Motley Fool contributor Jason Hall recently spoke at length with Fred Tomczyk, CEO of TD Ameritrade (AMTD +0.00%). Their conversation covered everything from Tomczyk's retirement later this year, to his thoughts on the man replacing him, to several key things about TD Ameritrade that investors should know.
If you're interested in understanding more about TD Ameritrade from the man who's spent much of the past decade running the company, keep reading.
Tomczyk on his retirement later this year
Jason Hall: Let's jump right into this here. I think some of the big things going on right now, one thing in the investment community that we're definitely interested in hearing about, is your impending retirement. You've done an admirable job of leading the company. You talked about where things were through the financial crisis, and here we are with a recovery that's still moving forward. The things that have happened and the growth that's taken place at TD Ameritrade during your time as CEO ... things have really gone well. You're still a young guy. Why retire now?
Lon-time TD Ameritrade CEO Fred Tomczyk. Image source: TD Ameritrade.
Fred Tomczyk: I mean, "young" is a relative term. I became a CEO when I was pretty young. This is my second stint at it. I became a CEO when I was 41. I ran a life insurer up in Canada, then we wound up selling it. I then transitioned and spent 10 years with Toronto-Dominion Bank (TD +0.84%) [which owns 41% of TD Ameritrade], and then I've spent the last 10 years with Ameritrade. I've been at a very senior level for a long time.
I also have a view that organizations do best when they have leaders that are the right leader for different situations. As it turns out, not that I knew it coming in, but I turned out to be the right person for the situation that TD Ameritrade found itself in coming through the crisis. I do particularly well in those environments. That's a great environment for needing change. We've had a lot of change here.
I'm of the view that, after you've put in seven to 10 years -- and I know there's exceptions to every rule -- but I think you have to sort of reflect and say, basically, is it the right time for you to move on and bring in a new leader to take the company where it needs to go for the next seven to 10 years? I came to the conclusion that it was the right time for the company for me to move on and to bring in someone of Tim's caliber to take it to the next level.
And also, just, personally, I've been working and traveling a lot of years, so, a lot of nights away from home, for quite a while. So it's a time for bit more time with my family, and a bit more of my time.
Hall: Makes sense. So, kind of a two-sided thing here. From a professional perspective, where you think TD Ameritrade is in the phase of where it is, you've leveraged your strengths, I think you're saying, of being an agent of change and building that growth organization, and it's time to move into a different phase for the company. And then, from a selfish perspective, for yourself, time for you to move on to the next stage of your life?
Tomczyk: I think that's fair. The company still has tremendous growth in front of it. But I think it's going to move to a second phase here. I think a lot of the strategies we put in place nine or 10 years ago, the strategy is not going to change, but the way you go about it, I think you should go to another place right now. We started positioning the company for that, and I think Tim is particularly well suited to lead that next phase.
Tomczyk's thoughts on his replacement, current TD Ameritrade President Tim Hockey
Hall: Interesting. Let's talk a little bit about Tim, and the whole relationship with Toronto-Dominion. You came over from TD, if I remember correctly. Right?
Tomczyk: That's right.
Hall: TD owns maybe a little bit more than 40% of the company. It seems like it's been a good relationship. TD's an incredibly strong bank, very well capitalized. The question that I have and that a lot of investors have is, you have a new CEO; that's always a concern. Obviously, you can't say everything about what will happen in the future; nobody really knows. But, the question is, Tim Hockey is at TD Ameritrade now. He's been there about a year?
Tomczyk: No, he's been here for three and a half months.
Hall: Oh, that's right, he just came over at the beginning of the year. He will have been there for less than a year when he takes over this fall.
Tomczyk: That's right.
Tim Hockey, who will replace Tomczyk as CEO later this year. Image source: TD Bank.
Hall: The question is, how much of a relationship and experience did he have dealing with TD Ameritrade when he was at Toronto-Dominion before? Do you think that'll play any factor in his success as a CEO? Or is it just time for somebody with a little bit of a different perspective to come in, based on where TD Ameritrade is in this next phase you're talking about of its growth?
Tomczyk: I'll answer that in two ways. No. 1 is, he has not really been closely associated with TD Ameritrade through his time at TD [Bank], prior to joining us. Having said that, he certainly was aware of what we laid out as the strategy, how we did what we did.
He's been a bit of a student and an interested observer of TD Ameritrade for quite a while. He's very technology-literate; he loves new technologies. He's seen what we've done, how we changed our business model, but from a distance, as opposed to close up. But I've known Tim for 20 years. He used to work for me. I was his mentor when he was younger. I know him pretty well; I know what his skill sets are. He had a very big job at TD.
But, you know, as I said it was the right time for a change; I think he was at the right point in his career for a change, given his strong technology orientation, and, he's a very analytical guy, and given where we are right now, which is, I think we're going through another wave of technology revolution or evolution in business in general. And I think basically, his intellectual curiosity, with us having invested a fair bit into data analytics and personalization, and moving down that journey, he's particularly well suited, with a combination of the technology and analytical horsepower and curiosity, to take the [company] to the next level.
Hall: Interesting. I think one of the things you touched on there was the technology side. We'll talk a little bit about that with a couple of questions that I have for you later. Obviously, when you look at the entire discount brokerage industry, technology has been a key driver there. I know it's something you guys have used as a differentiator, with a great platform that users love that's certainly created value. So that's great to hear, that that's a good skill set for Tim, that he gets technology and he understands that value. I think, one thing I want to mention, too, company culture is hugely important.
Typically, companies that have a history of long-term success, a big part of that is having that culture. If I follow you correctly, while Tim may not have spent a lot of time working at TD Ameritrade between the time he started a few months ago and the time he takes over, he has a history with you. So there's probably some value, in terms of continuing that culture, because I'm sure he should understand what you will have built, and that legacy that you will have established in terms of the company culture.
Tomczyk: That was very important in the selection process. As we went through this with the board, the board was very clear, they liked the strategy and they liked the culture of the organization. They wanted somebody who had either grown up and lived in it for the last nine or 10 years under my leadership, or somebody who I knew very well, who would understand that culture. Looking back at Tim and my history, we were two of the people who helped articulate the TD culture. Our culture is similar but different at TD. There's a lot of similarities, but there are differences, because we're in a different business and a different market. We're more nimble, and innovation-oriented, than the big banks. And that's an important part of our culture. But the culture itself, the core of that, Tim will be very familiar with it. It feels very comfortable to him, and he's already acknowledged that.
Hall: Right. And at this point, there aren't any plans, I haven't seen anything announced, in terms of any other changes with other executives leading the company at this time. It's actually going to be the same core group of people, right?
Tomczyk: Yeah, I think so, I think that's where his head's at. I don't speak for him, but I think that's true. I think this would happen whether it was him or me. He does have to make a few organizational adjustments, just given where we're at, and where we need to focus our time for the next five or 10 years. But he'll make those decisions in due course.
Hall: Absolutely, that would be the same whether he was coming in as the new CEO or not. Changes are inevitable. Change is a necessity a lot of times. That's understood.
Tomczyk: As I said, you have to continue to evolve as an organization. You can't stay stuck in a rut. I believe that quite strongly.
Potential impact of new retirement account rules
Hall: Absolutely, agreed 100%. Let's talk a little bit about the fiduciary rule. For those listening, the short version is, the Department of Labor has announced new rules that affect the [investing] advisory industry when it comes to, specifically, retirement accounts. I think, inevitably, this will play some overall role in the industry of lowering revenues and potentially should allow for better returns, and almost certainly lower expenses for the average retirement saver. On the earnings call, you said there would be opportunities for the company with the new rule. Can you elaborate a little bit on that, and give a little more color on how you think TD Ameritrade will be different from your competitors when it comes to this new rule?
Tomczyk: First off, I should preface this by saying the Department of Labor rule is 1,000-plus pages and open to a lot of interpretation. I think, right now, in many respects, there are still more questions than answers. Having said that, our early reading of it all, to some degree, you're right. I think in terms of the broader wealth-management industry, whether that's asset managers or brokers or private banks or what not, when it comes to IRAs in particular, I think this is a big change. Perhaps, some would argue, the biggest change in 40 years, since it's a regulation of commissions. It is a big change, and I don't want to diminish that.
I think it's a much bigger change for people like full-service brokers, or independent broker-dealers, or people like that, people who operate commission sales forces that are paid based on revenue, or differentiated by product, or those types of things. They have big changes to make. Certainly, the target of the rule is to take away some conflicts of interest and reduce the cost of investing.
I think some people in the industry will say that's going to harm the small investor, because they won't be able to service them economically. But I think, for the online brokerage community, particularly for people who run a business model like TD Ameritrade, that's a sweet spot for us. We run a business model that can effectively serve that market at the lower cost. If you think about it, we basically already are, essentially, a discounter of sorts at the root of the industry, our segment of the overall wealth-management industry.
So we're in a very good position, leveraging technology basically to be a low-cost operator in that market, and can deliver a lot of value, at a reasonable cost, to investors. We've been doing that throughout our history.
But do we have to make some adjustments? Yes, we'll have to make some adjustments. But I think on a basis relative to others in the industry, us and many of our peer competitors in the online brokerage business, we're in a good position to make those adjustments and to capitalize on it. We don't pay high sales commissions to our salespeople in our branches. They're not incentivized differently by different product types. We don't have proprietary products. We try to minimize conflicts of interest; we're an open-architecture philosophy.
So, from many respects, I think we're in a very good position to fill a void that may be left at the lower end of the market that others may vacate or find very difficult to service economically.
Hall: One way a friend of mine in the industry described it to me was, a lot of the full-service brokerages out there are going to be finding themselves in the same position as the buggy-whip manufacturers of the early 1900s. There's just not going to be any demand for what they do, because their business model is going to be so diminished, in terms of how they make money today, versus how they'll be able to make money in the future.
Tomczyk: That argument has been made for years. Certainly, we've benefited, because we're basically a disruptor of that model, at the retail level, basically, based on trading commission and cost and true technology, versus through salespeople. Secondly, we attack at the producer level, where we talk about the person in the wirehouse moving off and becoming an independent registered investment advisor who does act in the best interest of the investor under the 1940 Act with a Level B compensation model.
So I think that's been going on for a long time. I think it's been accelerated at the lower end of the market. Most of those firms have migrated to only wanting to deal with $1 million-plus parts of the market. That's perfect for people like us. We'll take all that business for the sub-$1 million market. Yes, there's a lot of assets in the plus-$1 million market, but it's a very small percentage of the market. So it leaves us in a very good position, with a very big market to go after.
On how the company assesses business performance
Hall: Right. I think, especially, when the transactional part of your business is relatively important, that certainly makes sense.
OK, so, just a couple more general questions for you. These are a few things you've probably answered a million times, but we want to make sure we really put this out there for anyone interested in investing in the company, to really understand how the company assess things.
How does your management team assess business performance, both in the short term and long term?
Tomczyk: First, the way we run TD Ameritrade is, we're all paid on the same bonus model. It's about 60% on earnings per share in the year, versus the target. But the other 40% is what we call our "CEO goals." What that is, basically, it reflects our strategy. Are we making progress on the strategic themes we've set as an organization, that we've agreed to as a management team, and we've agreed with our board?
So that would be all-around asset gathering. We track that, and we have metrics for that relative to our peers. Secondly, it'll be about our share in the trading markets. We track that. Third will be about growing investment products revenue streams, for longer-term diversification of our revenue and continuously a migration, and to also providing advice in the right way, in the fiduciary kind of way.
Those are the three broad, strategic themes that we basically track, focus the organization on from top to bottom. And those are all things that, we believe, over time, fuel the earnings power of the organization. It may or may not impact earnings as much in the short term, but they will matter over a three- to five-year time frame. We focus the organization more on building our earnings power than just short-term earnings.
Second, we look at how we're performing for our stakeholders. We look at total shareholder return over a one-, three-, and five-year period. Secondly, we'll look at our associates and associate engagement survey. We've been in the Towers Watson best-in-class benchmark for the last four or five years, which I'm quite proud of. So people are clearly engaged here and feel good about what they're doing, and the environment and the culture.
Then, lastly, we do look at our net advocate score, which is how we're faring for our customers and our clients, how they feel about the organization, and whether they'd recommend it to others. Then, we have one other bucket, which is our key strategic products projects that will likely span three years that we want to focus the organization on, that we consider important in terms of building capabilities or shoring up a weakness that we see in our infrastructure.
So basically, it's a model that basically focuses the organization on building long-term value and worrying less about quarterly earnings.
Hall: Got it. I think one thing I want to point out about what you just described -- first of all, the first section you talked about, in terms of the way you measure business performance in terms of earnings, looking at asset growth and things that are building your long-term core of the business, those are things that management regularly talks about and emphasizes on your earnings calls. It's pretty clearly aligned with what you're focusing on internally, and what you're reporting to Wall Street.
But it's also very good to hear you talking about ways that you're measuring what your employees see and feel and their level of engagement, also looking at your customers, as well. There's definitely four different things you have to look at -- business performance, management, your employees, and your customers. All four of the legs of that table are pretty important.
Tomczyk: That's right.
On investor demographics
Hall: Let's talk briefly about demographics a little bit. We're getting to a point now where you have the millennials, the largest segment of the population, they're finally bigger than the boomers. How do you really track different metrics and data for each of the different demographic subsets? Do you use those different categories in the way you decide how you're focusing on growing the business?
Tomczyk: Not as much as you might think. We do have segments that we target from a marketing perspective. But we more segment based on need, and what clients may need or want at different points in their life. So that somewhat correlates to what you might call millennials, and those types of things. But we focus more on need, because it's a more actionable item that we can present something compelling around. Our sweet spot, like we talked about earlier, is what we call the mass market. It's part of a market that I think the online broker business is focused on. We're very much focused on it. It's an area that we're in a unique position to be able to service and market to that part of the market, on an economic basis.
Millennials open one-third of TD Ameritrade's new accounts.
When it gets to millennials, we do a lot of things in the schools. We have something called TDA University, where we put our platform in the classroom at a number of universities. I think, I can't remember now, it's over 200 or 300 universities across the United States. So, when they're teaching risk management or portfolio management or investing and those types of things, they're actually using our technology. Then, hopefully, when the students come out and they decide what they want to use, they'll go back to the platform that they know and used during their university tenure.
We also give free education. We have easy and no-fee IRAs. We very much recognize that millennials are "mobile-first." So we've focused on mobile for a long time.
There's four things driving change in the way business gets done -- there's mobile, social media, data and analytics, and cloud computing. Those are the four underpinnings of what's driving change across every business. So we very much focus on those technologies, which is matching where the millennials will be, with respect to mobile and social media.
And I think our proposition fits well with millennials. Just to give you one data point, one-third of our new accounts today come from millennials. So we think we compete pretty well in that market. You have to go at it differently, recognize and update your business differently.
Hall: I know, on the latest call, if I recall correctly, mobile trading is still growing like wildfire for you guys. Is it a 30% growth, somewhere in that area, that you announced last quarter?
Tomczyk: Yeah.
Hall: Do you guys, I don't know if you report it publicly or not, do you internally track how much of your trading is coming based on demographics, so you can make sure you're marketing more effectively?
Tomczyk: We don't track it by demographic as much as, we do track the device and which platform they're using, and those types of things. Yeah, no question, when you go to a millennial, it's going to be more mobile, and much more, social media is important to them.
Hall: Have you found that millennials are more price-sensitive in terms of commissions?
Tomczyk: Yes and no. They are more price-sensitive, but when you think about it on a broader basis, whether it's $9.99 or $8.95 is not as important to them. It's really the package you offer them -- $9.99, relative to what they could get from other providers outside of our space, that's an attractive deal. But if you look more and more at what's going on in the industry, we're competing less on price right now. It's more on promotion and value-added tools and content. We've definitely shifted. It's all been very competitive on promotion, but at the same time, I think bringing them the value-added tools, so they know how to invest, they educate themselves, they have good technology, good screeners, good analysis, whether in technical or fundamental research, and they learn the basics of investing -- that's more important than the price.
Price isn't everything. If you're investing in the wrong stuff at discount prices, that's not a good thing. I think the most important thing to keep in mind is having a process to invest, a methodical way that gives you increased odds of success.
On TD Ameritrade's different revenue streams
Hall: Great. Let's talk about your fee-based revenue streams. What are the long-term goals and assumptions for those fee-based revenue streams?
Tomczyk: That's been an area that we've been focused on since I came in. It used to be 2% of our revenue, and it's now 10% to 11% of our revenue. And we've grown that revenue stream by about 20% to 21% a year for the last five years. So we clearly focused on it and have grown it very nicely. I think we're at a point where what we've done has worked well for us, but we know need to make more changes. I think Tim is well aware of and is focused on it right now. We're now over $300 million a year.
I think our goal now has to be, how do we get that, for the next five or 10 years, to $1 billion, and a more significant component of our revenue stream?
And when we think about it, while we do very well on the trading side, we're well known for that, we do think we have the best technology and the best platform for it, and we'll continue to focus on that and grow it; however, when you think about a world where we're growing this revenue stream to, let's say, $1 billion. You continue to gather assets and interest rates normalize, where the asset-based revenues make up a much bigger percentage of our overall revenue is really the longer-term objective here, while not killing our trading business.
Our trading business will continue to grow, but our trading business is more a low-single-digit growth business, whereas this particular revenue stream can be a 20%-plus growth revenue stream over longer periods of time.
Now, it does depend on the market. It will have its moments where it's not that strong. But I think over time, if you believe the equity markets in the long term will run up, and you can grow and gather assets in that space at a good clip, you can have a nice, high teen, low-20s percent of growth rates.
Hall: So in short, you think the [asset] business can get significantly larger than it is today, and that it can continue to grow at a faster rate than the entirety of TD Ameritrade -- than the consolidated business?
Tomczyk: Yeah, that's exactly right. When we get to where rates normalize and we continue to gather assets, because, our asset-based revenue is 70% of our revenue.
Interest rates helped offset weak margin and loan balances
Hall: Let's talk about where things are with the interest rate spread-based income. Obviously, today, interest rates are still essentially historically low. We saw a 25-basis-point bump in December, and I know the most recent quarter [TD Ameritrade's interest-rate income] was kind of a mixed bag. You got some benefit, but that benefit was more making up for lower balances, if I understand correctly, on some of your margin accounts and things like that. Could you give a little color, short term and long term, on spread-based revenue; what's going on there?
Tomczyk: Yeah. We did the benefit of the Fed fund increase, when we backtracked. We got that. In fact, the Fed fund increase and the strong trading organic growth drove record net revenues. Our pre-tax income was up 15% year over year. So we felt pretty good about that.
But I think where the market got confused was, our overall net interest margin came down. I think that's where a bit of confusion lies. What happened was, our two highest-earning asset categories are margin loans and securities lending. And the two are connected. And what happened was, during the quarter in January and February, we had, the market came off 10% to 11%, and people then basically moved out of the market and lowered their leverage. So margin levels dropped by $1 billion to $1.5 billion. So, when your highest-earning assets balances contract, and basically your highest-yielding assets came down and offset the growth in the Fed funds pickup.
The second thing is the securities lending, which is a function of margin loans, but also on the IPO market, and the IPO market has been very weak in the first quarter. So it came down a fair bit. So it really was a case of the market pulling in, and our two highest-earning assets balances kind of came in on us, although the yields were still very good. So you just have a mix problem, because cash balances were up nicely, I think 11% to 12% year over year, but that's one of our lower-interest-earning assets. So it really was very much a mix problem that reflected the market environment.
This will work itself out. The markets came back in March and are holding so far in April. But I think investors are still fairly cautious. We're back talking about records, but I think people are still pretty tentative, they remember last August, and remember January and February right now. So they're really waiting to see where the market goes.
Hall: Makes sense. So, really, it just boiled down to a matter of timing with the market activity and the volatility, corresponded and affected your mix, at the same time that the rate was going up. So you saw some benefit. In other words, your net income margin probably could have been even thinner if it weren't for that small increase we saw in December.
Tomczyk: That's right.
Businesses and leaders Tomzcyk admires
Hall: That definitely makes sense. Let's switch over. One of the things that we love to learn about when we talk to management is, when you think about your competitors out there, whom do you respect or admire? What CEO or executive at one of your competitors do you really respect or admire what they're doing?
Tomczyk: I'll answer this in two ways. First one is, because I do have a view that, I try to run TD Ameritrade like a tech company or an online company, but I manage the risk and the balance sheet like a financial institution. So that is part of the uniqueness of our business model. So I'll answer it in two ways.
First off, inside the online-broker space, I think, clearly, I've watched, for years, way before I started at TD Ameritrade, I've always been an admirer of Charles Schwab. I think he's been a tremendous innovator over the years. He's built a great organization. He has a long track record of innovation. It's not like they haven't made mistakes along the way, but they've learned and adapted from that. But every once in a while, they hit a home run.
So I think I'm definitely an admirer of Charles Schwab. I think he's built a great organization, and he's done it all more organically. He's not really been a great acquirer over that. So any time you see somebody has done that over as long as he's done that, your hat has to be off to them, you have to give them a certain amount of respect and admiration. And I've learned a lot from watching them over 25 years. I've always admired them, well before I joined TD Ameritrade. So I think, inside our industry, that's where my head would be at.
I think, the other side to me is, because of the way I feel how we run it, I'm a big admirer of some of the tech companies, whether you want to call it the [Amazon.coms], the Googles, the Apples. I would put BlackRock in that category, if you think inside financial services. They're organizations that are very clear what are business is. They know what they do; they're very focused. If you look at them, they basically keep the organization focused on a limited number of things, and they drive hard and focus very hard.
They also tend to have people who look at where the sector trends are, and are not afraid to invest into those and adapt their business model. When you think about BlackRock basically had the courage as a big, active investment management shop, to go out and buy iShares -- a disruptor of their business model. But, they had the courage to go up and pay out for that and say that's where the world's going. I'm sure some of the people thought they bought the enemy. But they had the courage to go do that, and make it work.
When you look at Apple, if you read Steve Jobs' book, incredible focus. He really brought technology to the masses. He's not the only one who did, but if you read his book, the hardest part was always getting the organization. It was one income statement, all-for-one, one-for-all kind of model. But he focused on three things and wouldn't let it be more than three things.
I think, you look at Amazon, data and analytics, and online retailing, a lot of what we've done, and I've been trying to build the capabilities around, I think Amazon has been a great online retailer of products. So I think when you look at those firms, they've been very focused, they've looked at the trends, they built capabilities, thought about the long term, and they're not afraid to innovate and go with the trends and focus their organizations where they need to go.
Hall: I think a key thread of almost all the companies, and the people who built those companies that you talked about is, you look at a lot of long-term success. But you also look at companies that are, today, very different from what they looked like 15 or 20 years ago or even farther back. That's a definite common theme there. I think, you talk about where TD Ameritrade is, and it sounds like you want to make sure that your company is in that same position to be able to adapt for whatever the future looks like. So that's a pretty powerful list of companies and names you've given.
Tomczyk: Yeah, I think you have to take that long-term perspective as a CEO. When I first came in, we had a lot of hedge funds in our stock. And we basically changed all that. We have a lot of long-term investors, people who have a three to five [year] or longer-term time horizon, because they realized, that's the way we're running the company, and that's what they want to invest in. One of the best things I ever heard, and I heard it from Marc Benioff from Salesforce.com, that I think it's particularly relevant to organizations, is, you always overestimate what you can accomplish in one year. You'll never get done in one year what you really thought you could. But you always underestimate what you can accomplish over 10 years, if you put your mind to it.
Hall: That's a powerful statement. Any other key business considerations that you would like to emphasize to the analyst community? Specifically things that are often overlooked?
Tomczyk: I think analysts understand us pretty well. We've had a strong growth orientation, we've also leveraged lean methodologies, which is a Toyota model that we've put in, to help us be more effective and more efficient in what we do and how we do it.
Keep in mind that the organization that I inherited was built through acquisition. So whenever you get those types of organizations, basically, you know you have a lot of, you plug something in and move on to the next deal. You have a lot of inherent inefficiencies in your processes and what you do and how you do it. And surfacing those, leveraging your front-line people, the people doing the work every day, has worked very well for us and given us a lot of room to free up resources and focus on our allocation of resources in areas that are driving the growth.
Hall: I think one of the challenges a lot of companies deal with, whether they've grown through acquisition or organic growth, is relentlessly focusing on that balance between driving costs down while also making sure there are enough resources to continue driving growth. It's a tough balance, but it's something that I think managements do have to be relentless about.
Tomczyk: That's right. Particularly when you're running it like a tech company or an online company. You have to continually focus on lowering your cost to the client, and at the same time continuing to innovate and invest. It's something you have to build into the business model that you run. And the other thing I would add is, I think, the relationship with TD has been beneficial to both parties. And it's been a key part of our leveraging of the way we manage our cash management with TD has been a key differentiator for us, at least over my tenure.
Hall: Provides a certain level of stability for the organization, you think?
Tomczyk: It does that, but basically, we run a model that's very capital efficient. So, we don't use a lot of capital, so we basically wind up, on top of it all, running a model that's very much an agency broker, with low capital intensity. Our earnings are largely all free cash flow, so we can return a lot to our shareholders, which our shareholders like as well.
