E*Trade is boosting spending in key areas, such as marketing and technology solutions, to lure trading clients and advisors “dissatisfied” with last year’s announced merger of Charles Schwab and TD Ameritrade.
That’s a complete turnaround in the spending cuts it had planned previously.
After the industry’s move to zero commissions, E*Trade considered cutting advertising and marketing expenses “substantially,” CEO Michael Pizzi said last week in a post-earnings analyst call.
But seeing the opportunity, the firm raised its 2020 expense guidance to $1.6 billion from the previous $1.5 billion, he added.
E*Trade “must seize” the opportunity “with deliberate measures,” according to Pizzi.
“We aim to win every dissatisfied relationship that comes out of the Ameritrade-Schwab transaction. The team is highly focused on this near-term opportunity, and we are deploying incremental resources across sales and marketing,” he said.
The target is not limited to those “disaffected” by the transaction, however, Pizzi said.
With one less competitor because of the deal, E*Trade is likely to gain mindshare and become a “branded alternative,” he said.
Tech upgrades for RIA biz
E*Trade is also spending on upgrading technology for its Advisor Network referral program. That program, launched in December 2018, connects independent advisors and clients with needs beyond E*Trade’s in-house offerings.
The firm wants to build out technology that connects third-party advisors to E*Trade’s back and middle offices by mid-2020.
That could help E*Trade court Schwab or TD Ameritrade clients “unhappy” over the deal, Pizzi said, noting that RIAs have reached out to the firm.
When asked about the rollout’s potential impact on asset flows, Pizzi said “some large national advisors” are waiting for the improvements, so he expects those relationships to come in the second quarter or later in the year.
Matt Wilson, head of E*Trade’s Advisor Services business, told FA-IQ in November the firm hoped to target RIAs with $50 million to $1 billion in AUM as well as bigger practices.
Advisor Services is E*Trade’s technology, custody and practice management business for RIAs. It has 230 RIA clients and $20 billion in assets, according to a January investor presentation.
E*Trade is also hiring more sales and services staff for Advisor Services to help seize opportunities from the Schwab-TD Ameritrade deal.
The firm is also increasing the branch financial consultant headcount from the current 410 to 450 by the end of 2020 and to a proposed headcount of 500 by 2021.