E*Trade, Ernst & Young to offer investment advice
The online broker and the consulting firm say they plan to launch a joint venture that will give financial advice to investors who use E*Trade's banking and trading services.
The companies said they would each contribute $25 million to the joint venture.
E*Trade and Ernst & Young are hoping that the new venture will help individual investors plan their financial goals by combining E*Trade's online financial services and products with Ernst & Young's national network of financial planners.
Many of the leading online brokers are doubling their efforts to find new streams of revenue that do not rely solely on trading fees, as the bulls have retreated from Wall Street, dropping trading volume precipitously in the past few weeks. With fewer trades, people are paying fewer commissions to brokers.
The key to survival and success for online brokers is to build assets and broaden offerings with such services as financial and estate planning, banking, mutual funds and credit cards, and access to cash through automated teller machines--allowing the firm to earn fees by managing the funds.
The new joint venture between E*Trade and Ernst & Young also highlights a battle in a sector that is increasingly pitting Internet start-ups such as E*Trade, Ameritrade Holding and Datek Online against full-service investment houses such as Morgan Stanley Dean Witter, Merrill Lynch and PaineWebber. The full-service brokerages have been emphasizing the depth and quality of the research available to their customers.
The new service to be offered by the joint venture was originally created by Ernst & Young's Personal Financial Counseling practice. The service tries to reproduce the experience of meeting with a personal financial adviser face-to-face, the companies said.
The offering would allow investors to electronically integrate their online banking and trading with their financial planning. Customers would also have the option of obtaining financial planning information by consulting with a professional adviser, the companies said.
Ernst & Young said it has more than 1,000 professionals providing financial planning and tax services in the United States.