February 9, 2001

Online trading trend turns back to brokers

Business Report Correspondent

BOULDER — Online-trading volume continues to increase, but many investors have resorted to seeking professional advice before making that quick click for cash.

Some area brokers say they are offering more assistance to clients who still want to do their own trading online, while others say their clients want full-service assistance with their investments.

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Clients are coming back to brokers for help in investing, said Sally Fischer, a broker with Edward Jones in Boulder. Some investors, she said, were playing the market blindly. “You could throw money at anything, and it would go up. It was not a realistic market. It was not based on earnings.” Earnings are what actually drive the stock market, Fischer noted.

Industrywide, online-trading volume rose 5 percent during the fourth quarter 2000 to an average of about 925,000 transactions per day, according to estimates by Chase H&Q analyst Greg Smith.

Fischer, however, said her firm doesn’t offer online trading because it can’t be all things to all customers. Instead, Edward Jones has more of a buy-and-hold philosophy in trading. “I have very few clients who trade online,” she said. While online trading was popular initially, Fischer said it has taken a volatile turn since the market correction.

Many investors who have traded online solo are now seeking information and advice. “They’re asking for more assistance, company and research reports, and they’re sticking with more blue-chip-quality stocks, shying away from the Internet and dot-com companies. That was a bad experience for everyone,” she said. “Nobody came out ahead. It goes back to quality investing.”

Broker Scott Bursten, associate vice president of investments with A.G. Edwards in Boulder, said he had one client who liked to trade a lot and went off on his own. “The last I heard, he bought Lucent at $60 and now it’s at $19,” he said. “He asks me about stocks more often now.”

Bursten said he primarily sees customers who want investment help and experience. “If you want to walk through the minefield on your own, that’s fine. But if you want the best and brightest to help you, that’s what you get,” he said.

Some investors are more concerned about paying a commission rather than on the results of their investments, and oftentimes, Bursten said they tend to want to trade themselves. “Statistics show that people who trade on their own don’t do as well,” he said.

Ameritrade, a premiere no-frills online trading firm, terminated 350 employees this month, signaling that investors may indeed be returning to the fold. “When you’ve got a great market, everyone looks smart. But when it’s a tough market you need the experience to watch other sectors,” Bursten said. “There’s a lot of information out there on the Internet, but you need to know how to use it.”

A.G. Edwards offers a free service allowing customers to view their accounts online and receive information on investments. Soon the firm will offer customers the ability to open an account and trade online. Bursten said the broker will still get paid, but the commission they received is lower.

Clients trust brokers when they hear about market movement first from the broker. “You become a valued member of their team,” Bursten said.

At Merrill Lynch, clients can execute their own trades through Merrill Lynch Online as an adjunct to their existing account, said Douglas Behnfield, vice president of the brokerage firm. “We offer service at a variety of levels. Clients can move freely from one level of service to another,” he said.

No statistics were available on the number of customers actually changing to pure online trading, but Behnfield said, “Clearly, the mania (for online trading) has cooled like a lot of things online.”

Still, Behnfield said Merrill Lynch’s online service has been successful in terms of competing with online competitors. “We don’t see a significant number of clients who have converted from full service,” he said. “We deal with higher-net-worth individuals who need the service.

“There’s a higher level of concern now that the markets are not performing well,” Behnfield said. “Most clients receive their investment ideas from us.”

Business Report Correspondent

BOULDER — Online-trading volume continues to increase, but many investors have resorted to seeking professional advice before making that quick click for cash.

Some area brokers say they are offering more assistance to clients who still want to do their own trading online, while others say their clients want full-service assistance with their investments.

Clients are coming back to brokers for help in investing, said Sally Fischer, a broker with Edward Jones in Boulder. Some investors, she said, were playing the market blindly. “You could throw money at anything, and it would go up. It was not a realistic market.…

Christopher Wood
Christopher Wood is editor and publisher of BizWest, a regional business journal covering Boulder, Broomfield, Larimer and Weld counties. Wood co-founded the Northern Colorado Business Report in 1995 and served as publisher of the Boulder County Business Report until the two publications were merged to form BizWest in 2014. From 1990 to 1995, Wood served as reporter and managing editor of the Denver Business Journal. He is a Marine Corps veteran and a graduate of the University of Colorado Boulder. He has won numerous awards from the Colorado Press Association, Society of Professional Journalists and the Alliance of Area Business Publishers.
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