Banks Offer Fractional Stock-Buying Service

Computerworld - In an example of how the Internet makes it possible for financial institutions to quickly add services that didn't exist a few months ago, several banks, insurance companies and credit unions have struck a deal with Bellevue, Wash.-based Netstock Investment Corp. to offer customers the chance to buy stock.
Netstock's ShareBuilder.com service allows anyone - usually beginning investors - to invest a regular amount of money in their favorite stocks at a cost of only $1 or $2 per transaction with no minimums.
That makes the company appealing to Main Street customers and first-time investors - and also helped attract ShareBuilder.com's new partners.
"Many other online investment systems appeal to day traders," said Randy Talbot, president of Safeco Life & Investments, a subsidiary of Seattle-based Safeco Corp. (Nasdaq:SAFC). "Our customers are long-term savers and long-term retirement builders."
Talbot said the service will be available by the end of next month and marketed not only through the Safeco Web site but also through agencies' and financial professionals' Web sites.
Because of its low cost, ShareBuilder appeals to people who want small amounts of stock, Talbot said. "It allows people who have previously not been able to afford the transaction costs of small share buys to start building positions in stocks that they want to own."
The main advantage besides the low price - which is possible because ShareBuilder saves up all the trades and executes them once a week, rather than in real time - is that by buying a fixed dollar value of a stock every week or month, the investor ends up buying more of the stock when it's cheap and less of the stock when it's expensive, says Netstock Investment CEO Jeff Seely.
Last week, the company signed a deal with a number of financial services companies - including San Francisco-based Wells Fargo & Co. (NYSE:WFC), Safeco and six of the largest credit unions in the country.
According to ShareBuilder.com spokesman Brian Ratziff, the company will now be able to reach 25 million customers, 15 million of them through Wells Fargo alone.
"It helps us satisfy an important need in the market," said Martin Gates, manager of Wells Fargo strategic investments.