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BUSINESSWEEK ONLINE: Business Week ebiz | ||||||||||||||
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Ranking Online Brokers: The Cyber-Nimble Still Have the Edge E*Trade takes the crown in Gomez Advisors' newest rankings. Wall Street's titans will need more than deep pockets to catch the Web's fleet pioneers When Merrill Lynch (MER) announced last week that it was going to offer online trading for its customers, it officially ended an era when full-service brokers dared ignore the Web. The online brokerage industry has exploded from almost no accounts five years ago to 7.1 million accounts in 1998, with growth expected to continue at a 25% clip this year. Merrill and the other titans of Wall Street hope that they will be able to win over customers using their deep pockets. But a quick look at the new quarterly rankings from Gomez Advisors shows that speed, computing power, and ingenuity are what it takes to run a first-rate online brokerage. Capital and brand name don't count for as much on the Web as they do in the nonvirtual world. Gomez Advisors tracks more than 120 online brokerages and ranks them according to six criteria including cost, ease of use, and on-site resources. In addition, it rates them according to how well they perform for different types of customers (such as the Active Trader or the One-Stop Shopper). It bases the rankings on a proprietary formula that factors in their own testing of the Web sites, a questionnaire filled out by the brokerages, and telephone interviews with the firms' customer representatives.
One firm that made a significant move in the rankings, from 19th to 2nd, was National Discount Brokerage, or ndb.com. Its site underwent an enormous overhaul this spring that included a new design. It provides a new set of research tools, such as personalized stock alerts and streaming quotes. "The difference in the site is enormous," says Burke. "They are a good example of a firm that doesn't have a major corporation behind them that is keeping up with everybody else." One of the biggest surprises was the appearance of the first bank-owned brokerage site in the top 20. Bank One's (ONE) OneInvest reached the 15th spot. "Until now, bank brokerage sites competed with other bank sites," says Burke. "This is the first one that is trying to compete with other online brokerages, which is a heartening sign." Burke noted that in the past quarter, there were no major outages of service in any of the principal sites. That compares with more than half a dozen outages lasting an hour or more in the first quarter at E*Trade, Schwab, and Ameritrade. Burke attributes the improvement to major investments in server infrastructure, which are allowing the brokerages to establish layers of redundancy in their systems. "These firms are growing so fast that it's an almost impossible task to determine the scalability of their systems from one month to the next," he says. "They all say that the outages are a thing of the past. But there was usually a big outage right after every time they claimed that." Outages or not, full-service brokerages know they now have to be plugged in -- to the Net. Jaffe writes about the markets for Business Week Online. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ |
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 WEB POINTERS To visit the sites mentioned in the story, click on these links: ndb.com DLJdirect OneInvest ETrade Schwab Ameritrade | |||||||||
