THE SHIFT from a brick-and-mortar economy to online brokerage services is transforming the role of stockbrokers and how clients are charged for investment services.
As investors become more comfortable with online trading, stockbrokers are focusing more on selling clients such services as portfolio analysis, designing managed investment programs and investment research. A trend is emerging for brokers to steer more clients toward fee-based accounts and away from charging commissions.
Fueled by new technology and millions of dollars spent for television advertising campaigns, online stock trading is expected to continue growing at an explosive rate.
The Securities Industry Association projects that by 2001, 50% of retail stock trading will be done online. At the end of 1999 there were approximately 5.4 million online trading accounts representing $374 billion in investments, according to the SIA.
Besides being affected by the growth in Internet trading, stockbrokers at investment companies are facing increasing competition from brokers working at banks.
Stockbrokers are expected to become more technology savvy as investment companies increase their spending on Internet trading technologies. The SIA estimates budgets for developing online trading businesses will increase by 12 times in the next six years.
A poll of the readers of Registered Representative magazine indicated 98% of stockbrokers use the Internet at work and at home. About 49% are on the Web several times a day.
– More than 600,000 securities and commodities sales representatives licensed to work in the United States are commonly referred to as stockbrokers, brokers and registered representatives.
– Brokers can be found in most large cities but the majority work for small investment brokerages in New York. Many brokers also trade in Chicago and San Francisco.
– Most brokers work in offices at financial institutions where they can meet with clients and walk-in customers. In the discount brokerage sector, however, the majority work in call centers.
– The number of brokers working in banks is expected to increase faster than those at other financial institutions, as banks expand to provide diversified investment services in the wake of deregulation.
– Brokers handle an average of 17.5 transactions per client annually. About 57% of clients authorized brokers to handle three or more transactions within the past year.
– Brokers manage investment accounts for 50 million investors directly – and tens of millions of investors indirectly – through corporate, thrift and pension plans.
– About 50% of brokers earn between $31,400 to $103,040 per year. The median annual earnings level is $48,090. The highest-paid 10% take in more than $124,800; the lowest-paid 10% receive less than $22,660.
– Investors’ views of brokers are improving. Among those surveyed last year, about 37% of investors indicated they believe either brokers or the firms they’re working for put their own interests ahead of the investors’ interests, down from 44% in 1998.
Sources: U.S. Department of Labor; Securities Industry Association, New York
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