Merrill Lynch finally moves on Net trading

Merrill Lynch's Australian arm is currently "looking very carefully" at the possibility of introducing online trading locally, according to a company spokesman.

This follows last week's announcement that the investment bank will offer cheaper online trading services to individuals in the US from December 1999, charging $US29.95 per trade.

Internet brokerage E Trade estimates online trading currently represents about 10 per cent of all share trades in Australia.

Bill Wileman, general manager, marketing, E*Trade Australia, said he was not surprised by Merrill Lynch's move into the online delivery model.

However, he warned the Internet strategies of traditional brokers could be hampered by the conflicts between their traditional modes of operation and the Internet delivery model.

"I think there are going to be some issues . . . for [traditional brokers] to deal with in terms of the way their business model works. At E Trade we don't have another delivery system.

"We're not bound by a code of operation that was conceived before Internet."

Merrill Lynch is significantly behind its online competitors in embracing the Internet. The company has hesitated to move online primarily out of concern for the financial wellbeing of its army of brokers -- which numbers nearly 14,000 in the US.

The new service options might have a detrimental effect on brokers' incomes, which historically have been inflated by commissions on trades.

However, in the statement relating to its new online initiatives, Merrill Lynch said it anticipates a "substantial, multiyear expansion of its financial consultant workforce".

Less than one year ago, Merrill Lynch executives publicly denounced Internet-based trading, calling it a threat to Americans' financial lives.

Since then, online brokers such as Charles Schwab and E Trade have experienced remarkable growth rates, acquiring many customers from full-service firms like Merrill.

Cheap online trading is one option included in a spectrum of financial services, which Merrill Lynch will begin rolling out in the US in July.

Clients will be able to choose from three levels of services.

The first level will offer clients the traditional financial-consultant relationship structure at full commission price.

The second level will enrol them in a "one fee, total access" account, which will include a fee based on assets, with a minimum annual fee of $US1500. This service will include financial planning, access to online research and unlimited trades through a Merrill Lynch broker or over the Internet.

The third level, which won't be available until December, will allow investors to opt for the self-directed, $29.95 per trade service, which will include equity and fixed-income trading, mutual funds as well as online access to cash-management services and Merrill Lynch research.

Additionally, Merrill Lynch will establish an online "commerce network", which will include discounts for goods and services from e-commerce partners such as small-business e-commerce site

"We've designed an integrated approach that empowers investors by providing the broadest range of options to create a financial plan and then execute it 'your way'," said Merrill's vice chairman John "Launny" Steffens. Steffens, who runs the firm's private client group, is the same Merrill Lynch executive who bashed online trading last year.

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