E-Trade Group, the no-frills, on-line discount brokerage operation, is looking to bring its brand of self-directed investing to a new market segment: credit unions.

The Palo Alto, Calif., company announced an alliance this week with San Diego-based CUSO Financial Services, a full-service broker-dealer that caters to credit unions. The program is to be kicked off July 1.

CUSO Financial, known as CFS, offers full-service brokerage programs to customers of six credit unions. With the alliance, it would add direct investing to the mix, said Valorie Seyfert, president.

"Now customers can also open up an account and self-direct their investments using low-cost on-line trading," Ms. Seyfert said.

CFS' registered representatives are stationed in the credit unions' offices, where they provide investment advice on a commission basis. The company's clients include Rockwell Federal Credit Union, Downey, Calif., and Mid-County Teachers Credit Union, Port Neches, Tex.

Credit union members are unusually loyal, and that bodes well for the E- Trade program, said Donald J. Sawyer, chairman of Rockwell Federal's service organization, through which it offers the brokerage program.

"People like to deal with the credit union because they worked for Rockwell for 35 or 40 years," Mr. Sawyer said. If the credit union does not provide up-to-date investment services, its members will "end up with somebody at one of the other brokerage houses."

Even in the case of on-line trading-which in many cases is done from home-credit union members want to direct business through their institution, Ms. Seyfert said.

The partnership will allow investors access to no-load funds for the first time, through E-Trade's no-load fund mart, she said, adding that the mart will eventually form the basis for a mutual fund wrap account.

Under the agreement, E-Trade will serve as the clearing firm for CFS, for which CFS will pay fees. In turn, CFS will receive compensation for acting as an introducing broker. Both E-Trade and CFS intend to market the service to other credit unions around the country, Ms. Seyfert said. E- Trade did not comment at press time.

E-Trade's alliance with CFS marks its first correspondent clearing relationship, noted Bill Burnham, an equity analyst at Piper Jaffray in Minneapolis.

Many full-service firms regard "E-Trade as the enemy," said Mr. Burnham, which makes the deal with a full-service institution particularly interesting. "It's inviting the fox into the henhouse."

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