WealthManagement Magazine

Report from the SIA Sales and Marketing Meeting

Ben Edwards lived up to his tell-it-like-it-is reputation. The CEO of A.G. Edwards sounded a rare cautionary note as panel after panel of top brokerage executives extolled the virtues of Internet technology at the Securities Industry Association's (SIA) Retail Management Conference in Orlando, Fla., Sept. 18-19.But Edwards warned that in the rush to give clients on-line access to their accounts and

Ben Edwards lived up to his tell-it-like-it-is reputation. The CEO of A.G. Edwards sounded a rare cautionary note as panel after panel of top brokerage executives extolled the virtues of Internet technology at the Securities Industry Association's (SIA) Retail Management Conference in Orlando, Fla., Sept. 18-19.

But Edwards warned that in the rush to give clients on-line access to their accounts and even, in some cases, provide on-line trading, the full-service brokerage industry is straying from its basic mission: to provide professional advice for the long run.

"On-line access makes clients more short-term oriented," Edwards said. "We have to use technology as a navigational tool, but does it help the client become a better investor?"

Edwards is in the minority, however. The head of a large regional firm was heard saying, "Ben Edwards has his head in the sand."

Lauren Mascitelli, director of electronic marketing for PaineWebber, said her firm recognizes that some of its best clients are active Web users. It's only a matter of time before the on-line discounters start strengthening their advice role, she said.

"Our earlier perception was that the Web was being used mainly by younger clients with lower assets--the broker's B or C book," Mascitelli said. "The reality is that clients with an average of $800,000 in assets are checking out their accounts four times a week with PaineWebber Edge," the firm's Web site for client account access. "Forty-eight percent of Edge users are over 55."

The star of the SIA show was Eric Roach, founder and president of San Francisco-based Lombard discount brokerage, newly dubbed "Discover Brokerage Direct" in the wake of its January '97 acquisition by Dean Witter Discover.

This discount pioneer began in June '92 and now handles the highest percentage of Internet-based trades in the business--63%. Last year, Roach reported, trades were up 378%. The brand name of Discover has already had an impact on attracting high-net-worth clients, he added. New accounts typically have been in the $25,000 range. Recently the firm bagged an $8 million account, which he claimed was more anecdotal evidence of the sea change in providing financial services over the Internet.

Roach hopes this trend will continue as he mounts a large advertising blitz. The company has been nearly silent the last nine months since being acquired, but the SIA show marked a coming out party to celebrate and publicize its new name.

Roach says Discover Direct will increase its advertising exposure greatly through TV spots beginning later this year and continuing into 1998. With Morgan Stanley behind it, Discover Brokerage Direct will sometime offer research on-line, plus direct trading of bonds, foreign securities and IPOs. And yes, Roach even anticipates that sometime in the not too distant future, his discount firm will enter the advice-purveying business, utilizing some sort of worksheet for on-line clients.

The question Roach gets asked most frequently is: What about Dean Witter reps? Aren't they worried about being undercut by a subsidiary of their own firm?

Roach replied with an emphatic "No." Dean Witter is operating independently and "doing great," he says. "The merger is hitting on all cylinders."

An executive at Dean Witter echoed Roach's optimism, saying Dean Witter had doubled its international business and increased its research budget to $300 million from $35 million--a popular move with its reps.

Some reps at the firm are concerned, however (see "Discover Direct Causes Some Grumbles at Dean Witter," Page 42).

(For an expanded version of this story, see RR's Web site at rrmag.com and go to the Breaking News section.)

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