Online brokerage wars heat up

The competitive heat between Fidelity Investment's online brokerage and Charles Schwab & Co. just got hotter.

Fidelity's Internet stock-trading site, dubbed Powerstreet, reported record growth in its customer base and assets today.

Meanwhile, Schwab today announced it has halved its monthly fees for its most active customers.

San Francisco-based Schwab, the nation's largest online brokerage, which claimed 3.3 million online customers at the end of last year, cut its monthly online trading fees from $29.95 to $14.95 for customers who make more than 60 trades per quarter.

The move was "a competitive response to us," said Gail McGovern, president of Fidelity Personal Investments in Boston.

In a statement Schwab released today, Chairman and co-CEO Charles R. Schwab said the price reduction "further enhances our competitive position with more active investors."

Fidelity already charges $14.95 per month for users who make at least 36 trades per year.

Powerstreet finished 1999 with 3.5 million user accounts, up 71% from 2 million accounts in 1998. Its online assets topped $269 billion, more than double 1998's $134 billion.

Fidelity ranked ahead of Schwab in unique visitors to its Web site for the month of December, according to Media Metrix, a market research firm in New York.

But Schwab ranks No. 1 as the best overall Internet brokerage, according to Gomez Advisors Inc. in Lincoln, Mass. Schwab's offering of personalized stock analysis tools and its online bill payment system put it at the top, Gomez said. Fidelity, meanwhile, came in fourth in Gomez' rankings and was dinged for its cluttered, hard-to-navigate site.

Overcoming its reputation as a mutual funds-only company has been a challenge for Fidelity, McGovern admitted in a conference call today.

Fidelity is working to coax its existing mutual-fund customers to start trading stocks at Powerstreet. "We're stretching the brand," she said.

Though Schwab is better known as a full-service online brokerage, Fidelity has a big advantage in its wireless service offerings, said Edward Kountz, an analyst at TowerGroup in Needham, Mass. For more than a year, Fidelity has let traders buy and sell stock and get investment information via pagers and Palm handheld computers, Kountz said. Schwab won't offer such a service until later this quarter, he added.

At one point, "Fidelity lacked a vision" and was out-marketed by Schwab, Kountz said. "Not anymore."


Copyright © 2000 IDG Communications, Inc.

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