Notebook: Just Don't Call Fidelity an Online Broker

The Internet is a key part

Fidelity's

new "Know what you own and know why you own it" campaign. The company's Web site is in the tagline of its new commercials and, as of Friday, includes new

Peter Lynch

-created investment education content. Among other features: Asset allocation tools based on Fido's own methodology and advanced portfolio management.

Fidelity wants the site to lure the much-desired "serious investor," people who manage their own finances but haven't yet fallen en masse for the Internet. "We've got the active trader," says Stephen Killeen, senior vice president of interactive services. "We've got what they want. The next big group of people coming online are serious investors."

But Killeen says not to expect any major changes in the trading part of the site, though it will make refinements. As for prices, Fidelity is comfortable where it is (which, at $14.95 to $25, is in the upper end of the online discount broker scale) but won't rule out a change.

Meanwhile, Killeen says Fidelity's site handled the market's recent volatility, including the record trading volume on Monday. In August, a new tech center that monitors volume across the system and identifies actual and potential trouble spots became fully operational. During the volatility, Fidelity's site traffic was up 50% and online transactions doubled.

Fidelity has 1.5 million accounts registered for online access, although not all are used for online trading, and 60% of the firm's trades are placed online, compared with just 7% in January 1997. According to

Credit Suisse First Boston

, the third-placed broker has 9.2% of the online broker market. But Killeen says that rank is too low, although he declined to divulge numbers.

But don't call Fidelity an online broker. "We're an online financial institution," says Killeen. In other words, online transactions are only one part of a customer's lifelong investment relationship with Fidelity. Or at least that's what the company hopes.

Already, there are signs that online traders are broadening their relationship with Fidelity. Traders are adding funds to what once were stock-only holdings and vice versa. Killeen credits the fund and stock resources already on the site for the expanding relationships. That bodes well for successful results from its

new investor education campaign.

New Site Offers Online Interaction With Brokers

New York's

Westminster Securities

has launched what it calls a next-generation Internet brokerage site. The site and accompanying software allow traders to conduct conversations, receive investment advice and place transactions with brokers through instant messages.

Westminster -- a

New York Stock Exchange

and

National Association of Securities Dealers

member founded in 1971 -- calls the product

Live Broker

. The secure software application means customers don't have to go to the firm's Web site to trade, which saves time, according to Darin Myman, a Westminster vice president. He also talks up the firm's commitment to getting the best execution price (an increasing concern of traders) and the fact that the firm doesn't sell order flow.

"We're going to give you the same service you get from a

Merrill Lynch

," says Myman. Brokers can advise customers about stocks, strategies and long-term financial planning online. Myman says Live Broker's cheaper-commission full-service model will work because communicating by IM is more efficient than placing trades and giving advice over the phone. Full-service brokers have shown extreme reluctance to offer Internet trading.

However, Westminster's online trading prices are more expensive than discount broker online commissions. The commission price for trading 500 shares at $40, with or without advice, would cost $65, although active traders can get lower commissions. A similar online trade with a major discount broker would cost between $7.95 with

SureTrade

(which along with

Quick & Reilly

is a

Fleet Financial Group

(FLT) - Get Report

unit) and $29.95 with

Charles Schwab

(SCH)

.

Myman says each customer will be assigned two brokers. Currently, the company has about 26 brokers, three of whom have been assigned to online traders. More will be added as demand rises. Only residents of 27 states may open an account.

Ameritrade Fixes Tech Glitch

Ameritrade Holding

(AMTD) - Get Report

-- the No. 6 online broker -- says just days remain before a troublesome piece of technology is replaced.

Tuesday and Wednesday, the Ameritrade site suffered downtime and some customer accounts didn't update. Wednesday, for example, the site was down three times, for two 10-minute periods and one 15-minute period. When the site goes down, customer calls pile up and customers may have to wait five to 10 minutes to get someone on the phone.

"Account summaries and positions are reported as of the close of business Monday," wrote Ameritrade customer Frank Lachance on Wednesday in an email to

TSC

. "And perhaps worst of all, continued troubles with order entry and execution."

Joe Ricketts, Ameritrade's chairman and chief executive, says the same piece of middleware technology is to blame for both problems. It started causing problems in the spring and, since then, the company has been replacing it for blocks of accounts. Ricketts said the technology would be completely replaced by next Friday.

On Monday, Ameritrade's biggest volume day ever, Ricketts says there were no technology problems. Thursday was also clear, he says, but Friday there were three minutes of downtime around the open.

Despite its continuing technology problems, Ameritrade has been growing rapidly. It has 6.9% of the market, according to Credit Suisse First Boston, up from 5.9% in the first quarter. It added 57,000 accounts in the quarter ended in June, a 27% increase over the previous quarter, to bring its total to 267,000 accounts.

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