From: The Afternoon Express For December 08, 1998 EXTRA! EXTRA! (Today's Feature Headlines)
INTERNET BROKERAGE SEES SOME GROWING PAINS
Recently we have reported on how the growing trend toward Internet
brokerage is beginning to nibble at the earnings of traditional brokerage firms. It is clear that many investors have accepted the Internet as a medium for managing their investment accounts, however it is also clear that not everyone's experience with Internet brokerage has been trouble free.
Two reports in recent weeks particularly point up the problems facing this new part of the financial services market. The first was by MSNBC and outlined that some on-line brokers have become concerned about how the courts might interpret their liability for poor, or uninformed, investment decisions made by their on-line clients. In particular, one complaint was recently filed by a 27 year old grad student who says he lost $40,000 in savings for medical school due to trading he did in an on-line margin account over the summer. This was a self-managed account, however this client's contention is that the broker had a responsibility to stop him from blowing himself out of the water. While the outcome here may be rather obvious to any experienced investor, the implications of this and other cases have on-line brokers concerned. Enough so, in fact, that they have formed a committee within the Securities Industry Association to request that regulators provide clarification of the rules to be applied in this type of situation.
A second report, which is our featured hyperlink today, is from CNNfn and details the negative experiences some investors have had with on-line brokers due to system capacity and technology problems. A notable piece of information in this article is that Mondays tend to be a high traffic day for on-line brokers. This coming about due to the phenomenon of folks working on their portfolios over weekends and translating this into orders on the first trade day of the week. (Undoubtedly some enterprising B-school professor will work this into a paper on the 'Internet Monday Effect'). Another perspective in the article is related to client perceptions of this new investing medium and gives credence to an assertion we previously made in the Afternoon Express. Specifically, this client notes that she might not have been able to do the type of trading she does if the Internet did not exist. She goes on to say that "I would rather deal with a (bad) online
broker then [sic] a human broker". This appears to support the conclusion that the financial services industry is undergoing a metamorphasis and investors are beginning to find Internet investing to be more appealing than dealing with a traditional brokerage. We will certainly continue to monitor this trend.
To view a report relating to this story you may wish to try the following
hyperlink:
cnnfn.com
You can read this great story and more at stockgroup.com
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* DISCLAIMER *
STOCK GROUP INTERACTIVE MEDIA, is not a registered Investment Adviser or a Broker/Dealer. Readers are advised that the report is issued solely for information purposes and is not constructed as an offer to sell or the solicitation of an offer to buy. The opinions and analysis included herein are based from sources believed to be reliable and in good faith but no representation or warranty, expressed or implied is made as to their accuracy, completeness or correctness. Readers are urged to consult with their own independent financial advisors with respect to any investment. All information contained in this report should be independently verified with the companies mentioned.
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