| BUSINESSWEEK ONLINE : MAY 24, 1999 ISSUE | ||||||||
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| COVER STORY
Commentary: Why Old-Line Firms Need New Online Tricks In a world where brokers still can't send E-mail directly to clients, what can a customer expect online from a full-service broker? The question troubles Wall Street's big brokerage houses. Caught off guard by the growth of online investing, they have only just begun to convert their marketing-oriented Internet sites into really useful investor tools. Most full-service brokers' sites don't offer online trading yet, though firms vow that will change soon. The big brokers can't even tap into so basic a tool as E-mail because securities regulators require that a branch manager review any written message your broker sends you. Little wonder full-service brokers seem clueless about the Net. They must do a better job of tailoring their offerings to their strengths--advice and planning--or lose clients to online discounters. ''Our real value is in our heads, not our trade execution,'' says Prudential Securities CEO Hardwick Simmons. Indeed, with execution becoming a $10-or-less commodity, the winners will be firms that best use technology to target specific financial information to clients--and persuade them it's worth paying for. Prudential has taken the boldest steps. Prudential Advisor (www.prusec.com) goes online on May 17, charging clients a fee based on the size of an account. Clients with $100,000 will pay 1.5% of their assets annually, while those whose account tops $5 million will pay 0.5%. In addition, each trade--online or not--will cost $24.95, high for online trades but a fraction of traditional commissions. Pru says clients will get better tips and advice because brokers--who won't share in the commission--won't have an incentive to encourage trading. Others, such as Morgan Stanley Dean Witter and Merrill Lynch, have asset-based fees that include a fixed number of trades. NEW AND IMPROVED. Full-service firms also hope to capitalize on the Web's potential for improved service. Salomon Smith Barney's AssetOne account (www.smithbarney.com)--which charges an asset-based fee but hasn't yet launched online trades--provides detailed cost basis and long- and short-term gain and loss calculations on a client's portfolio. The data can be downloaded into Quicken, Microsoft Money, or a spreadsheet. Where full-service firms still come up short, however, is in converting the Net's vast investment information into useful guidance for clients. True, most post research, and many let clients set up watch lists for E-mail alerts of news on stocks. But brokers have stopped short of embracing the ''mass customization'' pioneered by Amazon.com, which provides personalized recommendations on books based on your purchases and browsing habits. ''Recommendations are the job of the financial consultant''--the human broker--says Steve Clifford, Smith Barney's director of interactive marketing. To avoid losing this human factor, some brokers will offer ''collaboration'' before long. Stumped by a chart on a firm's Web site? Click a button, and get a voice link to a broker. Viewing the same chart, the broker could talk you through it and lead you to other data. Innovations like this could help keep Wall Street from laying off legions of brokers. Surely an industry that spends billions on computer systems to keep its own traders in the black can do more. Why, for instance, can't your broker's system automatically track your investment needs, risk tolerance, and trading style, and then zap customized tips to your desktop? Full-service brokers figure there will always be a market among affluent clients for hand-holding. But if they don't use information technology to serve these clients better, someone else surely will. BY MIKE MCNAMEE _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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 Your Guide to Online Investing COVER IMAGE: Our Guide to Online Investing CHART: The Biggest Online Brokers TABLE: Broker Scoreboards TABLE: Online Brokers That Meet Your Needs Gotta Do the Legwork ``A Diversity of Thought'' Testing the Waters Commentary: Why Old-Line Firms Need New Online Tricks TABLE: Full-Service Dream The Right Tools for the Right Trades Street.Cop TABLE: Smart Investing on the Web TABLE: Web Resources for Online Investors Rocket Science Made Simple TABLE: Quant for a Day How to Seal a Great Bond Deal TABLE: Where to Buy...And Get Info What to Read: The Good, the Bad, and the Terrible TABLE: Wired-Up Investing Books Investor Beware of Web Talk TABLE: Separating Fact from Fiction TABLE: Cross Checkers Smells Fishy? Tell the SEC This EDGAR Is a Real Know-It-All TABLE: Searching the SEC Commentary: Analyst Calls: Let Investors Listen TABLE: Calling All Netizens The Barker Portfolio: A Battle Plan for Accidental Investors Inside Wall Street: Wells Fargo Online CHART: The Rise Trails Other Banks Inside Wall Street: Bidding for 3COM? CHART: Prior Takeovers Fizzled Out Inside Wall Street: A TV-To-Net Linkup CHART: ACTV's Rise Is Due to E-Commerce INTERACT E-Mail to Business Week Online | |||
