German Online Investors Set To Benefit From Easytrade Changes

Philip Morton, Investors Offshore.com

05 February 2001

German "do-it-yourself" investors could soon be reaping rewards from recent developments at direct brokerage Easytrade and the announcement that US funds giant Fidelity is to establish an online fund supermarket in Germany.

Last week Postbank, the retail banking subsidiary Deutsche Post AG, outlined a new strategy for its Easytrade unit, following the resignation of Easytrade chief executive Wilhelm Hemmerde. Easytrade was only launched five months ago, and Mr Hermmerde's swift departure is believed to be down to a clash of views with Postbank chief executive Wulf von Schimmerlmann.

Now Easytrade's future strategy is set to change. In an interview with German daily Handelsblatt, Mr von Schimmerlmann said: 'It was always clear to me that Easytrade should not be an independent brand, just one of the services offered by Postbank. The market doesn't need another independent discount broker – it needs a way of dealing in shares that is as cheap and convenient as conducting a banking transaction'.

Although in its infancy, Easytrade currently operates 350,000 accounts, 150,000 of which are held by Postbank employees, while 100,000 have been opened by independent clients. By comparison, Germany's leading online brokerage, Comdirect, has 537,000 accounts.

Von Schimmelmann said one of Easytrade's main selling points is the fact that it has a physical presence, not only an Internet presence. It has 500 outlets located at larger branches of Postbank, and this number is to increase to 750 by 2002. Easytrade outlets have special consulting areas where customers can obtain basic advice about share trading.

Moreover, Easytrade plans to increase its range of mutual funds - currently, the group has distribution agreements with only two asset-management firms: Adig, the asset management unit of Commerzbank, and Credit Suisse First Boston of Switzerland. Under these agreements, Easytrade customers receive a discount on management fees if they buy into funds offered by these companies. Plans are also in the pipeline to give Easytrade customers access to foreign stock markets. This is likely to happen in the latter part of 2001.

Mr von Schimmelmann has a long term goal in mind of lowering costs for investors. He told Handelsblatt: 'One day customers won't have to pay a penny to trade shares, just as they don't have to pay to transfer money between accounts. As long as there is a certain amount of money in the account, transactions could be free of charge. The transaction will pay for itself from the interest that the bank earns from the customer's account. Besides, in two to three years time, trading systems will be so efficient that the cost of trading in shares will be as low as the cost of making a payment transaction.'

German investors are also set to benefit from an online fund supermarket, courtesy of Fidelity. Fidelity has launched supermarkets in both the US and UK but has been relatively slow to break into the German market. Fidelity faces a challenge, given the increasingly competitive fund business, and is up against a number of players - mainly German online stockbrokers - who are developing their own fund supermarkets. These include Brokerage 24, comdirect, ConSors and Direkt Anlage Bank, all of which are already firmly established in Germany.

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