In the latest of a series of moves to strengthen its appeal to high net worth investors, E*trade Securities has signed a letter of intent to acquire eInvesting.com, which specialises in 'designer' baskets of equities customised to wealthier investors.
Amy Errett, who was appointed as Chief Asset Gathering Officer for E*Trade earlier this year, said that E*Trade will integrate the 'baskets' into its product range, probably incorporating them into its on-line investment advisory joint venture with Ernst and Young. E*Trade is planning to develop a network of financial advisers who will work with clients to optimise investment planning.
E*Trade is calculating that its backbone of younger, occasional market players will mature into more affluent investors to whom it wants to be able to offer a more comprehensive service. Errett explains that E*Trade also hopes to attract a higher proportion of its customers' assets into management, and needs a more sophisticated product offer to achieve this. Errett anticipates that, when E*Trade moves forward with a human advisor network, these individuals will be important to the promotion of the product.
E*Trade could have developed its own 'basket' product but, explained Errett, decided to buy eInvesting because an acquisition allows the brokerage to bring the product to market more quickly. The new product will likely be marketed in the fall.
E*Trade's view of equity baskets as an up-scale product is not universally shared in the market. Some of its competitors have similar products which they market to mainstream investors, pitching the basket as a 'create-your-own-mutual-fund'.
Like other trendy on-line brokerage/stock management companies, E*Trade suffered in this spring's high tech meltdown. The brokerage currently counts $57 bn of assets in its client accounts, although obviously these assets aren't 'under management' in the conventional sense. If E*Trade's strategy works out, many of them soon will be.
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