Will the avalanche of investment and company information now available through the World Wide Web help make traditional, high-fee, full-service brokers an endangered species? Is disintermediation an inevitability in the investment management business? And if so, what does all this portend for how individual investors gather and process investment-oriented information? What’s on the Web for investors?
Ask a stockbroker over Don Diegos and a few malt whiskies in the Men’s Grill on Saturday night, and you might get a blast of the professional bravado that keeps a sales person charged up for all that full-throttle cold calling.
No, full-service brokers will never go away, the refrain goes, because a lot of investors up and down the asset food chain will always want someone to monitor economic news and investment information for them, turning all that raw data into analysis and recommendations. Traditional brokers will always be gatekeepers between providers of investment information (such as analyst reports, company background, and industry trend tracking) and the information consumer (the investor), the well-paid face insists.
Well, I wouldn’t bet the country club membership on that one for too long.
Explosive Growth
The explosive growth in the US of discount brokerages in the years since the 1970s and the May Day abolition of fixed commissions has revolutionized how Americans manage their portfolios.
Now there are estimates that individual investors in large numbers are poised to migrate to online brokerage services accessible through the Internet. Forrester Research, respected soothsayer in the information and online industries, recently estimated that by 2001, some 10 mn online brokerage accounts (with a total of $524 bn in invested assets) will be open, up from 1.5 mn at the end of 1996. By the end of 1998, more Americans with online brokerage accounts will be dealing with a Web-based service (a total of 3.73 mn accounts) than with the direct dial-up services offered by today’s discount kings (a total of 1.38 mn accounts), such as Schwab’s StreetSmart and Fidelity’s Xpress.
Part of the switch from private dial-up services to Web-based ones will be driven by the simple fact that companies are providing employees with direct Internet access from office desktops, but not with the capability to load-up stand-alone communications software required to access, say, StreetSmart. Also, sophisticated Web users, even those at home, want to keep as much of their online lives on the Internet as possible. Why bother to fumble with all those different sets of disks when the Web is just a click or two away?
One result of the move to Internet brokerage services, says Jupiter, will be the emergence of a new, mid-tier broker providing ‘value-added content, advice, and service that discount brokers can’t match at a price that full-service brokers can’t touch.’
Those mid-tier brokers will offer personalized content (meaning that investment information is tailored specifically for the individual based on portfolio holdings and lifestyle profiles); point-and-click analytics and other tools (such as model building, stock picking filters, and embedded trading systems that can work in the background) once available only to the professionals; human advisors (a hybrid of registered representatives and help-desk staffers) who won’t offer investment tips but will be available to guide the individual through the nuances of online account management; and competitive pricing, with estimated flat fees in the $30-50 per trade range.
Smarter Investors
For the IRO, there’s another product of the move to the online, mid-tier broker that should be of interest: Smarter investors, or at least investors with a new freedom to research investments from a wider range of possible influences.
Today’s dial-up online brokerages usually do offer some accompanying information service, such as access to newswires, company profiles and historical pricing. Precisely what information services are relayed to the individual, and at what cost, is a decision solely for the service provider, based, naturally, on what is profitable to deliver.
But with more individual investors unshackling themselves from both dial-up services and traditional, high-fee brokers, all the information out there in the vastness of the Web comes within reach of each and every interested investor. That, in turn, might make the job of the IRO, if not more complicated, then certainly more multi-faceted.
So who is supplying investment information through the World Wide Web?
Well, I tried counting the players but wasn’t up to the task. The list is long, too extensive for any fair survey. So here we offer quick snapshots of so-called meta sites that can be a springboard to your own electronic prowling.
But first, a mention of what is in store. Until now, many of the investment oriented sites available through the Web – at least the ones I’ve checked out – do not really address the needs of the high-end sophisticated individual investor or the more demanding requirements of professionals.
Info Powerhouse
Soon that will change. The Investext Group, the Boston-based unit of Canada’s Thomson Corporation that has long been a known as a powerhouse in the collection and delivery of analyst reports, market research, financial data and news reporting, is set to unveil its fee-based, Web-accessible service.
Investext’s numbers are impressive. Its research currently encompasses some one mn reports from 350 sources worldwide. The company recently added to the mix a collection of research reports gathered from trade associations in a product called Industry Insider.
Investext materials, for the moment, are delivered through non-Internet online networks, or via CD-Rom, phone and fax. The company serves mostly institutional investors and brokerages, as well as IROs and other information specialists particularly within corporations.
Now it is aiming to deliver its high-end information portfolio directly to retail investors. Investext’s Web site is in its beta testing stage, and is slated for promotion within weeks. Says John McGovern, Investext’s director of worldwide sales and distribution, ‘We expect to be more involved with the consumer market.’ The company is also developing a service to supply research into intranets, which are walled-off corners of the Internet accessible only to those associated with one company or group.
Let Yourself Go
Now the fun begins. To begin your own tour of some of the thousands of other investment sites available, my recommendation is to devote an evening – one that might otherwise be wasted in front of summer reruns – wandering through the Web.
Point your browser to one of the sites noted below, and just let yourself go. The Web is nothing if not a force that can pull you ever forwards, like some alluring maiden in the mist. And even as midnight approaches, it’s hard to stop the cyber prowl. The suggested first stop: Internet search service Yahoo operates a speciality area focused exclusively on investment-related information at www.yahoo.com/Economy/Markets-and Investments/. Included are links to an investment chat channel, and to corporate profiles, broker recommendations, SEC filings and much more. Definitely worth a bookmark.
Another launching pad is provided by Ohio State University, which houses a virtual library of investment information at www.cob.ohiostate.edu/dept/fin/overview.htm. It’s well-organized and appealingly presented, with links to literally thousands of Web sources on everything from personal financial management to developing an investing strategy. An opening screen index makes it relatively painless to dig down into the relevant areas of interest; skimming through the irrelevant can be a frustrating task.
If a Web site a bit on the quirky side is to your taste, then browse over pw2.netcom.com/~kirk-69/Finance.html. There, an investment manager named Kirk Lindstrom maintains a site full of links to Web sites put up by financial organizations, investment banks, and quote services. He also offers up a review of his own investing prowess.
My favorite site is Investorama, at www.investorama.com. It has an extensive set of links to the expected (investment banks and exchanges and the like), as well as the unexpected, such as a great section on individual investment clubs. And, refreshingly, it doesn’t take itself too seriously.
Happy prowling. Start with the meta sites mentioned above and you might just meet your investors along the way.
