Financial marketers who pigeonhole customers according to technological preferences may be missing an important point about people's desire for multiple choices, several industry experts said at a conference last week.

They said alternative distribution channels, all the rage among financial industry technology strategists, should be viewed as just that-a range of alternatives.

Along that continuum there was room for PaineWebber Inc. chairman and chief executive officer Donald B. Marron to say, "So far, the Internet client is not the client we want."

But over at Fidelity Investments, 60% of commission trades in April were initiated on the Internet, up from 7% in January. That led FMR Corp. vice chairman J. Gary Burkhead to say, "On-line trading today is greater than all of our trading one year ago. I'm very deeply committed to developing product for this distribution channel."

The movement from zero to total Internet will take time, speakers at the Forrester Research Inc. conference in New York said, and even then it may never be absolute. Banks and their brokerage competitors will still need branches and call centers and other "touch points."

"Less than 2% of the people who do on-line banking only do on-line banking," said Intuit Inc. executive vice president William H. Harris. "They use multiple channels."

"Internet banking is not a product-it is a distribution channel," said Barry X. Lynn, executive vice president of Wells Fargo & Co. "It is just another way for customers to get at their data-they don't do something different with it."

Even as he spelled out a scenario that will see the creation of a heavily Internet-oriented "open finance" market over the next eight years, Cliff Condon, a senior analyst at Forrester, said, "People will remain mixed-channel users.

"Charles Schwab says 90% of its customers still use multiple channels," Mr. Condon said. "You never know how the customer will connect to you next." To be ready at any time for any type of contact, "you need tight integration of the various channels."

"You have to look at all channels-customers don't just come in on the Web," said Jeffrey M. Crowe, president and CEO of Edify Corp., which specializes in on-line banking software.

Such remarks reflected how far analytical sophistication has come-fueled in part by research and consulting specialists like Cambridge, Mass.-based Forrester-since the early flush of Internet and "alternative delivery" enthusiasm in the mid-1990s.

Just as many bankers came to realize that customer profitability was not always directly linked to balances and that some of their most desirable and technologically sophisticated customers were also frequent branch visitors, on-line opinion leaders have come to warn against overgeneralizing.

Mr. Harris, who has been designated to succeed Intuit founder Scott Cook as the company's chief executive officer in August, said an investment industry dualism-self-directed versus assisted-is losing its meaning.

"Traditionally, these have been two worlds, black and white," Mr. Harris said. "But I don't think many customers are either black or white. They are gray."

Customers look for many things in transaction and investment service providers, including basic information, back-room support, advice, a brand name, and trust.

"They may want to check a stock quote themselves," Mr. Harris said. "But they also want a broker available. We need to find ways to deliver high tech and high touch simultaneously."

One inkling, he said, is in the way people buy Intuit's TurboTax software to prepare a return, and then run it by a professional preparer for further vetting. Small-business people similarly use QuickBooks to prepare their basic ledgers, then pass them on to accountants for "higher- value work."

Mr. Lynn, chief information officer of Wells Fargo Bank, said Wells' industry-leading 500,000 on-line customers is the result of its being one of the first on the Internet. But early-mover advantages quickly dissipate, and he looks to wholesale clearing of electronic transactions and a deepening of customer relationships as the real payoffs.

Bankers have to face the fact that customers "will still shop around. The question is, how do we make money by serving customers who also use other financial institutions? We will end up selling other services at our site and integrating information about our customers' financial relationships in one place."

PaineWebber's moderate and measured approach to on-line opportunities is dictated by demographics, Mr. Marron said.

"The clients we want are in their 50s and have more than $1 million to invest," he said. These are not prototypical Internet surfers.

PaineWebber's Internet service, Edge, is aimed at serving existing customers, not attracting new ones. The site lets users download daily account valuations and other information including interest and dividends, movements in their portfolios, and news reports.

The site does not now allow on-line trading. Nor can prospective clients enroll in Edge without first calling a broker. Mr. Marron estimated it would be three to four years before PaineWebber relied on the Internet to acquire customers.

Though PaineWebber may not be trying to tap all the Internet's potential, the public network has fundamentally changed aspects of its business. No longer can it charge customers for basic information like stock price updates, which have become widely available and commoditized, said Mr. Marron.

Nor can the firm charge full-service prices for transactions that can be executed at a fraction of those costs by the new breed of Internet trading specialists. Mr. Marron conceded that "there is a class of client" that uses a firm like his for advice before transacting a piece of business with a company like E-Trade Group.

PaineWebber can charge for advice that leads to better performance, Mr. Marron said. As a result, "The Internet will change our revenue mix toward advice and away from transactions and information."

With growth in assets "radically outstripping" their ability to be managed, brokers are best equipped to provide this much-needed advice, Mr. Marron said. "That talent doesn't exist on the Internet."

PaineWebber is thus training its brokers to become asset gatherers, allocators, and managers, rather than transactors. "We have found that gathering assets raises more questions in clients' minds," he said, "and that's when they pick up the phone" to talk to a live broker.

Like PaineWebber, Merrill Lynch & Co. is feeling the pressure of reconciling its full-service orientation with the ease and low cost of Internet trading.

"We view the trade as a small portion of the overall relationship," said Randal Langdon, first vice president and senior director, interactive sales technology at Merrill Lynch.

Merrill Lynch has announced it will add trading to its Merrill Lynch Online services, which currently includes account look-ups, access to news and research, and electronic bill payments. Trading will not be positioned as low-cost and no-frills. It will be available to holders of certain accounts, with fees based on asset size, not number or type of transaction.

Like PaineWebber, Merrill Lynch aims to use trading to enhance relationships with existing customers, not compete for new business with commodity-type pricing. As at PaineWebber, new customers will contact a financial consultant before getting on-line.

Coming from its mutual fund and discount brokerage background, Fidelity Investments launched its Web site in 1995 and added Internet trading about 18 months ago.

Fidelity's on-line clients hold $73 billion of assets in more than a million accounts. They visit Fidelity's Web site eight million times a month, compared with 300,000 in December 1996.

Fidelity's 401(k) Internet site-where 4,000 companies and nonprofits offer access to more than four million employees-also is on the rise. In April, 11% of institutional retirement connections were conducted on-line, up from 1% a year earlier.

Mr. Burkhead, president of the personal investments and brokerage group, was careful to note that Fidelity differentiates itself from those in the full-service, advice-giving business.

"The full-service firms appeal to a different marketplace," he said. "We typically deal with customers who are prepared to make decisions themselves. It's a somewhat younger customer base that's more comfortable using technology."

He added, "We're very happy with these customers."

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