bonds and other investments.
TDA’S TIMELINEHighlights from the company’s history
Three years earlier, the company (then known as Ameritrade Holding Corp.) had acquired the online brokerage firm TD Waterhouse USA, which brought with it a well-established network of independent investment advisors and a focus on “asset gathering,” in which clients turned to these independent professionals to manage their long-term assets or did the investing themselves. The enthusiasm for online day trading in the 1990s had plummeted after the stock market crash of 2000, hurting discount brokerage firms like Ameritrade, whose main revenue had come from trading fees. “We had to shift into asset gathering if we were going to grow, which meant changing everything we did — how we paid our people and dealt with clients, the products we offered and all our operations,” says Tomczyk.
The CEO says he aggressively executed the plan at a time when other financial corporations were deeply cutting budgets. By 2009, the company was reporting record numbers of average client trades per day, net new assets and new accounts. With skills honed during more than 25 years in the financial services industry — in various positions at TD Bank Group and TD Canada Trust, and before that as president and CEO of Canadian insurance company London Life — Tomczyk offers five core management principles, all of which he’s applied at TD Ameritrade to keep earnings steady in challenging times.
IN MY OWN WORDS
CEO, TD Ameritrade
If I could meet my 20-year-old self... I would say don’t rush through life; enjoy each phase of the journey along the way. At 20, I was a hockey player, quiet but very competitive.
My definition of leadership is... Getting someone to a place he or she wouldn’t otherwise go.
The best advice I could give to a young employee is... To take experience over money.
The business book that most influenced me is... Leading Change by John P. Kotter.
My idea of a perfect day off is… To spend it with my family at our cottage on Parry Sound in Georgian Bay, Ontario.
1. You can’t shrink your way to success.
Tomczyk recalls that more than a few of TD Ameritrade’s board members weren’t happy when he announced that he wanted to add $20 million to the 2009 marketing budget when most other companies were slashing theirs to contain costs. As he explains, “The online brokerage industry has always been a disruptor of the full-service brokerage houses, and now that they were in financial trouble, it was time to take market share from them.” By 2012, the company was spending $240 million in marketing — $100 million more than budgeted in 2008.
The company also seized an opportunity to redirect investment monies into technology, including integrating a more sophisticated platform from thinkorswim Group Inc., which the company acquired in 2009. “We’ve been able to keep costs under control without letting up on key tech investments, including readying ourselves for high growth and rebuilding technology to create a more tailored experience for clients,” says Marv Adams, executive vice president and chief operating officer.
2. “The certainty of misery is better than the misery of uncertainty,” to quote motivational speaker Alan Zimmerman.
Keeping employees in the dark is the worst thing a company could do, Tomczyk says. As he ramped up his visits to branch offices and call centers to answer employees’ questions, he delivered the same message: “We can’t control what is happening in the economy or the market, but we can use events to our advantage.”
Something else uncertain times call for: diligence in analyzing metrics. “If you normally measure something quarterly, start managing it monthly,” says Tomczyk. “If you look at it monthly, then manage it weekly. If you’re going off the rails, you can rectify the problem very quickly.”