American Express announced the launch of its American Express Brokerage today, becoming the latest in a series of traditional brick-and-mortar brokerages and financial firms to launch major online trading sites.
The financial services conglomerate disclosed that its new site — which is an upgrade on the rather lackluster Financial Direct site it launched in 1996 — will offer equity trading at a US$14.95 rate per selling transaction, financial planning tools, professional research, and access to its 9,300 financial advisors.
The Minneapolis, Minnesota-based company will offer free trades to account holders with a balance of $100,000 or more, signifying that the company is aiming at the well-heeled investor.
Jupiter Communications analyst Robert Sterling told the E-Commerce Times that the new launch signals a shift for American Express.
“The other online site has been an also-ran, so I expect they will do better with this one,” said Sterling. “The most important thing is that they are chasing assets instead of accounts, and that’s where their brand name will help.”
The site will also help American Express link its chain of online financial services and keep pace with Merrill Lynch, Morgan Stanley Dean Witter, and other full-service firms that are moving online.
“Our aim is to be a leading destination site in financial services online,” said American Express Senior VP of Strategic Planning and Business Development Ruediger Adolf. “Now, with just the click of a mouse, customers can move from American Express Brokerage to Membership B@nking, to personal or corporate card accounts, and even book a trip — all on americanexpress.com.”
Challenging Online Brokers
American Express makes the upgrade as the online brokerage industry is in flux. While traditional firms are moving online like a pack of worker ants, online brokers are feeling the pinch of a shrinking market and rising costs.
Online brokers such as Charles Schwab, E*Trade, and Ameritrade have watched the market tumble this past summer — and their stock prices along with it. Some have chopped their fees, but the price to compete with heavyweights like Merrill Lynch and American Express is rising and is not expected to decrease anytime soon.
Some reports have Ameritrade spending $200 million in an ad campaign, while E*Trade is reportedly ready to spend $350 million in the next year on ads and promotion. The spending could force consolidation between some of the brokers in the near future.
Still, the picture is hardly grim. Sterling said his company forecasts that online accounts will rise to $3 trillion by 2003. Currently, the figure is under $1 trillion.
Many of the new investors will be risk-averse and are looking for long-term relationships, Sterling said, and that is where American Express excels.