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European Online Brokers Branching Out

Caroline Maxwell, Investors Offshore.com

20 February 2001

In order to offset the slowdown in new account growth, European online brokers are developing wider product offerings, according to BlueSky International's latest report. In 2000, figures show new account growth dropping from 200% in the first six months to just 30% in the latter half of the year, a decline which has forced online brokers to re-evaluate their postion in the investment world, and to diversify their product ranges and revenue streams.

Suzan Nolan, president of the online ratings agency, believes that the sea change came in March of last year, when the market began to falter. 'Brokers began to realise that they would not be able to live off the transaction-only customer but needed to target the asset-gathering clients,' she explains. ' [Now] the biggest challenge they face is to get the other 80% of investable assets their existing clients may have in another online or offline account.'

And many of the major European online players seem to be facing up to that challenge, introducing various new offerings including mutual funds, index tracker funds, and multiple market trading in order to keep their existing customers happy and to encourage new, and traditional offline investors to take the plunge.

So far, German online brokerages appear to be reaping the most rewards from this strategy of innovation and diversification, with Comdirect, Consors, and Deutsche Bank's Brokerage 24 occupying the top three slots in BlueSky's quarterly poll, which assesses over 700 European online brokers from a consumer's point of view.

The move towards the provision of general financial services in a 'one stop' environment is undoubtedly a timely one; in the UK alone, average trading activity has declined by almost half since the beginning of last year, and Huw van Steenis, J.P. Morgan's e-broking analyst believes that this may be the beginning of the end for online brokerages and financial service providers which refuse to diversify: ' A year from now today's "over-broked" market will have far fewer pure brokerages' he predicts 'But there will be more stockbroking services, provided - among other services - by big name insurers, credit card companies and banks.'

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