with the same dedication as professionals, on-line brokerage is now attracting more mainstream investors with an affinity for mutual funds.

A recent survey by Gomez Advisors predicts that more than 16 million people could begin trading on-line over the next three years. The Lincoln, Mass., e-commerce consulting firm estimates that many will be drawn from the ranks of investors who value long-term goals and one-stop financial shopping over the ability to make a quick killing in the stock market.

Currently some 4% of an estimated 5.2 million people who invest on-line describe themselves as "one-stop shoppers," according to Alex Stein, a Gomez co-founder. In many cases, they already have an on-line bank account and would like to be able to seamlessly invest on-line, if they can't already.

Banks with on-line brokerage capabilities are thus in a good position to benefit from the changing profile of the on-line investor, said Mr. Stein.

For the most part, banks have not looked to go toe-to-toe with discount brokers like E-Trade Group Inc. or Charles Schwab & Co. that offer low trading commissions and access to huge mutual fund supermarkets as well as special services for the so-called active investor. Rather, many banking companies are in the business in an effort to provide an additional service to their bank brokerage clients and prevent them from taking their business elsewhere.

Banks that do want to take on the heavyweights, like Toronto-Dominion Bank, have bought the capability. Toronto-Dominion acquired Waterhouse Investor Services in 1996, the first of three acquisitions in North America by the Canadian bank.

Most recently, Citigroup and Bank One Corp. have thrown their hats in the ring with their new Internet-only banks, which offer retail-banking services and access to a range of investment products.

"Until now, every bank's on-line brokerage has been an appendage, it's been an accommodation to customers," said Mr. Stein.

Mr. Stein said that Citi f/ i and Wingspan may be an attempt by Citigroup and Bank One to recoup some of the assets lost by banks to other financial institutions over the last 25 years, said Mr. Stein.

"What's impressive about Wingspan and Citi f/ i is not the initial product but what they're targeting," Mr. Stein added.

But there should also be opportunities for banks that have developed on-line brokerage capabilities as an add-on to meet customer demand, he said. However, banks must integrate their on-line brokerage services with their Internet banking capabilities to capture the new wave of investors, he said.

Currently, the majority of investors trading on-line are primarily interested in buying stocks. But with more mainstream customers migrating to the Internet, Mr. Stein predicts that more investors would buy mutual funds over the Internet in the future.

"Mutual funds make up the core of their investments," he said.

At Wachovia Investments Direct, the discount brokerage arm of Winston Salem, N.C.-based Wachovia Corp., currently 95% of the transactions conducted on-line are in individual securities, said Paul C. Richards, senior vice president and managing executive.

Wachovia sells load funds from 53 fund companies through its two-year-old on-line brokerage but is upgrading its systems so it can add some 2,300 no-load funds to the menu, said Mr. Richards. No-load funds are currently available over the phone. Though the bank still conducts most of its mutual fund sales through the bank branches, Mr. Richards said he believes Wachovia could increase fund sales on the Internet.

Roughly 20,000 of Wachovia's full-service brokerage customers trade on-line, out of 200,000 using the bank's brokerage service, said Mr. Richards. "We see customers go between both channels," he said.

Wachovia is also exploring a seamless connection between its on-line banking and Internet brokerage capability. Customers can currently switch in and out of each account using a hot link and the brokerage service offers a cash management account, with checking and a debit card, he said.

At Wachovia's cross-town rival, BB&T Corp., the on-line brokerage business is still in its infancy, said Darren Earnhardt, assistant vice president and manager of the BB&T Investment Services.

Less than six months old, BB&T's service has yet to attract big numbers to the Internet. Out of 25,000 to 30,000 brokerage customers, fewer than 1% trade on-line, said Mr. Earnhardt.

"I'll be honest, we have not done one single mutual fund trade on the Internet."

Still, he added, "Most of our mutual fund traders are on the full-service side, they're not ready to use the Internet."

"One of the things you don't do on-line is limit choice," said Michael Gazala, research director at Forrester Research, a Cambridge, Mass., consulting firm. "If a bank is trying to hold onto customers, it has to offer choice," said Mr. Gazala. However, banks are not going to differentiate themselves by offering fund supermarkets, said Mr. Gazala. Banks have to find a way of electronically integrating banking and brokerage, Mr. Gazala addedd.

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