WealthManagement Magazine
Chuck Is Still The One To Beat

Chuck Is Still The One To Beat

Chuck is still the one to beat.

In the online brokerage space, Charles Schwab is still the company to beat. With 7.9 million client brokerage accounts, 1.5 million corporate retirement plan participants, 803,000 banking accounts and nearly $1.4 trillion in client assets, Schwab is number one. Well, Fidelity may have more accounts, but Schwab has more client assets by a long shot.

And then there is Merrill Lynch, the retail brokerage behemoth. Merrill has revamped its online trading platform trying to encourage its clients who keep “play,” do-it-yourself money at DIY leaders such as Schwab, Fido, TD Ameritrade and E*Trade to bring their money to Merrill — and get sharply discounted trades, sometimes even free trades.

Is this a wise move? After all, Merrill is known for being a full-service brokerage, specializing in offering its clients financial advice. Only time will tell, but there is no doubt that retail investors have been moving to online brokerages. “We have seen an acceleration of investors moving away from managed brokerage relationships to self-directed investments in order to have more control of their financial decisions,” concludes Celent in a recent research report.

The report also notes that traditional brokerages are not taking this trend lying down. “Retail brokerage firms have been quick to react through a combination of innovative trading tools, increased product offerings, and improved customer service,” Celent says. In short, the battle over retail investors is in full swing, as Merrill's efforts attest. To attract investors, “online brokers have lowered commission rates and even offered commission-free trades for certain securities,” Celent notes.

Of course, Merrill has attacked Schwab in the past (see cover of our January 2008 issue above) by going after Schwab's institution, RIA marketplace. But last year Merrill's Broadcourt RIA unit quit accepting new RIA assets (although it is keeping its existing clients). Merrill never gave a reason publicly, so it will be interesting to see how its DIY online trading initiative plays out. Apparently, Sallie Krawcheck may revive the unit. At press time Merrill had no comment. But observers say that anything that is considered counter to the interests of its advisors is not pursued. (Why work at Merrill if you can set up an RIA and get Merrill quality service?)

The ML advisors we spoke to mostly were supportive of the discounted trading, acknowledging that many wealthy clients spread money around anyway, including to discounters. So why not ask them to bring their money to Merrill and get similar pricing? On our message board, two Merrill FAs debated the topic, one saying it was bad and the other concluding that it would not cannibalize the FAs business. We shall be watching with great interest.

We thank you for your support. Drop us a line with your comments: 249 W. 17th St., New York, N.Y. 10011-5300. Or email us: [email protected]. Publisher Rich Santos can be reached at [email protected].

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