TD Bank 2002 Annual Report Download - page 23

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21
HOW WE PERFORMED IN 2002
TD Wealth Management
Overall business strategy
The objective of TD Wealth Management is to provide superior
service and results for all customers, either through discre-
tionary managed products, advice-driven strategies or self-
service. TD’s integrated wealth management business aims
to provide value-added results from the most sophisticated
wealth and estate planning strategies to the daily investing
activities of our nearly five million investment accounts.
Challenges in 2002
Fiscal 2002 was a challenging year for both our businesses
and our customers. Worldwide markets remained volatile
throughout the year, with the S&P/TSX Composite Index and
the S&P 500 Index declining 9% and 16% respectively. As
a result, investor confidence was shaken and sales of mutual
funds and discretionary managed products were hampered,
as were trading volumes in the full-service and discount
brokerage businesses. TD Waterhouse International suffered
losses during the year due to a decline in trade volumes. The
resulting loss of revenue could not be offset by cost reductions
because at this stage in its development, the business lacks
scale economies.
2002 Highlights
During the year, a number of significant accomplishments
were achieved:
•Successful launch and integration of TD Waterhouse
Canada, which includes Investment Advice and Financial
Planning in addition to the Discount Brokerage business.
•TD Waterhouse (USA) ranked #1 for Do-It-Yourself
Investors by SmartMoney magazine. TD Waterhouse (USA)
has received this honour in four of the last six years.
•TD Asset Management was recognized as the largest
manager of high net worth assets in Canada.
•Established a joint venture with The Royal Bank of
Scotland to provide discount brokerage services to
Royal Bank of Scotland and NatWest customers. In
addition to building revenues, the joint venture will use
the TD Waterhouse U.K. platform thereby also helping
to build needed scale for costs purposes.
Business outlook and focus for 2003
In 2003, TD Wealth Management will continue to expand
our network of financial planners, grow our Investment
Advice channel and leverage the Bank’s strong retail
relationships. Our domestic and international goals are:
•continued growth in our Financial Planning and Investment
Advice sales force.
•leverage distribution channels within the Bank to assist in
the growth of the advice business and overall profitability.
•continue to invest in systems and infrastructure to better
position ourselves for future growth.
•simplify sales processes and product offerings and reduce
overall costs.
•increase operating efficiencies in TD Waterhouse USA and
TD Waterhouse International Discount Brokerage operations.
Review of financial performance for the year
TD Wealth Management reported moderately lower earnings
in 2002 compared with 2001. Cash basis net income of
$131 million was $17 million or 11% lower than last year.
Cash basis return on economic capital increased from 18%
to 22%, while the cash basis efficiency ratio remained
virtually unchanged.
Fee-based revenue declined $57 million or 3%, primarily
due to the significant market declines which reduced trading
volumes in our discount brokerage business and impacted
asset-based fees. In addition, narrower spreads and lower
margin loan balances reduced net interest income by 9% to
$435 million.
Cash basis expenses decreased $70 million or 3% in
2002 compared with last year in spite of continued
investment in our Financial Planning business, rebranding
TD Waterhouse Canada to include Investment Advice and
Financial Planning and continued growth internationally of
the discount brokerage business.
Total assets under management (AUM) decreased by 6%,
as negative markets and reduced institutional mandates
resulted in ending AUM of $112 billion. Additionally, assets
under administration (AUA) ended the year at $234 billion
down by 2% from last year.
One of Canada’s largest asset
managers, advisors and distributors
of investment products.
Mutual Funds, Private Client Group, Asset Management,
TD Waterhouse –Investment Advice, Discount Brokerage
and Financial Planning
Retail and Wholesale