Brokers, listen up. Investors will give you more trades if you give them better online investing tools, according to a new report from Internet research firm Gomez.
Online information stimulates interaction between brokers and their clients, the report said. In fact, firms that fail to provide planning information, research and account management via the Web are making a “costly mistake” and risk losing business to those that do.
After surveying 2,700 investors, Gomez found that active investors who use Internet tools provided by brokerage firms make 40 percent more trades than those who don't.
More specifically, those investors who make the most of online research are twice as likely to make transactions.
Still, Gomez said, only two — Merrill Lynch and Salomon Smith Barney — of the top 10 full-service brokers rated by the research firm offer all four tools it said are most “demanded” by customers: financial planning, investment selection, research and alerts.
Wirehouses could learn a bit from discounters, who, Gomez said, offer account management, education and administrative functions that are “currently unmatched by the online offerings of many full-service competitors.”
While wirehouses aren't likely to lose much business to discounters, Gomez said in the report, discount brokers “are aggressively pursuing advice relationships, and their online offerings in this regard are considerably superior to functionality and corresponding usability offered in the full-service space.”
The bottom line is that reps who use these Internet tools effectively, educate their clients about investments and encourage them to be more active.
Advisors must realize, though, that because of the glut of investment information being churned out, their role will have to “segue from delivering information to filtering information.”
|Brokerage||Total Actions*||Number Per Million Accounts|
|US Bancorp Piper Jaffray||47||64.46|
|First Union Securities||88||35.2|
|Salomon Smith Barney||204||30.71|
|Morgan Stanley Dean Witter||151||27.96|
|Quick & Reilly||34||18.89|
|TD Waterhouse Investor Services||68||15.25|
|American Express Financial Advisors||19||9.5|
|Credit Suisse First Boston||20||4.96|
|* Total Arbitration Cases, Regulatory and Legal Actions from 1997 through 2001|
|Source: Weiss Ratings|
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