Monday, August 15, 2005

Lowering the Velvet Rope

DETERMINED NOT TO BE JUST A BRIDESMAID, E*Trade is hooking up with Harrisdirect. Ameritrade, of course, had previously turned down E*Trade’s overtures, and instead wound up marrying TD Waterhouse.

Both E*Trade and Ameritrade have been intent on bulking up to benefit from the economies of scale they can realize, given the excess capacity of online brokers. And Harrisdirect and TD Waterhouse, both units of big Canadian banks (Bank of Montreal and Toronto-Dominion, respectively), never achieved the size needed to make them competitive with their eventual merger partners, or other leaders such as Charles Schwab. Indeed, according to a research note from First Global, the operations of Harrisdirect were “more or less immaterial” to the bottom line of BMO. E*Trade, however, gets “the high-quality, affluent client base of Harrisdirect.”

Such customers—the sort reading this now—are the Holy Grail of mainstream online brokers, which seek to sell them an array of financial services. One way is to give breaks to the richest, most active clients. An example is Wells Fargo’s online brokerage firm, WellsTrade, which is connected to its banking site at http://www.wellsfargo.com. The site slashed its commissions for customers with a Wells Portfolio Management Account to zip for the top tier.

A PMA includes money-market interest rates, no-fee linked checking and savings accounts, a Wells Fargo credit card with no annual fee, free checks, free online banking and bill paying, overdraft protection and a combined statement that links all accounts.

Most brokers count only brokerage assets in determining the perks accorded to the biggest customers. Wells’ PMA takes into account bank checking and savings deposits, personal loans, credit balances, investments including individual retirement accounts—plus 10% of a mortgage balance with Wells. Counting a portion of your home loan, especially if you live in an expensive real-estate market, significantly lowers the bar for top-tier treatment.

PMA customers with more than $250,000 in total-relationship balances qualify for 50 commission-free online trades per year. Accounts with $100,000 to $250,000 get 50 online trades annually for $2.95 each. After those 50 online trades, it’s the same $9.95 commission paid by the hoi polloi with under $100,000 in balances in their PMA. More than 800 no-load, no-transaction-cost mutual funds also are available at all levels.

The Wells brokerage site is easy to use but somewhat spare in terms of amenities. In our annual review of online brokers ("Speed or Comfort?” March 7), it ranked near the bottom of our list; its formerly higher-than-average fees certainly hurt its ranking. But the new fee structure makes a WellsTrade account very attractive to a PMA customer with a large mortgage who wants to build long-term assets in a cost-efficient manner; for example, with regular purchases of exchange-traded funds.

Back to School: Three interesting resources for students of investing and trading hit my desk this week. One is a book entitled, The Investors Free Internet: How to invest in the U.S. stock market using free information from the Internet, published by Investors Internet (http://www.investorsinternet.com). The 281-page guide tells readers about a variety of free investment sites on the Internet, and how the information on each site can be used. It draws parallels between the business of investing and the operation of major companies. The authors picked their favorite freebies from the 2,000 sites they studied, then put together this guide on how to find, organize, synthesize and use the information available.

The book is can be purchased at its Website, as can a variety of subscription services based on the researchers’ findings. The book is $37.50; subscription services range from free to $29.97 per month.

The second resource is a CD-based course on chart reading and investment research, called InvestorsHelper. The designers estimate it would take about four hours to go through the material provided, after which the student would be prepared to analyze stock-price movements and predict price swings. Topics include charts, trend lines, channel lines, level lines and various forms of moving averages, as well as analyzing income statements, balance sheets, cash-flow statements and other fundamentals.

The lessons on the CD are extremely simple, occasionally a little too simple. If you’re new to the concepts of technical and fundamental analysis, the videos are helpful. There is a heavy focus on stock-price shifts, and how to predict them. InvestorsHelper is available at the company’s Website ( http://www.investorshelper.com) for $29.95. The CD includes a charting package called the Playground; it features the basic technical studies covered in the lessons.

It’s possible to find all of the technical-charting capabilities included in the Playground free at sites such as Prophet.net and Stockcharts.com, along with explanations. The CD does a good job of explaining “how to,” but seldom takes the extra step of explaining “why to.” InvestorsHelper is published by the Boloto Group, which, according to the Website, will be offering $10 trades at its soon-to-open online trading site, Boloto Financial.

Lastly, GAIN Capital (http://www.gaincapital.com) offers an online course for novice currency traders, called “Learn to Trade Forex.” This course, which can be found at http://www.learn-to-trade-forex.com, gives the student 60 days of access to course materials. Along with the program, students receive a demo trading account with $25,000 in virtual funds, allowing them to apply lessons learned.

Analytical Platform Updates: Townsend Analytics has added the Nasdaq’s market-data product, TotalView, to its RealTick trading platform (http://www.realtick.com).

TotalView provides market transparency by showing the complete depth of the Nasdaq market at all price levels, including the aggregated size of all quotes and orders available for execution in the Nasdaq Market Center for each Nasdaq National Market and SmallCap stock. It also includes multiple attributed quotes for each Nasdaq market participant, and net-order-imbalance information for Nasdaq Opening and Closing cross-eligible securities.

TotalView provides very fast Nasdaq order-book information as Nasdaq has made technology investments to reduce TotalView’s latency by more than 75%, to an average of less than 50 milliseconds.

ESignal, which provides streaming, real-time financial market data, news, analytics and decision support tools to professional and individual traders, has added Nymex Direct to its futures-data platform, FutureSource Xtra. A Web-based Java application, FuturesSource Xtra supplies the commodities, financial futures and foreign-exchange trading community with real-time market data, decision support systems and services covering a broad range of markets.

FutureSource builds its offerings from several core features, including streaming real-time quotes from over 50 worldwide exchanges, real-time interactive tick charting, full options coverage and news feeds delivered immediately on demand. Users can add or subtract modules as needed; for a complete list of FutureSource features, as well as an overview of the entire product line, go to http://www.esignal.com/futuresource.

Published in Barron’s August 15, 2005

Posted by twcarey on 08/15 at 01:07 PM
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