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Ameritrade Emerges As Small, But Able, Giant

Ameritrade is finally seeing the fruits of its labor, especially when it comes to its Advisor Services division.

After 18 months of operation, at least after the implementation of Ameritrade Connection - its back-office platform for advisers - the division has more than doubled its number of advisers to 750 and tripled its assets under management. As of the end of its fiscal 2003 year in September, the adviser division had $1.1 billion in assets under management.

"Most of that is net new assets coming in," said Mike Feigeles, executive vice president and head of Ameritrade's institutional client division.

In fact, the company as a whole has some respectable numbers. According to a written release, Ameritrade Holding Corp. expects to increase its earnings to $0.59 per share from $0.37 so far for its fiscal year 2004, which started Oct. 1, and to $0.17 from $0.14 for the first quarter of 2004. (Ameritrade is scheduled to hold an earning call Jan. 20.)

Toughing it Out

"In May of 2002, we rolled this business out. That was a very difficult market. There were lots of questions as the business got tough - that was our commitment to [the adviser] business," Feigeles said.

But it seems that questioning Ameritrade's commitment may have been foolhardy. The Omaha, Neb.-based company is not embarrassed to admit that it's seeking advisers with under $50 million in assets under management (AUM), according to Feigeles. The Advisor Services division makes up for a small fraction of the total $61.3 billion company-wide AUM. And yet, Ameritrade doesn't want to compete with the Schwab's, Fidelity's and TD Waterhouse's that have grabbed most of adviser's business.

Of the remaining advisers, "it's up to us to go after the other 5%," Feigeles said, as well as increasing wallet share from their existing adviser-clients. Taking some of Schwab's business in the meantime couldn't hurt, he added.

The firm is picking up assets and advisers wherever it can. In early November, Ameritrade acquired Portland, Ore.-based brokerage, Bidwell & Co. Advisor Services picked up 88 advisers and $546 million in assets from the transaction, which is expected to close in January.

Ameritrade's closest rivals include of TD Waterhouse, E*Trade and Shareholder Services Group, based out of San Diego.

"Ameritrade is clearly is one of the ones that will be at the forefront of that lower end," said Jeff Gyomber, research analyst and consultant at Tiburon Strategic Advisors in Tiburon, Calif. A lack of brick-and-mortar presence gives Ameritrade cost-effectiveness when targeting lower end advisers, he added.

Now, more than a year and a half later, "people are saying we're not a fly-by-night organization," Feigeles said. "We think the more people understand that, the more people will say, Yeah.'"

The company, which does not have asset minimums for advisers, plans to increase its technology and product offering in early 2004.

Additionally, the firm is working with Advisorport to give advisers access to a separate account platform, which should be available in January.

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