William J. Gerber: You''re right. Rich. About two-thirds of it will hit in 2009 and then the run rate would be in full effect by 2010.
Richard Repetto (Sandler O''Neill & Partners L.P.): Schwab''s got $30 plus billion in the Treasury money market. Can you tell us how much is in the funds and what''s the yield?
William J. Gerber: A lot of the funds are very low. We have about $30 billion in total money market funds and the vast majority of those have yields in the single digits.
Patrick O''Shaughnessy (Raymond James): Could you provide some updates on some of your asset gathering plans, specifically some of the things that you''re trying to do at TD Bank to better work the relationship that you have?
Fredric J. Tomczyk: We talked about three areas that we''re working with TD Bank. Number one was us originating more accounts and assets out of their customer base and branch network. Number two is increasing the breadth and depth of our banking-type products to our customer base. Three was working with TD Waterhouse in the U.K.
The reality is that all those are at very early stages. They''re really not impacting our asset gathering numbers as of yet. I''d say the last one, the one with TD Waterhouse U.K. is probably moving along the quickest because that clearly is a win-win for both organizations. The other two, because our partners at TD Bank USA are in the midst of a significant conversion, that is their top priority and ought to be their top priority. On that one, until they get through that, which will be September, we will continue to pilot different programs but not really get at it in real earnest and have any impact on us until probably 2010 fiscal.
Daniel Harris (Goldman Sachs): Can you talk about the change in the commission rate that you have in the new outlook versus the old one? Do you expect the level of free trades and sort of a lower percentage of option trades to continue over the next few quarters?
William J. Gerber: Not really. We''re expecting that to revert back to the mean. We think that the options trading, particularly the volatility was so high this last quarter that options became fairly expensive and so as that volatility moves back we would expect to see more options trades. The free trades, as we mentioned, the 217,000, was the second-best quarter in our history, only exceeded by one back in March of 2000 and so we would expect to see free trades probably abate as well.
Right now we''re expecting a range of right around $13.25 for the midpoint for the commission for the year or for the next nine months.
Daniel Harris (Goldman Sachs): With regards to the outlook statement and expenses, you''ve got revenues down 12% or so on average and advertising down 3%. Is the thought here continue to spend at a similar level and hopefully take more market share or is that just not something that you had anticipated lowering at all anyway?
Fredric J. Tomczyk: Our view on marketing, at $215 per account to $300 an account, if we can continue to do that and get the new account flows and share of wallet lifts that we are seeing, we''ll continue to make those investments through this cycle.
Daniel Harris (Goldman Sachs): Is there any reason why you couldn''t repurchase debt other than the fact that you''d like to hold more cash right now?
William J. Gerber: Our debt right now is at 1.77% interest rate pre-tax, so we really don''t think that that would be a good use of our cash, to pay down the debt. We think we can do other things with it and look for opportunities that would make more money than that.
Roger Freeman (Barclays Capital): When did you cut fees on the money market funds?
William J. Gerber: It''s on several different funds. It''s not just one fund. I think the first time I actually waived was in early December, so now we are looking at the timing as really going through the rest of the next probably four to six months, assuming that the rate environment doesn''t change, assuming that the funds don''t start purchasing assets that are higher yielding to maintain a greater than zero percent interest rate for the clients. We just think it''s the right thing to do to look at waiving our fee. It''s a fluid situation but that''s essentially what''s happening right now.
Roger Freeman (Barclays Capital): Do you have a good prime offering? We''re seeing shifts market wide from Treasury to prime.
William J. Gerber: There is a prime offering at TDAM and so people are certainly looking at that as well. That''s another area. As one of the mitigating strategies, we are looking at all of these potentials for shifting.
Roger Freeman (Barclays Capital): The margin rate was quite strong; it was actually down very slightly, about 5 basis points. How come that didn''t go down more in the quarter?
William J. Gerber: It''s more probably the mix in the tiers. What we''re seeing is that, although the rate is down, the people who are deleveraging are at the lower rate levels.
Roger Freeman (Barclays Capital): Can you comment on margin utilization? Margin balances were down 42% sequentially, S&P down 22%. How are people actually using available margin right now?
William J. Gerber: Margin utilization had been holding in much at the same rate that we had seen until probably the beginning of October and now we are seeing more deleveraging of the client relative to their total portfolio.
Michael Vinciquerra (BMO Capital Markets): On the net new assets, where are you seeing the majority of flows from?
Fredric J. Tomczyk: It''s not one thing; it''s a whole lot of things. If it was just one thing, we''d tell you that, but that is not what we''re seeing. It''s a combination of things. We continue to see our retention rates being quite good. We''re still early in the share of wallet but we''re seeing some nice lift there. The new accounts are definitely contributing and year-over-year you''re seeing the RIA business come back to where it was pre-conversion and get back to being a decent and a healthy asset gatherer for us which you wouldn''t have seen last year to the same degree.
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