Giving full-service brokerage customers the freedom to do Internet trades could be a risky proposition for firms whose livelihood comes from both the advice they give and the transactions they conduct on behalf of clients. Prudential Securities is taking the chance anyway, and will pilot PruTrade for a select group of customers beginning in December, says Pru Securities CIO William H. Anderson.
Initially, financial advisors will select clients falling into certain criteria to use the trading portion of the company's PruOnline, which provides account information and analysis. "This is somebody who's PC- literate and will work with his financial advisor," says Anderson.
The goal of the offering is to lure clients who may use both the full- service firm and make trades via a discount broker to consolidate their relationships with Prudential. "Our intention is to allow the customer to have as many of his assets as possible in a combined, command account statement," Anderson says. Pricing for the trades has not been determined. Anderson says the company will review the pilot after three months, make any necessary changes and then expand the offering to a wider audience.
Analysts say full-service brokers that offer Web trading aren't really risking losing customers because customers who don't want the advice would have already switched to on-line discount brokers. "They are attracting a whole new market because this will allow people who are right now turned off by the full-service offering to come back and use a full-service provider and the stability of the brand name," says Booz, Allen & Hamilton's Navtej S. Nandra, vp in the financial services group. But broker acceptance and pricing issues could eventually cloud advantages. Nandra cautions, "By lowering the boundary between the two, you're likely to lower your overall pricing."