Discount Brokers Fine-Tune Online Experience In Preparation For Market Rebound, G�mez Q2 2003 Scorecard Reveals

Fidelity’s emphasis on improved usability, enhanced research and accounting tools as well as active trader services help propel firm to the number-one spot, overtaking perennial winner Schwab

Waltham, MA, May 16, 2003 – Amid the unrelenting equities trading slump, discount brokers remain acutely focused on Web site usability and process enhancements that make the online customer experience more compelling and profitable for investors and firms alike, according to the Q2 2003 Internet Broker Scorecard released today by G�mez, Inc., the leading provider of Internet Channel Effectiveness solutions.

While the top three firms remained locked in a tough battle for Scorecard supremacy, Fidelity Investments overcame Charles Schwab — the top finisher in the previous seven rankings — to earn top honors in the Q2 2003 Internet Broker Scorecard. Fidelity’s ascendancy was due in part to recent upgrades in the usability of its feature-rich online offering and significant enhancements to the site’s research and accounting tools. Fidelity also transformed its active trader platform into a competitive service.

Fidelity’s online offering now allows investors to compare mutual funds across multiple criteria such as performance and fees and retains the last mutual funds researched, which delivers incredible client conveniences. Moreover, the site also enables investors to trade fixed income products with real-time prices and offers leading edge tax-lot accounting capabilities.

“With Fidelity, the issue was never a lack of functionality but the extent to which users could gain the intended benefit of features and services, such as its depth of equity and mutual fund research content and investment selection and financial planning tools,” noted Dan Burke, a G�mez vice president of research who directed this Scorecard. “Replacing PowerStreet Pro with Active Trader Pro has vaulted Fidelity in the middle of the industry’s battle for extremely active traders with a software-based platform that finally delivers a speedy trading cockpit to time-sensitive users.”

The Q2 2003 Internet Broker Scorecard reveals that firms are for the most part sticking with what they do best, though subtle changes persist. For example:

  • Schwab, the runner up, remains committed to blending the online and offline channels to support the investment needs of its vast customer base while branching out with its long-delayed mortgage offering.
  • E*Trade, the number three finisher, is committed to its pure-play roots, but diversification and improved customer support remain top priorities. Gone are E*Trade’s Financial Centers and on the way out is its year-old advice service with Ernst & Young. The firm is quietly embracing a quasi full-service model more focused on the connection between relationships managers and their clients to help boost its asset profile beyond the present average of $14,000. E*Trade also continues to nip away at costs; for example, it just recently dropped 24×7 customer service (though extended hours coverage remains available).
  • HarrisDirect, which finished fourth, continues to segment commission schedules to reward its best customers. In short, active traders pay less for commissions or margin expense. The broker has also quietly improved its online offering beyond transactions and is tightening integration with Harris Bank through the latter’s branch office services and soon-to-be-released integrated cash management services.
  • TD Waterhouse, which finished fifth, continues to focus on tools and services that help investors make sound investment decisions. Long overdue cost basis was added during this review period in addition to an improved stock screener that allows users to save screens, while integrating S&P research and Goldman Sachs ratings into the rating criteria.
  • Number-six Ameritrade continues to blend homegrown services such as Command Center — a customizable integrated tool that allows active traders to transact from a single page, view account information and access streaming Nasdaq Level II quotes — with recently acquired Datek’s rapid order-entry system.
  • While no one knows the direction of self-directed trading volumes in the near term, discount brokers continue to look to the online channel to further operational efficiencies, Burke said. Until the markets turn up and clients show a proclivity for the surfeit of existing online tools and services, discount brokers will continue to focus on streamlining the user experience to keep existing clients loyal and leverage the Internet channel to reduce fixed costs.

    To qualify for this Scorecard, discount brokers must first meet minimum criteria. Discount brokers meeting the minimum criteria are then rated against one another on the quality of their Internet delivery of brokerage and related services to arrive at the 20 firms that comprise the published Scorecard. All brokers on this Scorecard offer their individual investors browser-based stock and mutual fund trading and have provided online account access for at least six months.

    About G�mez

    G�mez Scorecards bi-annually measure the quality of e-commerce offerings, with a predominant focus on the Internet channel and a secondary focus on auxiliary channels and measures. Scorecards rank all firms in an industry that meet minimum standards of service (typically in terms of depth and breadth of product and national availability), and provide a snapshot of how industry players compare and contrast across user profiles and usage categories.

    G�mez’s primary investors include: Dolphin Equity Partners of New York; Doughty Hanson Technology Ventures, the London-based venture capital fund of Doughty Hanson & Co; DB Capital Venture Partners, the venture capital arm of Deutsche Bank; and Harbinger/Aurora Funds of Research Triangle Park, NC.

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