customers have found something even more annoying than the firm's '70s-themed TV ads: its customer service.
On a recent day, Ruby Jackson, 55, of Myrtle Point, Ore., logged on to her Web Street account -- an IRA -- and found that it showed she had no available funds, even though she knew she did. She says that's been the case since Web Street began running all of its books for itself -- something called self-clearing -- in late June.
Web Street says only a handful of customers are experiencing problems and that most of the problems occurred during the conversion's first three days -- when the company posted a message on its site telling customers to call in rather than trade online.
Web Street's customer service problems come at a tough time for the company. It has drifted from the public eye. The television commercials that once seemingly appeared on
during every commercial break have disappeared. The company's stock price is suffering. The shares were offered by little-known
Pacific Crest Securities
on Nov. 17 at 11, and rose as high as 19 1/4 before falling to a low of 2. They closed Friday at 2 11/16.
Web Street has just 123,000 accounts, compared with
2.7 million, and according to the latest
U.S. Bancorp Piper Jaffray
report, the Chicago-based brokerage ranks 15th in terms of average trades executed daily at online brokerages. In addition, customer account growth has slowed and commissions are down sharply as investors trade less thanks to the market's slide.
Then there are the customer service problems. The Web Street message board on
resembles a support group for sufferers of a mysterious disease.
Of course, Web Street isn't the only online brokerage with systems problems: There have been enough outages at competitors like
and E*Trade that the
Securities and Exchange Commission
is looking at how online brokerages should handle disclosure of outages and systems disruptions. (
wrote about this issue.)
Taking Too Long
Knowing that the problems are industrywide only angers Jackson more, because she feels that merely moving to a new brokerage won't solve the situation. What really bothers her at Web Street is that each time she wants to buy stock, she has to get on the phone and convince customer service that she actually has money in the account and then place the trade. On a slow summer day that's not so bad, but if the market picks up in September, it could be a big problem.
"What's crucial and hurting me and the rest of their customers -- to trade over the phone, if the market is really active, takes too long," Jackson says.
Joe Barr, Web Street's president, says most of the company's customer service problems are behind it. "The site is working better than it did prior to conversion," Barr says. "This is not a pervasive issue at the site." And, Barr says, customers can always use the phone or go to one of a handful of branch offices if the site doesn't work.
The problems at Web Street may have begun at the end of 1999 when the company first decided to go self-clearing, which involves handling all trade confirmations, settlements and executions.
Web Street started planning a little later than other brokerages have, under similar circumstances. E*Trade, for example, converted to self-clearing in July 1996 but had already begun preparations in 1995. According to Web Street's SEC documents, as of Nov. 15, 1999, the firm still hadn't decided if it would stick with
division, or go solo. Web Street then announced plans for self-clearing in January with a May 1 start date, and later moved it to June 28.
Web Street's Barr says that the company left adequate time for the conversion process and that the problems customers experienced didn't last as long as they did at E*Trade. "We did it in less time and had a much more successful conversion in terms of the duration of any lingering problems," he says.
That certainly wasn't the case at E*Trade. On Aug. 22, the
National Association of Securities Dealers
fined E*Trade $20,000 for not reporting its short-interest positions for 28 months. E*Trade says the problem was associated with mistakes made when it converted to self-clearing, more than four years ago.