E*Trade teams up with Ernst & Young in the US
E*Trade in the US will team up with accounting and consulting giant, Ernst & Young to provide online financial planning, according to reports in the New York Times.
E*Trade in the US will team up with accounting and consulting giant, Ernst & Young to provide online financial planning, according to reports in the New York Times.
Both parties will contribute US$25 million to create a new venture which should be ready to deliver electronic financial advice by the end of this year. It is hoped the new venture will boost trading volumes for E*Trade and increase customer account sizes by tieing them into advisory relationships.
The deal should assist E*Trade compete with conventional brokerage firms' online offerings, as well as with Charles Schwab, the largest discount and online brokerage group in the US.
At the end of March, Schwab was directing customers to around 5,800 affiliated fi-nancial planners with the average account at nearly US$113,000. The average E*Trade account size is about $25,400 or about 25 per cent of the average customer's investment portfolio.
Schwab also has US$213 billion out of US $725 billion in funds under advice at the end of last year. It made adviser referrals to 16,700 customers with more than US$100,000 in their accounts. E*Trade has yet to outline details of its own plan but will require no minimum account balance.
The company will fix higher prices for more complicated or personalised service, in-cluding direct access to Ernst & Young's staff and should make the entire network of about 1,000 advisers available.
Ernst &Young vice chair for strategy and corporate development Beth Brooke says the accounting firm would hold onto its high-end brand status by continuing to charge additional fees to E*Trade clients who sought more personal advice. However all E*Trade clients will likely be offered the basic service.
Both companies say Ernst & Young will offer advice that provides an array of sug-gestions and avoids simply directing clients to make more E*Trade transactions, and the advice must be given under the standards required of registered investment advis-ers.
AUTHOR
Jason Spits
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