Investors, who for a long period used services of discount web sites, are going to leave their previous providers and go to prestigious full-service firms such as Merril Lynch and Co, Salomon Smith Barney and Paine Webber, which jumped into Internet trading war. Full-service firms were able to combine both the professionals’ advice and low commission rates and now they are going to deprive cut-rate firms’ status of king of the Internet–trading. Of course, the price for services is still higher than prices of discount firms, but analytics declare that investors become wealthier, more prudent and adverse to risk and they will prefer to make decisions based on the advice of the professionals than on their own anticipation. That’s why many of these investors may not feel comfortable managing their money in accounts at discount firms that don't offer as much advice as full-service brokerages and more and more traders seek out the advice of the professionals now.
The successes of these firms are stunning. From July, in first three months of this hybrid program, which offers simultaneously human advice and unlimited Web trading for an annual fee, the income of companies consisted more than 16 billion dollars, when the similar fee-based program without web trading took five years to get the result in 24 billion dollars. Guy Moszkowski, a brokerage analyst at Salomon Smith Barney, mentioned that this growth of earnings doesn’t mean the strong desire to work over the Internet, investors look for an only cheaper fee.
Forrester Research noted that assets on accounts will grow to 3 trillion dollars from 374 billion this year and full-service broker’s share of online assets will grow to 45% from 18% today and their share of the online accounts will increase to 22% from 3%. This data can indicate significant losses of discount firms, which cannot compete for the market with companies with such a big names, but, in practice, all indications show that shares and accounts of discount firms are skyrocketing anyway. This is related to the fact that firms have started spending huge sums on advertising because of fear of a serious competitor in the market. E*Trade, for example, is spending $350 million on advertising and marketing. Although full services companies want to lure customers from other firms, 20% of the assets were from new accounts. Of course, big companies are more favorable now, but discount brokers slowly move in the direction of expanding the range of services to be able to compete.
Investors, who for a long period used services of discount web sites, are going to leave their previous providers and go to prestigious full-service firms such as Merril Lynch and Co, Salomon Smith Barney and Paine Webber, which jumped into Internet trading war.