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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | JANUARY 19, 2001 CLICKS & MISSES By Lewis Braham DLJ Redirected The broker's online unit, now run by Credit Suisse as CSFBdirect.com, does offer some new features, but it will be playing catch-up with Merrill
The ads promise the world, but in reality, CSFB wants to keep the transition as simple for its investors as possible. "Our colors were green and yellow, and our name was DLJDirect," says Debra Isenberg, CSFBdirect's chief marketing officer. "Now our colors are blue and red, and our name is CSFBdirect." Other than some minor shuffling of links and tabs on the site, that's about as far as the Jan. 15 changes go. DEFECTIONS. In truth, no online company waits for a face-lift to exploit a competitive edge. CSFB began incorporating the now-advertised changes to the site as soon as it took over DLJ. DLJDirect.com's strength was always its research capabilities: Investors had access to stock reports written by DLJ's top analysts. Now they can get CSFB's as well. The quantity and quality of reports should definitely improve, putting the site firmly ahead of E*Trade, Schwab, and Waterhouse, which do very little internal research. But CSFB will be hard-pressed to catch up with online offerings from Merrill Lynch and Morgan Stanley Dean Witter, which have better-rated analyst teams. According to Institutional Investor magazine, which publishes an annual ranking of sell-side analysts, CSFB's global research team ranked seventh in 2000. Aggregating CSFB with DLJ's ninth-ranked team would lift CSFB's rankings in eight sectors: banking, capital goods, insurance, retailing, oil, pharmaceuticals, telecom, and overall economic strategy. CSFB's U.S.-only team may have a bigger edge, however. Combined, CSFB and DLJ would have two more top-rated analysts than Merrill and Morgan Stanley, catapulting it to the No. 1 spot, according to Institutional Investor. All told, the combined firm has more than 300 analysts covering more than 3,000 companies worldwide. But that's assuming the combined team has no attrition from layoffs and defections to other firms. CSFB spokesperson Charlotte Fox declined to disclose how many analysts were laid off after the merger but says a few defections occurred. "Nearly 100% of the analysts that were asked to join the combined firm did," she says. Still, Institutional Investor estimates that at least 25 analysts, 10 of them top-rated, would be eliminated because of job duplication. And many of those will go to rival firms. That makes CSFB's No. 1 domestic position tenuous at best. Meanwhile, Merrill Lynch's research team has been tops in Institutional Investor's All-America Research Team Survey for five straight years and beat every other outfit 19 times in the ranking's 29-year history. Merrill was also voted No. 1 in the Wall Street Journal's analyst survey in five of the last eight years since the study started. No other firm comes close to that record. All of this research is available online to Merrill Lynch Direct clients. WEBCAST STARS. Investors can search for CSFB reports by stock ticker, but daily and weekly roundups of such sectors as technology and health care are also available. One of the site's more innovative features gives investors access to live Webcasts of CSFB industry conferences. This November, the group held its annual tech conference in Phoenix: It was attended by such industry superstars as Oracle's Larry Ellison, Steve Case of AOL, and Dell's Michael Dell. You can watch these experts in action or read summary reports and skip all the grandstanding. Another new feature CSFB added this December is a managed-accounts program. Managed accounts are diversified investment portfolios run by professional money managers. They are substantially more tax-efficient than mutual funds and can be customized to suit individual investment styles. Full-service brokers such as Merrill Lynch typically charge upwards of 2% for managed accounts, and they're only sold through financial planners. CSFBdirect charges just 1.25% of assets, one of the lowest fees in the industry. While Web sites like www.wrapmanager.com are solely devoted to managed accounts, no other diversified online broker offers them yet. Then there are IPOs. CSFB is one of the largest investment banks in the world, having underwritten 67 initial public offerings in 2000. Access to those offerings will surely be of interest to every investor if the bull market roars back to life. But in the meantime, demand is limited -- as it should be, considering that the average IPO declined 27% from its offering price in 2000, according to Thomson Financial Securities Data. Unfortunately, CSFB has restricted all of these new features to clients who have more than $100,000 in their accounts. To access CSFB research reports, view tech Webcasts, buy IPOs, or open a managed account, you must have a "preferred" or "select" account, and those have investment minimums of $100,000 and $1,000,000, respectively. (Third-party research from Standard & Poor's and Briefing.com have no minimum requirements.) That seems a foolish choice, given that it only takes $2,000 to open a Merrill Lynch Direct account, which provides full access to all of Merrill's research. Merrill's stock-trading commissions are a bit higher, $29.95 compared with CSFB's $20, but any investor who could afford the $100,000 to join CSFB probably won't mind paying a little extra per trade. TOOLS FOR COMMON FOLK. Not everything is reserved for big-bucks clients, however. CSFB recently added an asset allocator to the site's investment planning section. Although a familiar tool at most online brokers, CSFB's not only makes allocation recommendations, based on your investment time horizon and risk tolerance, but also suggests individual stocks to meet the advice. These stocks are culled from proprietary research databases of Zacks Investment Research and Standard & Poor's. (Note: Standard & Poor's and BusinessWeek are both units of The McGraw-Hill Companies.) The stock recommendations are available to all CSFB customers, while any Web surfer can use the asset allocator to decide how much to invest in each asset class. The real problem with CSFBdirect isn't its technology or features. It's the way the firm has positioned itself. CSFB's prices aren't low enough to make it a deep-discount broker, but its services and research aren't as good as Merrill Lynch's or Morgan Stanley's. The site is best suited for middle-of-the-road investors who don't trade too much. Aggressive, self-directed investors would be better off paying $1 a trade at www.interactivebrokers.com or $5 at www.brownco.com than $20 at CSFB. The site may have many cool features, but who cares if you can't get a decent price on a trade?  Braham, a BusinessWeek staff editor, covers personal finance  | | |
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