[B] Amer Express Brokerage targets long-term planning, existing customers
By Cameron Dueck, Bridge News
New York--Oct 5--Online brokerages are increasingly separating themselves
into two camps: the many smaller deep discount brokerages and those that aspire
to be a one-stop financial planning service. American Express Co. is steering
its online brokerage unit down a well-traveled road by promising financial
advice and rates that are meant to deter day-trading.
* * *
The financial and travel services giant today unveiled American Express
Brokerage, offering online trading, financial planning and cash management. (See
.15271)
The firm is making a clear effort to provide comprehensive financial
services to individual investors and steer away from the cutthroat day-trading
model. This is similar to the approach many of the larger online brokerage
services are taking, offering access to a wide array of mutual funds, research
and information as well as banking transactions to create a one-stop center for
customers.
Ruediger Adolf, senior vice president, strategic planning and business
development at American Express, said the offering's unique pricing structure
helps define the target customer.
"Many people do not want to churn their accounts, and this is not tailored
to the day-trading community, which is why we do not allow round-trip trades in
the same day," said Adolf. "We're sending the market a signal that churn trading
doesn't work as a business model."
American Express is offering free equity buys and sells at $14.95 each for
accounts with at least $25,000. If the buy and sell order is placed on the same
day, each trade costs $14.95. For smaller accounts, both the buy and the sell
cost $14.95. For account balances over $100,000, all online equity buys and
sells are free.
Trades of over 3,000 shares will carry an additional charge of 3 cents per
share. Trades through a telephone agent will cost $44.95 each for all pricing
tiers.
A key part of this approach is the company's plan to offer its buy-side
investment advice by e-mail, phone or in person at an extra charge to online
customers.
"We wanted to focus on the features that make us distinctive, because most
people can't get access to buy-side research on the street," said Adolf.
Adolf said sell-side research will also be added as the services expand in
the future.
The goal of allowing customers to trade online but consult with their own
personal advisor to form longer-term plans is to make American Express Brokerage
a destination for people looking for advice in their current financial position,
tax situation, insurance needs, retirement plans and estate needs.
LEVERAGING EXISTING CUSTOMER BASE
While American Express Brokerage is open to new customers, new accounts are
not its primary focus for the moment.
"You will see less advertising around this offer than from other industry
leaders," Adolf said. "We don't have to go out and tell the
market what American Express is--the market knows us--and what American Express
stands for."
Doug Lennick, executive vice president of the advice and retail distribution
group at American Express said there will be an ad campaign including print,
radio, billboard and direct mail sometime this fall, but as yet no budget has
been announced.
Instead of spending millions of dollars in advertising and competing with
the likes of Charles Schwab and E*Trade Group for customers, American Express
will instead focus on cross-marketing.
The firm plans to leverage its large base of credit card customers as well
as the current clients who have relationships with financial advisors. American
Express would not detail how many brokerage accounts it has, saying only that it
is "several hundred thousand."
"We're targeting the existing customer base, and the net-net will be
leveraging the assets that American Express brings to the party," Adolf said.
"It is a key part of our Internet strategy and complements a series of
recent introductions, including Membership Banking and Blue, our new credit
card, with features for people interested in shopping online," said Adolf.
SECOND ATTEMPT AT ONLINE SUCCESS
This is the company's second attempt at doing business online. In 1996,
American Express launched Financial Direct, a less comprehensive offering of
financial planning tools.
Lennick said in its first attempt, American Express made the mistake of
assuming that the customers who want to do business online were different from
those who want financial advice. While the service is still available, the
company stopped marketing it several years ago. "Now we, and the entire
industry, are learning that the same customer wants to be online, face-to-face
or at other times on the phone." Lennick said. "We thought customers would be
channel loyal, but we learned they are not."
Existing Financial Direct customers will automatically be transferred into
the new brokerage plan. End
Bridge News, Tel: (212) 372-7569
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