It's no surprise that when Donaldson, Lufkin & Jenrette (DLJ) and American Express decided to migrate to the Web, the sites they created reflected the focus of their parent firms. What is surprising, given both firms' standing in the financial services business, is that their sites aren't better at telling you how to trade online.
DLJDirect (www.dljdirect.com), the 82%-owned online trading subsidiary of DLJ, is what you would expect from a firm whose small bricks-and-mortar brokerage caters to the extremely wealthy. It has fast, no-nonsense navigation, an easy-to-read layout, and minimal explanation. At $20 per trade for up to 1,000 shares, plus two cents per share above that, it's also more expensive than its Amex counterpart.
You can use DLJDirect's TradeTalk telephone service to have someone explain things that appear on the site, but these people won't give you investment advice. That's great for an experienced investor who's willing to pay a premium for DLJ's well-known equity research. It's not so great for a beginner who just wants to trade without a broker's help.
MIXED BAG.
American Express (www.americanexpress.com), by contrast, has a site that feels like it was designed by a broker -- or several of them. It's crammed with so much detail that it makes you want to head straight for one of Amex' 10,000 brokers to sort it all out. In fact, the person who demonstrated for me how trading works on the site acknowledged that the company "really wants people to sign up with a broker."
If you have a relationship with an Amex financial adviser, you can negotiate the terms under which you'll pay for online trading. Otherwise, it's $14.95 per trade for accounts with $25,000 or less, and free stock buy orders and $14.95 per sell order for accounts between $25,000 and $100,000. Accounts with $100,000 or more trade for free.
For the cheaper price, you get a mixed bag in terms of quality. All account holders get free Standard & Poor's stock reports as well as Amex' research. The latter doesn't have the same reputation among individual investors that DLJ's research does. And the site's layout is not as clear as DLJ's, nor are its graphics as slick. But its worst sin is that, in its attempt to educate investors, it provides an amount of jargon-laden detail that makes the process of trading online more confusing.
NO MONEY DOWN.
On either site, it was absurdly easy to set up an account via the Web -- complete with a $15,000 line of credit I hadn't requested. Each brokerage added that so I could start trading immediately. All I had to do was reveal my salary and my net worth, which I estimated aggressively at $2,000 (that's right, two thousand dollars). On both sites, in less than half an hour I was ready to make a trade -- no cash down.
Neither site even asked for a credit-card number. It takes a couple of weeks for VISA to reject my applications for a new card, so I'm mystified at how either site did a credit check on me. I asked a DLJ representative, who said the site gets an electronic credit report from Equifax before granting you an account. Amex says it uses a similar credit service. At both of these brokers, you can buy stock using the line of credit initially. Your payment is due three days after your first trade has been executed -- when the transfer of stock, or whatever it is you've bought, would settle according to SEC rules.
Initially, I thought I had been granted a $15,000 margin account with each broker. I immediately began trying to figure out how that had happened. In their customer agreements, both sites cover your responsibilities under margin accounts in lengthy pieces of legalese. Such margin accounts are different from the getting-started line of credit they granted me. Neither site explains clearly that they're granting you a credit line to start off with or how it works. Both sites even let you click "I agree" at the beginning of the agreement, so you can skip it if you want to play fast and loose.
GOOD HELP.
While I admit I was half asleep by the time I had waded through 16 pages of fine print in Amex' customer agreement, I didn't even see the term "margin account" in it. That would make it hard to know where to look on the site for an explanation of the difference between a margin account and a line of credit. It wasn't until I spoke with a representative at American Express that I had the difference clearly explained to me.
This brings us to the help the two sites provide. I think DLJ wins when it comes to explaining its own Web site. If you see a term like "stop limit," you can just click on a "help" menu, and it walks you systematically through each screen, defining terms. Amex' site has the same feature, but it's labyrinthine to navigate.
When it comes to helping you map out an investing strategy, Amex has a lot more to offer than DLJ -- which offers nothing. But Amex' tools sound better than they are. With the help of a company employee, I took a look at a tool called "Equity Portfolio Evaluator." I was singularly unimpressed when it lumped Microsoft, Motorola, and CMGI into the same industry category -- "electronics." It also advised me that the portfolio was overweighted in electronics stocks.
While Amex' site probably erred on the side of good intentions, it highlighted the fact that it's hard to design a Web site that precisely simulates the process of dealing with a trained financial adviser. DLJ's site, on the other hand, leaves investors almost entirely on their own. Both left me with the feeling that people without significant training shouldn't be trading on these sites.
Copyright 2000 , by The McGraw-Hill Companies Inc. All rights reserved.
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