Activists Fire Up Ameritrade

Last year, the company merged with TD Bank's U.S. retail brokerage, TD Waterhouse USA. In May, the company finally completed the conversion of former TD Waterhouse clients.

The two hedge funds say they are not convinced that the new firm will be successful.

TD Ameritrade's "modest track record of organic growth in qualified accounts and assets, narrow product set and unproven ability to offer investment advice gives little indication that it will be successful in doing so," the hedge funds say.

"A strategic combination with Schwab, which dominates this market, would solve this problem immediately," they say. "Likewise, combining with E*Trade would provide greater customer lifetime value," given the younger average age of E*Trade's customers, the ability to enter international markets and cross-selling services through E*Trade's bank operations.

(To watch Laurie Kulikowski's video take of this column, click here).