Nine months after introducing an investment account with checking account features, American Express Co. says it is making inroads in acquiring customer assets traditionally held by banks.
The One account, which has been available since May of 2002, links to Amex charge cards while offering banking features such as automated teller machine rebates, free online bill payment, free check writing, overdraft protection, and direct deposit. It effectively replaced the Investment Management Account that American Express launched in 1996, and it is offered through the company's financial advisers unit based in Minneapolis.
Francois Odouard, a vice president at American Express Brokerage, says Amex has begun a marketing push to promote the product to its 35.1 million card customers in the United States. Its 10,000 U.S. financial advisers are being trained to prompt customers to open a One account as the "hub of the relationship," he said.
"We know our customers have assets with multiple institutions and brokerages," Mr. Odouard said. "We want them to bring all of their assets here to support our asset growth." The launch is part of an effort to compete for the "same asset categories" as banks, he said.
The account is aimed at people with six-figure investment accounts. A $20 quarterly fee is waived only for those with balances exceeding $100,000, but all One account customers can withdraw funds free from out-of-network ATMs four times a month and can sign up for overdraft protection, paying an interest rate of 18.99% on outstanding balances.
American Express would not say how many have signed up for the One accounts, though Mr. Odouard said their enrollment for direct paycheck deposit has risen 20% in each of the past four months.
James Cracchiolo, group president of global financial services, told analysts on Feb. 5 that said Amex had "acquired $2.2 billion in incremental new assets with an overall average account balance of $306,000" since rolling out the One account.
Mr. Odouard says Amex will enhance the product regularly. The latest enhancement came in late January: the addition of a high-yield savings account offering tiered annual percentage yields of 1.3% for balances of $25,000 or more and 1.05% for accounts with a minimum of $5,000.
In November the company upgraded its brokerage Web site by allowing the viewing of multiple accounts with a One account ID and password. A spokeswoman says other changes include a guide to walk investors through the buying and selling of stocks and mutual funds. Users can also access stock quotes from every page of the site, so they do not have to toggle back and forth as much, the spokeswoman said.
American Express has offered online bill payment services since 1999. The May launch included the elimination of a monthly $6.95 fee, reflecting a strategy of "incenting customers to look at us as their primary financial relationship," Mr. Odouard said.
In the past Amex financial advisers emphasized long-term investment and planning, with little focus on day-to-day cash needs. The One account is part of an effort to include all aspects of a customer's financial dealings, with Amex no longer giving One account customers separate numbers for their brokerage, checking and savings accounts, Mr. Odouard said.
Though One is an investment account, its "guiding principle" is that it work like a checking account, Mr. Odouard said. "We have a lot of customers that decide not to have a banking relationship."
A "significant" number of Amex customers - though less than half of them - pay bills online, Mr. Odouard said. He would not give the exact figure but said customer interest in electronic bill payment is rising.
In remarks to analysts on Feb. 5, chief executive Kenneth Chenault said that only 7% of American Express' base of retail financial advisers is enrolled for online access. Daniel Burke, a vice president of research at Gomez Inc., said the industry average is 20% to 40%. But customers look to Amex for long-term planning as opposed to day-to-day trading, so there is less need for electronic tracking of account activity, he said.
Robert Sterling, a senior brokerage analyst at Jupiter Research, said the One account is not a "novel idea" but that the strategy will probably be profitable for Amex. "The ability to mimic bank-like features can bring it bank-like assets," Mr. Sterling said.
"Launching a CMA-type account is a proven way of improving asset inflows on a per-client basis," he said. "I'm surprised more online brokers haven't done it, but we'll be seeing them also doing it in the coming months."
Since many employees only allow their workers to directly deposit their paychecks into One account, "the ability to be the One is important ground to stand on," Mr. Sterling said.
Mr. Burke at Gomez said the One account is akin to the cash management services offered by full-service firms such as Prudential Securities and Merrill Lynch & Co., though he said Amex's reticence on product use makes it hard to gauge how well the account is doing.
It is "a vehicle they needed to have; this is what their [financial] advisers are competing against," he said. "This is a catch-up game for them."
