At a time when most other online brokers are tightening their belts, and assessing damage limitation possibilities, E*trade has been voted the best online brokerage for fund investors by TheStreet.com. The group was praised for its strong and well-displayed fund selection (providing access to over 5,200 funds in its offering for both account and non-account holders), and also for its competitive pricing and simple fee structure. This follows E*trade's #1 rating by the Lafferty Internet Ratings annual survey, and its top 20 rating by kasina LLC, both in September of last year.
However, the company's place at the top of the pile is by no means assured: this time last year, E*trade and other discounters (such as Ameritrade and Datek) posed a serious threat to the traditional brokerage industry, but a lot has changed in a year, and the online sector now has to seriously rethink its strategy in order to survive.
Cheap trades and a bullish market drew investors to execution-only online brokerages last year, but now they are realising that they may need advice after all. It was one thing to follow the market upwards, which didn't require discriminating judgement - following the market downwards is not so attractive, and many loss-making investors are now too nervous to make trades without support from experienced operators.
Of course, traditional brokers have also suffered from the recent turbulent market circumstances, but on account of their greater size, and deeper pockets, they have weathered the storm slightly better, and are finding that clients are flocking back. It seems clear then that online brokers need partners to help them build up competitive research and advisory services, and E*Trade seems to have been quicker off the mark than many, having teamed up with Ernst and Young last year. This may just have saved them from suffering the same fate as their brethren, but as the events of last year prove, it's easier to fall from the top of the pile…
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