Instant Messages Gaining Speed

Despite the work full-service firms have put into Web-based client services, there's one function that's still missing -- the ability to chat in real time via text-based message screens. The term for this, coined by America Online, is instant messaging. None of the firms offer the service yet, nor will they discuss their plans. However, behind the scenes, there's a lot of interest in instant messaging,

Despite the work full-service firms have put into Web-based client services, there's one function that's still missing -- the ability to chat in real time via text-based message screens. The term for this, coined by America Online, is “instant messaging.”

None of the firms offer the service yet, nor will they discuss their plans. However, behind the scenes, “there's a lot of interest in instant messaging,” says Hardy Calcott, Schwab general counsel and a member of the NASDR's e-brokerage committee. If brokers could instant message clients or vice versa, it would be one more way to communicate, he says.

Online brokers are taking the lead. National Discount Brokers (NDB) of Jersey City, N.J., instituted the technology about two years ago using the service from technology provider LivePerson of New York, says Keith Gillespie, supervisor for electronic communications. When NDB clients have questions, “they can click on a LivePerson icon, and it will connect them with a customer service representative,” he says. Questions can deal with anything related to their accounts.

Live chat is a popular feature since clients can get answers on the spot without waiting for an e-mail response or making a phone call, Gillespie says. Currently, its reps conduct about 200 chats a day. Six months ago, when the market was more active, the number was about 500, he says.

Likewise, CSFBdirect of Jersey City, N.J., also instituted the LivePerson technology in late October. It uses the chat function to answer only technical support inquiries, not trading questions, says Mike Hogan, CSFBdirect general counsel and chair of the NASDR's e-brokerage committee.

Regulatory Questions Pop Up

The use of instant messaging is so new that regulators have yet to offer any guidance. In particular, there's a question about whether, or for how long, chats have to be archived for review.

Hogan says he expects the NASDR to issue an official view on archiving by the end of this month. An NASDR spokesperson says only that archiving is “currently under discussion.”

When e-mail first came on the scene five years ago, the brokerage industry was still operating under rules that said every piece of correspondence had to be screened before it could be sent. Prior review would have killed the value of e-mail — its immediacy — and created an enormous burden for firms.

After lengthy discussions between industry officials and regulators, the rules were revised to allow for after-the-fact review and spot checks of both written correspondence and e-mails. In addition, both paper and electronic correspondence were made subject to the same archiving requirements.

Working through the archiving and supervision issues with instant messages will be more difficult, says Yoon-Young Lee, a partner with the Washington, D.C., law firm of Wilmer Cutler & Pickering, which is studying the area for brokerage clients.

Instant messages are much more like “the back and forth on a telephone call,” Lee says. A record of an instant message conversation will show “little fragments,” making it difficult “to figure out what was going on,” she says. The firms aren't required to tape or retain records of phone conversations, so Lee thinks they shouldn't have to save instant messages.

Archiving might be a sticky regulatory issue, but technology exists to do what may be required, says Tony Pante, LivePerson senior vice president of product and marketing strategy. Instant message transcripts can be retained, stored and searched, he says.

Hogan says human contact and telephone calls will remain dominant in the future. “I don't see or hear of any rush by the Merrills to get this to work,” he says. But as instant message technology spreads among online brokers, the full-service firms might have to provide clients with the same level of convenience.

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