The response of online brokers to the recent backlash has been mixed, with new initiatives ranging from the sensible to the downright silly. Intelligent e-brokers are cutting back on the non-essentials, having realised that cheap trades and flashy ads just don't cut the mustard in a bearish market, and that this is simply no way for a grown up industry to behave.
As Matt Vetto, an analyst with Salomon Smith Barney points out: 'It used to be exclusively about cheap trades, but customers now want broader product offerings, advice, different access points for their money, and maybe even bank branches.' As a result, the online contingent are now concentrating on creating a niche for themselves amongst the traditional offline brokerages, and are employing various different techniques to get themselves noticed.
Addressing the complaint that new investors often lack understanding of the ins and outs of online trading, and feel that the information offered by many sites is pitched above their level, Schwab have recently launched 'Webshops', a series of educational seminars designed to introduce customers to online trading.
E*Trade, in addition to providing improved investor research tools, has recently rolled out a national ATM network, and a New York shop front with advisors available to offer customer support is also planned.
Other brokers are attempting to move away from their previous target market, and towards the more affluent investor promising a much more 'hands-on' approach, and a level of personal attention and research similar to that offered by traditional brokerages. Glenn Tongue, president of CFSBdirect.com succinctly (if somewhat ungrammatically) explains this change of direction: ' Many of the online brokers out there are attracting customers with very low asset levels and you can't make money off of them unless they trade a lot, which right now they aren't.'
Datek, meanwhile, have upgraded their technology in order to target the most frequent traders, offering real-time trading facilities, and allowing customers to direct orders to the market maker or ETN of their choice.
Despite the many and various approaches, all of these traders have one thing in common. They have all recognised that in order to win back customers, online brokers must listen to their needs, and attempt to accommodate them, rather than simply offering a 'one size fits all' service.
Finally, then, to the downright silly. Special recognition for failing to learn from the lessons of last year is due to French based Fimatex, whose incisive and customer responsive reaction to the latest crisis is to pay clients 50 Euros ($47) a month to stick the broker's logo on their cars. Despite this piece of marketing genius, Fimatex didn't win as many clients as expected last year, which you may interpret as you will…
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