E*Trade has expanded its service to include brokerage shops.
E*Trade’s move reconfirms its plans to become a full-service financial services firm, stealing a march on the other online brokers who are dragging their feet into the post-euphoria Internet world. With the recent downturn in equity markets and resultant squeeze on retail investor activity, brokers have realized that they can no longer afford to simply offer a pared-own transaction-only service.
Moreover, the focus of customer acquisition is now turning to the so-called ‘second generation’ of investors. These investors, hardened by the knowledge that equity markets really can go down, have highlighted the importance of some sort of ‘handholding’ during the early stages of investing online.
It is here where E*Trade’s latest move should pay dividends. Online stockbroking is still a relatively new service in the financial services world and there is still plenty of potential in the market. By moving towards a ‘skinny branch network’, E*Trade is maximizing its chances of winning over the second generation of investors and as time goes by, cross-selling its burgeoning catalogue of products.
Until now, Charles Schwab has mainly led the way in setting up a limited branch network and gradually raising the service stakes in the online broking market. The relative success of Schwab in this respect is testimony to the wisdom of pursuing such a strategy. In Europe, aside from Schwab, major German player Consors has also begun rolling out a limited branch network, beginning with a shop in Paris.
Far from being a genuinely new way of doing business, the Internet is continuing its turn full-circle into a very useful distribution channel for the right products and services. E*Trade has the right bunch of products and it is now developing its distribution network for them. Its metamorphosis from pioneer of the Internet age to financial advisor at the end of the fresh fruit aisle is almost complete. Perhaps now it is time to start putting stocks and bonds in the shopping cart with the apple pie.
