What should a full-service firm charge clients for an on-line trade? What should full-service brokers get paid on the trade?
Prudential Securities is finding it tough to come up with answers as it beta tests Pru Trade, its on-line trading system. More than a half dozen pricing models are being considered, confirms Stanley Witkowski, director of the firm's strategic client initiatives.
About 200 brokers, branch managers and clients are involved in the beta test, which could run through April, says Witkowski. Most of the brokers involved were chosen by the firm when they came forward with clients who wanted on-line order entry, he says.
Witkowski wouldn't detail the pricing models being tested, but said that the firm is considering the five models currently offered by the 30 to 40 on-line trade providers, plus "a couple of others we've come up with."
Investors will not be able to use Pru Trade to trade independent of their broker, Witkowski stresses. "We want to use technology in conjunction with the platform of a full-service provider." Users will only be able to act in response to a broker's recommendation. "We recognize some people want the convenience of mulling over an idea their broker has discussed with them and now it's Saturday night, and they're ready to enter the order or it's Sunday and they have to catch a plane in the morning," Witkowski says. Orders can be made through Pru Trade on a 24-hour basis.
Down the road, brokers aren't so sure they'll remain a central feature of Pru Trade. "A lot of brokers are a little nervous they'll be taken out of the link," says a Prudential broker in California. "But those who are really afraid of losing control are just the order takers. I think on-line trading will save me a lot of time with people who know what they're doing. When clients contact us, it will be for something really important."
Says another California broker, "I've read articles that warn brokers on-line trading will require them to greatly increase assets under management, that they must look hard for ways to differentiate themselves. But because 80% of my business is fee-based, I see no impact at all for me."
Robert Krivit, a Prudential rep in Melville, N.Y., believes Pru Trade will allow him to get larger accounts. He's come across a number of million dollar prospects who have accounts with Fidelity because they need the convenienceof the on-line and touch-tone phone trading Fidelity provides. It's a real roadblock to capturing all their assets, says Krivit. "I want to be able to provide what Fidelity does, and then some."