Good night. Got to get up extra early to run, since GC went to TX to visit her ill father, and I'm playing Dad's taxi service in the morning.
Jack
One more:
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MARKET TODAY
Battle of the Brokers
May 26, 1999
FULL-SERVICE brokers vs. online traders. Let's get ready to rumble.
John "Launny" Steffens, a Merrill Lynch (MER) vice chairman and head of its brokerage group, has been at the forefront of the online-trading debate since he declared last June at a PC Expo Conference that Internet trading "should be regarded as a serious threat to Americans' financial lives."
Since then Steffens has been the Great Defender of the full-service brokerages. At nearly every opportunity, he has expounded on the importance of having a broker available for solid market advice. You almost expect Steffens to show up at conferences decked out in an action hero's costume. Now introducing Launny Steffens: Superbroker.
Well, Steffens appeared in more traditional business garb at Monday's Forrester Research Open Finance Forum in New York. His message was toned down somewhat from his bold remarks of last summer, since the company has been making some online forays of its own. Merrill now offers online trading for some of its more well-heeled individual clients and the company recently set up a new division that will let corporate and institutional clients access research and trade bonds over the Internet. But Steffens is still a full-service broker at heart and he had some unflattering words for online investors and some of his competitors.
Steffens said there is too much panic selling and irrational buying when companies make announcements and online traders rush to quick investment decisions. "Super-active traders getting a hunch and betting a bunch are creating problems," he said.
That may be true, but Merrill's reluctance to adopt the Internet as a major distribution channel has clearly hurt the company's image. That was no more evident than when the audience was asked who the leader of the brokerage industry will be in five years. The audience had to pick between E*Trade Group (EGRP), Fidelity, Merrill, Charles Schwab (SCH) and Morgan Stanley Dean Witter (MDW). The more than 350 conference attendees were provided with little wireless consoles so the results of the vote could be shown on a big screen.
Schwab captured 58% of the votes. Merrill barely came in second with 14%, just ahead of Fidelity (13%) and E*Trade (11%). Only 4% of the audience thought Morgan Stanley Dean Witter would be the leader.
Now if these tech-savvy conference attendees are unenthusiastic about Merrill's chances for future success, then is it any wonder that Wall Street is lukewarm about Merrill as well?
In the last 52 weeks, Merrill's stock has fallen 25% while Schwab's has soared more than 340%. There was a lot of hoopla back in December when Schwab's market cap went ahead of Merrill Lynch's for the first time. But if Merrill catches up to Schwab anytime soon, it might rank as a bigger shock than Truman's defeat of Dewey; Schwab's market cap now exceeds Merrill's by $15 billion.
But Steffens remained undaunted and stubbornly stuck to the mantra that investors will want their hands held by a broker instead of the convenience of inexpensively executing a trade with a simple click on Schwab's Web site. "The real challenge for [Schwab] is the issue of the quality of people involved, the quality of advice," he said.
Steffens expects the firm to hire more brokers in the coming years, saying that the company's most affluent customers value the services of a qualified financial consultant. He said the number of people with more than $100,000 in investable assets will increase from 19 million today to 40 million by 2005 and the number of people with more than $1 million in investable assets will grow from 3.5 million to 10 million.
And while he was cagey about what Merrill's future online plans for less wealthy retail investors would be, Steffens said Schwab may have won the first round but that the fight among the brokers is not over. The second round, he declared, will begin soon.
Let's get it on!
-- By Paul R. La Monica |
