eBroking joint venture MLHSBC is scaling back its expansion plans and reducing its trading fees.
Merrill Lynch HSBC, the online wealth management joint venture, is curbing its worldwide expansion in the face of sustained competition among retail brokers to serve affluent customers. MLHSBC said it had decided not to begin a service in Germany or Japan as planned, but would concentrate on the UK, Australia and Canada.
The wealth manager will also scrap the quarterly GBP18 ($26) portfolio fee charge, which it said was putting the company at a disadvantage with investors. It is also reducing the telephone dealing fee to GBP19.95 – the same rate as for online trades.
Despite the strong support that Merrill Lynch HSBC enjoys through its parent companies, and despite the fact that Merrill Lynch and HSBC have enough financial resources to sit through the bear market, the fact remains that, in the short- to- medium term, the new venture will face difficulties in finding customers for its proposition. Online stocktrading is highly competitive in Australia, Canada, and the UK, and market growth has slowed down considerably during 2000.
With the current downturn on the global stock markets, not many investors will now decide to give execution-only stocktrading a go. UK stockbroker Killik & Co., for example, reports that, due to the current market situation, its number of new offline customers is growing more quickly than the number of new online customers.
In short, Merrill Lynch HSBC is dependent on recovering stockmarkets in order to be able to find new execution-only customers. If the venture is ever to be a success, MLHSBC may have to expand its branch-based operations and sit tight for the long haul.
