Internet brokers continued to grow at a frenetic pace in 1998 and
managed to double their business during the year, according to a new
report issued Thursday.
According to Stephen C. Franco, senior research analyst of electronic
commerce at Piper Jaffray, online brokers now collectively manage $420
billion in assets. That’s due in large part to the fact that the
industry’s increasing number of competitors added 3.6 million new
accounts during the year for a total of 7.3 million. Since many
investors have multiple accounts, Franco estimates the total number of
online investors to be about 4.4 million.
Of the top 10 online brokers, all reported growth of more than 13
percent, with Waterhouse
Securities leading the pack. Waterhouse grew its customer base 59
percent to end at 529,000 accounts. Other strong gainers were Datek, which grew 58 percent to 152,000
subscribers and Schwab, posting a 21
percent increase to end at 2.2 million accounts.
The top 10 brokers and the number of their customers were: Schwab, 2.2
million; Fidelity, 2 million; E*Trade, 676,000; Waterhouse, 529,000; DLJdirect, 529,000; Ameritrade, 354,000; Datek, 152,000; Discover, 112,000; Suretrade, 109,000 and National Discount Brokers, 85,000.
As a group, online brokerages averaged 336,700 trades a day in the fourth
quarter, up 32 percent from the third quarter and 125 percent from the
previous year. An estimated 27 percent of individual trades were
executed online and the cost to acquire customers dropped from $205 in
the third quarter to $196. For 1998, about 37 percent of individual
trades were conducted online.
“Without a doubt, in 1998 individual investors discovered and realized
the power of trading online. Looking ahead, the successful online
brokerages will attract laggard accounts and assets by empowering
investing online as we look forward to new advances in online asset
management beyond the resurgent equity trade,” Franco said.