Business
E-trades a better value now but still demand your time
■ A column offering help for your wallet
By Katherine Vogt — covered hospital and personal finance issues, physician/hospital relations, and ancillary health facilities for us during 2003-06. Posted Aug. 15, 2005.
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Online brokerages often carry the image they forged in their early days, as being a home for day traders who constantly monitored their investments. So between decreasing the price of a trade and increasing their services, such brokerages might be a option even for time-pressed physicians.
"We're not back in the 1990s any more, when a lot of people were making money. Trading has slowed down a bit. We have too many brokers going after a pool of investors that has diminished," said Frank Minssieux, president of TimingCube, an online service that provides advice about market trend timing. "So competition has been pretty cutthroat, and prices have come down."
Several major online firms have slashed prices, with Charles Schwab recently dropping its price from $19.95 to $12.95 per trade and Fidelity cutting its commissions to $19.95 and lower for more active trading. Other online brokers charge $7 or less.
But the competition has resulted in much more than a savings bonanza. It has also forced online brokers to offer more services, better educational resources and better navigational tools as they try to appeal to a broader range of investors.
For physicians, this could mean that some brokers may now offer enough extra service to make online trading viable for them.
Among the extra offerings coming from larger firms has been a shift toward more advisory services, said Timothy Carpenter, a senior analyst with Watchfire GomezPro, which tracks online financial services.
"The focus of these online brokerages has shifted from being purely a trading tool to being more of a planning and goal-monitoring tool," he said. "They're trying to say to the customer with several hundred thousand dollars in assets but who doesn't trade that often, 'We can offer you an alternative to working with a fee-based adviser.' "
That might mean offering investors an annual portfolio review with a registered representative for a flat fee. The investors would still be responsible for conducting their own online trading, but could get a professional opinion about their portfolios each year.
More online brokers are also working to boost their online educational resources to help investors make better decisions, said Carpenter. That includes offering more detailed portfolio reports, so clients have more information about their investments.
And Minssieux said some brokers are now expanding what investment vehicles they offer. For an investor looking for a specific mutual fund, exchange-traded fund or the ability to short a transaction, this type of nuance could be key in determining which broker is the right fit, he said.
Some are also trying to enhance their online tools so investors can understand their portfolios better. For example, Carpenter said that some firms are now providing tools for diagnosing how a portfolio has weathered the highs and lows of the market.
Some tools are so fine-tuned they essentially do much of the legwork in making complex portfolio choices.
"The tools that are available online are getting more and more sophisticated. There are a lot of services and sites that have prepackaged portfolios for investors. You have these things already thought through for you. The package has already been put together -- you just put your money in," said Larry Klein, a financial planner who helps coach other advisers and who is president of NF Communications Inc. in Walnut Creek, Calif.
As these services are added and technology continues to advance, it has become easier for investors to monitor their portfolios on handheld devices, cell phones and more, said Minssieux.
"I don't know if it's necessarily a good thing, because it kind of pushes you into being in tune with the market all the time, and you need to get a life," he said with a chuckle.
For less technologically sophisticated investors, these extra bells and whistles may be too much. Carpenter said the tools for navigating the world of online trading are somewhat easier to use than they used to be, though they still can befuddle some.
"Firms could be doing a whole lot more to provide a user-friendly portion of that process, but they are doing a better job than they were," he said.
Even with the changes in the industry, online trading takes time. Investors who only trade occasionally wouldn't likely need to devote as much time to it as active traders. But some experts warn that even a little tinkering can require a great amount of research to be done right -- and therefore those who have time constraints should avoid this type of do-it-yourself approach.
"It sounds so easy, but it's more involved," said Ed Hart, an investment advisor with the wealth management firm Austin, Calvert & Flavin Inc., in San Antonio. "Very few people make day trading work. They have to have a real trader's mentality -- an ability to spot trends and make things work."
Hart said that also means having patience to navigate slow times in the market. "If you can't stand being told that you aren't making as much money as your friends at a cocktail party, then you don't have the right temperament" for doing it yourself, he said.
Todd Rustman, a certified financial planner and wealth manager with GR Capital Asset Management in Montecito, Calif., said investors should test their own ideas on paper before deciding how much advice they need from a broker.
"The best part is, it's a very competitive industry so you can be very particular about what you want -- and you will get it," he said.
Katherine Vogt covered hospital and personal finance issues, physician/hospital relations, and ancillary health facilities for us during 2003-06.