Shares match online brokers' profits
Customers may deserve an apology, but not investors
Garry Marr
Financial Post, with files from news services
Service may be poor but the stock performance of online brokerage houses has never been better.
Customers of U.S.-based Charles Schwab Corp. were offered an apology for delays but investors in surging Schwab stock needed no apologies.
Schwab, the biggest online brokerage house in the U.S. with 6.5 million customers, sent a letter to customers from its co-chief executives, apologizing for the backlog. "If you are one of our clients who has experienced inconvenience, we extend our sincere apology and thank you for your ongoing patience," they wrote.
Investors need no consoling considering the stock is up almost 70% this year. The whole sector is booming. The Standard & Poor's investment bank/brokerage index is up about 45% this year and this week climbed another 12.7% on impressive earnings numbers. Goldman Sachs & Co. led the charge, when it announced a whopping 67% jump in first-quarter profit. Lehman Brothers Holdings Inc. and Morgan Stanley Dean Witter & Co. also marched out earnings numbers that trumped analysts' expectations.
Richard Fuld, chief executive of Lehman, boldly told employees the company's share price "reflects that the markets appreciate the strength and promise of the Lehman Brothers franchise." He noted that with 33% of the company owned by staff, employees now have a stake worth more than $4-billion (US).
The profits have come with an explosion in trading both in United States and Canada.Paul Bates, president of Charles Schwab Canada, said he has offered similar apologies to clients in Canada. "We've placed a note on our Web site," said Mr. Bates, who added that waiting times for phone orders have been reduced from a high of 12 to 20 minutes to an average of one minute and 26 seconds. He said, though, the wait is still too long.
Canadian brokerage firms have been scrambling to meet demand. Yesterday John See, vice-chairman at TD Waterhouse Group Inc., said his firm has doubled its staff in the past six months and is continuing expansion plans. "All our clients were mailed a letter similar to [Schwab 's]," he said.
Rob LeSourd, vice-president of sales for Action Direct, said his company has doubled its space in Montreal and Vancouver and is adding more space in Ontario and Calgary. "We've built our capacity, now we're looking for new staff."
The investment community is counting on a proposal to slash on-the-job training for investment representatives from 90 days to 30 as a quick fix to staffing problems. |
