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Clients and the Internet

Brokers face some interesting challenges from the Internet. More of their clients go online and confront them with information from a wide-ranging and eclectic assortment of Web sites."The questions come from all corners," says Edward Van Grouw, a vice president and financial consultant at Salomon Smith Barney in New York. "There's a lot of information out there, and people come at you and expect

Brokers face some interesting challenges from the Internet. More of their clients go online and confront them with information from a wide-ranging and eclectic assortment of Web sites.

"The questions come from all corners," says Edward Van Grouw, a vice president and financial consultant at Salomon Smith Barney in New York. "There's a lot of information out there, and people come at you and expect you to know it." This is especially true when it involves the technology and telecom sectors, he adds. "That really forces me to stay on top of the game," Van Grouw says. "I've never worked so hard."

When Mark Knodel talks to a client about a company, he very often hears the person tapping at the computer. "They're pulling [company information] up as we speak," says the first vice president for investments at PaineWebber in Houston. "Several years ago, all they'd listen to was what I was saying." Not anymore. A client can immediately access what everyone else is saying about a company--"quick and dirty, right as we're talking," Knodel says.

Lessons Learned Until the April crash, Van Grouw says he was getting about seven or eight queries a day about microcap stocks mentioned in online chat rooms. These were stocks about which he couldn't "get one iota of information" from either SSB's research department or well-respected sources like Standard & Poor's. He had to tell his clients they were on their own.

"Those calls have come to a screeching halt," Van Grouw says. "A lot of those people have either lost a lot of money, or they're stuck with investments they have very little knowledge of."

A case of novice investors lured by the Internet? Not always. Many of his clients are sophisticated bankers and analysts from New York's financial community. So long as the party was on, they were making money. He says he has one client who bought a microcap stock based on a chat room tip and sold it two days later for a 50,000 dollars profit.

But now that the party's over, those same clients are seeking guidance. "I welcome the fact that the [microcap] game is over, but these people have been hurt very badly," Van Grouw says. "They have no liquidity because they weren't smart enough to get out."

"This is where the role of the FC comes in--my job is to protect my clients from themselves," says Jennifer Madrid, a Merrill Lynch rep in New York who has a lot of Web-surfing Silicon Alley clients. She says that clients have gotten "very upset" with her for vetoing hot stock tips, but "at the end of the day, they came back and said 'thank you,' because everyone else in their office lost money and they didn't."

Yahoo! Finance Favored That's not to say you should ignore the Internet. To the contrary, brokers are taking the initiative, using Web sites to validate their conversations with clients or steer them toward sites with more reliable information.

Yahoo! Finance appears to be the site clients use the most ( It carries live news from Reuters. One of its more popular features enables people to set up stock-tracking portfolios.

Seth Diamond, a rep and sales manager for Prudential Securities' Park Avenue branch in New York, says that most of his clients are on Yahoo! Finance. While many of them have online access through Prudential, they keep information on spreadsheets on Yahoo! Finance as well.

"Everybody uses [Yahoo! Finance] for everything," agrees Steven Daniels, a senior vice president at Salomon Smith Barney in Menlo Park, Calif. "It has a tremendous amount of information, easy navigation and it's just fun."

Knodel says his clients also like Yahoo! Finance. They use it for quotes, news, charting, research and chat boards--all these features are just a click away.

Other Favorite Domains Here are some other sites brokers and their clients use:

* For stock charts, Diamond recommends He does a lot of technical analysis and "when a client calls me, I can refer him to BigCharts and set him up on the chart he wants to look at," Diamond says. He also likes because "it links to virtually everything under the sun."

* When it comes to mutual fund performance, Knodel likes to refer clients to the performance data on Clients can quickly see that the fund he's talking about is "one of the best performing ones out there, and clients don't have to just take my word for it."

* Another popular mutual fund site is Keith Connolly, a rep at Prudential Securities in San Antonio, uses the Morningstar site for the same reason as Knodel uses Bloomberg--clients can see "it's not just me saying that a mutual fund is great."

* For news and tools, Ed Igel, a senior vice president and sales manager at SSB's office in midtown Manhattan, points clients toward three sites he likes to browse. They are, and All offer some combination of news along with charts and graphs.

"I try to read or skim as much as I can because I want to know what other people are thinking and what the Street is thinking," Igel says. "Even if I disagree with it, it makes me think more clearly and also helps in my conversations with clients."

* For technology news, Madrid recommends She says the site's coverage of high-tech companies and detailed profiles about management make it popular with techie clients.

* When it comes to IPOs, several brokers say their clients are fans of the "IPO news" section on Madrid favors the "IPO Central" section of Hoovers at because of its detailed, ongoing coverage of deals and its syndicate calendar.

* Another site several brokers mention is "The market trades on this new thing called the whisper number," notes Phil Fiore, a first vice president of investments at Prudential Securities in Westport, Conn. The site does a good job of explaining the phenomenon to clients, he says. He and the four other brokers in his office use it in their own research.

* For tracking stocks that might be impacted by a mention on CNBC, Connolly suggests checking the schedule on From the home page under the CNBC TV tab, the "Full Guest List" tells who's going to be on and when. Under the Stocks tab there's a link to "Stocks to Watch," a section with stories on the stocks that were covered by CNBC reporters. A "Stock Picks" section on the home page also mentions stocks recommended on the broadcast by analysts.

* For short-term trading ideas and updates on market rumors, check "The site is clearly trying to stay in front of the momentum [stocks], and sharing with the public what they buy," Van Grouw says. "There are enough testimonials from people who have used the site and made enormous amounts of money. I put myself in that group."

Though brokers find the Web sites above valuable, they know using the Internet can be overwhelming for clients. "It's scary how much information is out there," Daniels says. The result? "Our job has changed from providing information to interpreting that information and providing an outlook for the future."

Now that clients are swamped with information from the Internet, what they need is another browser--a "human browser." And brokers are perfect for the role.

So says Harry S. Dent Jr. in his best-selling book, "The Roaring 2000s." A human browser is "an expert filter, giving clients the few, excellent choices that meet their needs, while shielding them from the overwhelming volume of options that aren't suitable," Dent writes.

Dent foresees a profound re-engineering of organizational structures to make them "operate from the customer back, not the top down." This is what Dent calls the new "network organizational model."

In this model, financial advisers become the browsers that search the "servers" (the providers of investment products and services). Advisers can "find just the right pieces from the servers to put together the puzzle, or solution, for the customer."

He predicts that financial service companies will find it "increasingly difficult [to] sell their own investment funds" because clients will perceive that as "biased." Clients will want their advisers to "consider every pertinent option in an objective manner." That means a greater, not a lesser, role for individual financial advisers.

"In a complex world of nearly infinite choices, customers increasingly need a new middle-person to fit a broad array of products and/or services into a customized solution," Dent writes.

Fidelity Institutional Services (FIS) of Boston did a random survey this past December of 1,100 investors (not necessarily Fidelity clients) on the value of advice. FIS found that to some extent, all types of investors agreed with the statement that "the Internet provides a lot of information, but for customized advice, you need an adviser you know and trust."

FIS queried three different segments. It wasn't a surprise that 82 percent of full-time users of advice agreed with the statement. So did 71 percent of part-time advice users. Even among do-it-yourselfers, 38 percent agreed, says Mike Kellogg, the firm's executive vice president for relationship management.

Further, 80 percent of full-time advice users and 74 percent of part-time users said that the ability to meet face to face with an adviser was "very important" to them.

"I don't think the Internet is a major risk to the adviser, given some of the research results we've seen," Kellogg concludes.

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