ETrade, E&Y Pair Up to Offer Financial Advice

BOSTON (06/02/2000) - ETrade Group Inc. and Ernst & Young LLP have joined together to form a firm aimed at delivering personalized financial advice over the Internet.

The move will give ETrade access to the growing market for online financial advice, according to Rob Hegarty, an analyst at Needham, Massachusetts-based TowerGroup.

According to Hegarty, there are currently 2 million online financial advice accounts in the U.S., a number expected to grow to 10 million by 2003.

With trading commissions down because of market worries, ETrade's entrance into the online financial advice space makes sense because the company needs to expand its revenue sources, said Linda Alt, an analyst at Gartner Group Inc. in Stamford, Connecticut.

The joint venture reflects how Menlo Park, California-based ETrade is moving away from its pure electronic-business model, said Lehman Brothers Holdings Inc. analyst Richard Repetto. Earlier this year, ETrade acquired Portland, Oregon-based Card Capture Services Inc.'s network of 8,500 automated teller machines. It also recently purchased retail space in the Super Target department stores of Minneapolis-based Target Corp.

"These measures are a step in the right direction," said Repetto. "It's too early to determine their effectiveness and whether they will be accepted by retail investors."

ETrade currently has an agreement with DirectAdvice.com Inc. in Hartford, Connecticut, to provide customers personal financial advice online. However, that relationship will be phased out as a result of the new deal with Ernst & Young.

The new company is expected to launch early next quarter.

The financial advice will be provided through Ernst & Young's network of 1,000 financial planners using a tiered structure of varying costs and different levels of interactivity.

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