TD AMERITRADE’s Joe Moglia bucks tradition

The following article is part of a special insert in the June 3-9 issue of The Reader, a weekly newspaper focusing on the area's culture. | Innovation, determination and the courage to change the way business is done — the boldness to disrupt traditional thinking — is often prized in hindsight. Success, as they say,

The following article is part of a special insert in the June 3-9 issue of The Reader, a weekly newspaper focusing on the area’s culture. The insert, titled disRUPT, is the result of a partnership between The Reader, Scott Technology Centeran incubator and data center aiming to enhance technology and innovation in Omaha’s business community – and Silicon Prairie News.


TD AMERITRADE’s Joe Moglia (right) speaks with Kyle Tonniges. Photo by Dale Heise.

Innovation, determination and the courage to change the way business is done — the boldness to disrupt traditional thinking — is often prized in hindsight. Success, as they say, has a thousand fathers. But the courage to take that first step is a rare quality.

In the rarified world of CEOs, TD AMERITRADE’s Joe Moglia is something of an anomaly. One of five children who grew up sharing a two-bedroom apartment in Manhattan, he’s truly a man who has made his own way in the world.

After high school, he enrolled in Fordham University, hoping to play football. When his girlfriend became pregnant and the two married, he chose to focus on school rather than sports

Not that he gave up life on the gridiron. He became a student coach of the university’s football team and after graduation was able to land a job as head coach at Archmere Academy in Delaware. He was, and remains, the youngest head coach in Delaware history.

It was on the drive to Delaware that Moglia had an epiphany that would forever change his perspective. While football appealed to him, he realized his love of the game wasn’t about football. “I truly think that by being a coach, and being a teacher, I can help a boy become a man,” he said. “I know that sounds corny. I was only 22. But I was already a father and I was already thinking about those important things.”

Moglia spent 16 years coaching college football, going on to win two Ivy League championships as defensive coordinator at Dartmouth before joining Merrill Lynch in 1984. He was a 34-year-old with four young children, and the only sales trainee in his group that didn’t have an M.B.A. Four years later, all of his classmates were working for him. He became the youngest senior vice president in the company’s history and the head of all investment products in the private-client division. He had planned to stay with Merrill Lynch until he retired — until he was asked to become the CEO for Ameritrade in 2001.

A coach by any other name

During his seven years as CEO of TD AMERITRADE, shareholders enjoyed a 500 percent return during the worst economic crisis since the Great Depression. The firm’s market cap grew from $700 million to $10 billion, client assets rose from $24 billion to $280 billion, it led the industry in consolidation and became the leader in online trade transactions.

Moglia’s making headlines once again, this time for his involvement with the University of Nebraska football program. His goal is to return to coaching, ultimately landing a head coaching position at the college level.

To him, it’s not so radical a change. “A head coach is the CEO of his program,” he told FORBES magazine. “You have to have a vision and strategy, and be a great evaluator of talent, and be able to mold a staff and players, and be a great ambassador and handle yourself under pressure. I can do all those things in my sleep.”

He’s had plenty of practice. When Moglia arrived at Ameritrade, the company was losing money, the online brokerage industry was in disarray and competition was intensifying. “Back then, if you asked everyone here who they were competing with they would have said Charles Schwab or Merrill Lynch, but the reality was that we didn’t really compete with those types of firms at that time,” he said.

“When I got here, there were around 200 firms that had online brokerage presences in the United States and around 15-20 names that everybody knew. Today there’s about five names that everybody knows.”

It was inevitable that they couldn’t all survive. Some would simply go out of business, while others would have to merge or allow themselves to be acquired to survive in any capacity.

Moglia saw an opportunity in the chaos roiling through the industry. Online trading was in its infancy and the marketplace was crowded. Once Ameritrade was able to stabilize its business and clearly define a course of action, they’d be in a better position to begin consolidating the industry by acquiring competitors and/or smaller businesses that could complement Ameritrade’s offerings, ultimately expanding their reach.

“As we started to do a better job of focusing, we knew that if we were going to maximize our long-term shareholder value, we needed to start to become a player in consolidations.”

Mergers and acquisitions

Ameritrade’s first acquisition under Moglia’s watch was a dramatic one: the online brokerage National Discount Brokers.

At the time, Ameritrade’s market cap was around $700 million, and the deal cost $154 million. Wall Street wasn’t enthused, according to Moglia.

“Wall Street didn’t believe that, A) we’d ever acquire anybody, and B) that we’d even survive if the deal did go through. Frankly, our franchise was at stake,” he said matter-of-factly. “Had we been unsuccessful [with an acquisition of that magnitude], we would have been out of business. But we weren’t.”

The next big acquisition was Datek, which followed a year later. Datek was valued at $1.2 billion, the exact same amount as Ameritrade’s total net worth. “Had we not done that deal correctly, we would have been out of business as well,” Moglia said. “Wall Street hated that deal; they thought we paid too much and that we’d never deliver on it. Our stock was under significant pressure for about a year or so.”

Ameritrade not only survived the merger, it thrived. “We more than delivered on what we said we’d do, and in a shorter amount of time. Once the street saw that they became believers.”

Moglia and his team saw that over time, there were essentially two types of acquisitions: those that increased their reach in the marketplace and those that made sense strategically. “The biggest deal in the online brokerage industry was our acquisition of TD Waterhouse. That was the one that really helped us go to the next level: to pursue the long-term investor.”

For the majority of its existence, Ameritrade’s strength was in transaction processing — the ability to help customers buy and sell stocks online as easily as possible. That was part of the puzzle.

“In the world of online brokerage, you want to do everything you can to help the individual make a good decision in regard to their portfolio,” Moglia said. “But the technology behind the actual transaction is relatively simple. So for us, productivity and efficiency were the name of the game. And the technology that allows you to be productive and efficient is the competitive advantage. We leveraged our technology and focused on enabling a client to buy or sell a stock.”

It’s one thing to enable a transaction, but it’s also important to make your website “sticky,” so customers will spend more time on your site and, hopefully, conduct more transactions. Day-traders, people who literally spend their days making transaction after transaction, can account for some of that site traffic, but Moglia and his team wanted to do more than that for their customers.

“We did everything we could to help investors be better prepared so they could make the right decision for themselves, for their family and their portfolio,” he said. “Then, they were able to execute that decision with us.”

The actual transaction was, in some ways, the least important reason Ameritrade wanted customers and visitors to come to their site. By giving customers the tools they needed to make better, presumably long-term, investments, Ameritrade could become more than a transaction processor — they wanted to evolve into the role of a trusted adviser.

TD Waterhouse had done well focusing on long-term investors, giving Ameritrade the competitive advantage they needed. And while it was certainly a high-profile merger, it wasn’t as fraught with danger as 2001’s acquisition of Datek. “Had we not gotten [the TD Waterhouse transaction] done we wouldn’t have been able to do what we’ve done in 2008 and 2009, but it wouldn’t have put us out of business. So the risk associated with that one was a little different.”


But there’s more to mergers and acquisitions than balance sheets and number-crunching. Much more. Plenty of companies are acquired, and plenty do their fair share of acquiring. But companies are merging more than products or services — they’re merging cultures, policies and business practices, any or all of which can cause an organization to fall short of its goals of increased production, product offerings and efficiencies.

TD AMERITRADE’s acquisitions have consistently been successful, and Moglia (left, photo by Dale Heise) attributes that to honest communications.

Change can terrify employees, especially when there’s the perception that their jobs could be on the line. Moglia acknowledged that a sound strategy is crucial when it comes to mergers and acquisitions; there has to be a clear, well-articulated plan for the future of the new, expanded company. But equally important is the organization’s grasp of priorities.

“We have to do a good job of taking care of our clients. Our clients come first,” he said. “We are a business, and we need to generate a profit so we can offer a reasonable return to our shareholders. In the business world, taking care of your clients and your shareholders are the two most important things in the world, and a lot of time is wasted when you’re not focused on those two things. One hundred percent of your energy has to be focused on that. Period.”

“Now, how you deliver on those two promises to your constituents is through your employees,” he continued. “The ability to stay in front of and communicate with your employees on a regular basis is key in being able to deliver to your customers and your shareholders.”

Which has the potential to bring a whole other set of problems along with it.

The financial services industry is highly regulated by the government. Insurance companies, investment firms, financial advisors and others who interact with consumers need to pay close attention to not only what they say, but how they say it. Advertisements, newsletters, banner ads and other communications need to be carefully vetted to make sure they aren’t making claims that could be considered misleading. In some cases even well-meaning advice can be deemed promissory, implying that if an investor follows a certain path or makes a certain investment they will reap great rewards.

Moglia acknowledged the importance of complying with myriad rules and regulations.

“It’s always something we need to pay attention to, but frankly that becomes more significant for a financial consultant that’s literally trying to do everything in regard to an individual’s personal wealth plan. We gave our customers all the tools they needed to make the right decision for them.”

So what does the future hold for TD AMERITRADE?

For one, they plan to stay in Omaha. The company is building a new corporate headquarters in Old Mill that will house all 2,000 employees from four offices currently scattered throughout the city. The headquarters will cost and estimated $80 million. The company has approximately 6,000 employees nationwide.

When asked why the company chose to maintain its presence here, he answered simply. “It’s a business reason. We have a lot of people that do a great job helping our clients, and they’re working with those people on the telephone,” adding that Omahans have the ability to empathize and truly connect with clients, a rare skill. “It also makes sense from a financial point of view.” Real estate is affordable. “You’ve got some perfect skill sets here. That’s number one. The other is that the company was founded here; we’re part of the Omaha community.”


Key dates & developments in TD AMERITRADE history

2010  TD AMERITRADE will break ground on its new headquarters and operations center in the heart of Omaha’s Old Mill area (Summer 2010).

2009  TD AMERITRADE acquires thinkorswim, the fastest-growing online broker in the industry, advancing its growth strategy for active traders by several years.

2008  TD AMERITRADE acquires a portion of Fiserv, Inc’s investment support services business.

2008  Joe Moglia steps down as CEO to take on the role of Chairman of the Board, paving the way for Fred Tomczyk, the company’s current president and CEO, to take over leadership of the firm.

Ameritrade acquires TD Waterhouse and becomes TD AMERITRADE.

2004  Purchases the online retail accounts of Brokerage America, Investex and 45,000 accounts from JB Oxford & Co.

2004  Acquires Bidwell & Company.

  Ameritrade merges with Datek Online Holdings Corp.

2001  Joe Moglia arrives at Ameritrade.

2001  Ameritrade acquires

2000   Ameritrade introduces Express Account Opening, forging the path for the paperless opening of accounts.

  Ameritrade offers extended-hours trading.

  Ameritrade Holding launches the Ameritrade Online Investor Index™, one of the first daily measurements of the behavior of online investors.

1998 Ameritrade is one of the first brokerages to offer complex options order entry on the Internet.

1998 Ameritrade introduces electronic trade confirmations by email.

1997 Ameritrade Holding launches Ameritrade, Inc., incorporating the most popular features of Aufhauser, Ceres, and eBroker in one firm.

1996   Ameritrade Holding launches eBroker®, an Internet-only broker and division of All American Brokers, Inc.

1995   Ameritrade Holding Corporation acquires K. Aufhauser & Co., Inc.

1994   K. Aufhauser & Co., Inc. is the first brokerage firm to offer Internet trading via its WealthWEB®. Ceres Securities, Inc. is formed.

1988   Touch-tone phone trading is introduced at Accutrade.

1983   TD AMERITRADE Clearing, Inc. is established.

  Thanks to the deregulation of the brokerage industry, negotiated commissions become available to individual investors. First Omaha Securities, Inc. opens its door as a discount brokerage firm (later named First National Brokerage Services, Inc. and then Accutrade, Inc. Currently, Accutrade is a division of TD AMERITRADE, Inc.)


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