E*Trade CEO: Company To Boost Marketing Expenses Over Time

E*Trade Financial Corp (ETFC) Chief Executive Steven Freiberg said Thursday the online brokerage expects to increase its marketing expenses over time.

Speaking to investors in a breakout session at the Sandler O'Neill & Partners LP Global Exchange and Brokerage Conference, Freiberg acknowledged that E*Trade has maintained such costs while competitors have boosted their own expenses to attract investors.

"We need to find ways to close that gap," Freiberg said, adding that E*Trade needs to do so in a "measured and intelligent way."

Freiberg said E*Trade spends between $110 million to $115 million a year for its marketing, which includes its well-known talking baby TV commercials. E*Trade expects to diversify its ads to focus more on its product offerings in the future, Freiberg said.

By comparison, earlier at the conference, TD Ameritrade Holding Corp. (AMTD) Chief Executive Fred Tomczyk said his company spends $141 million to $200 million a year in such costs.

Freiberg, making his first conference appearance since taking over as CEO on April 1, said E*Trade will reassess its order flow agreement with Citadel Investment Group, its largest shareholder and bondholder, over the next several months. The company routes 40% of its "marketable customer orders" in all publicly traded stocks to Citadel. The current deal between the two firms is set to expire in late November.

"We can internalize some [orders] if we want to, but others we can't," he said, adding that E*Trade doesn't make a market in options."

Freiberg said he spent the last day and a half meeting with personnel from the firm's market-making business in Chicago.

When asked about a potential merger with a competitor, Freiberg said his focus is on growing the franchise, even joking that "under my job description, it doesn't say sell the company."

Freiberg also said growth in the registered investment adviser space isn't on E*Trade's list of top priorities.

His comments come a day after E*Trade's 1-for-10 reverse stock split took effect. The measure, typically done to boost a company's stock price, cut the number of authorized shares outstanding to 400 million from 4 billion. E*Trade's stock price has lagged below $2 since November 2008, hurt by heavy losses within its bank's mortgage portfolio.

Shares of E*Trade were recently up 34 cents, or 2.3%, at $15.33.

-By Brett Philbin, Dow Jones Newswires; 212-416-2173; [e-mail]