Scottrade, a little-known brokerage in St. Louis, may be proving that exemplary customer service can pay off in spades.

The 21-year-old brokerage, with $8.52 billion of customer assets as of Dec. 31, was the hands-down winner in a Pacific Crest Securities survey of customer service at online brokerages. In a benchmark that may be directly related, Scottrade also had the highest revenue growth among online brokerages during the fourth quarter of 2000, according to Credit Suisse First Boston.

In Pacific Crest's survey, released Friday, Scottrade recorded almost zero-second wait times for phone service and 11 minutes for responses to e-mails. Its customer service representatives also had above-average product knowledge.

It may or may not be a coincidence that Scottrade's revenue grew 4% in the fourth quarter, compared with 1.3% at CSFB-direct and 0.9% at Charles Schwab and with revenue losses at E-Trade, Ameritrade, and TD Waterhouse, according to a CSFB report released earlier this month.

Customer service is the key to sustaining value in a market slowdown, said Tim Butler, a senior research analyst at Portland, Ore.-based Pacific Crest.

"Customers are demanding more hand-holding, and it will become more important … that online brokerages serve their customers during a downturn," he said. Scottrade is doing a good job of bringing in new customers by offering excellent service, he added.

The brokerage relies heavily on its network of 130 branches, which about 95% of Scottrade customers use, mostly to fund accounts.

Individual branches average from 10 to 65 customer visits a day. They also take phone calls directly; overflow calls are routed to the company's 25-person call center, which also handles e-mail inquiries for the 425,328 accounts.

"The branches are certainly awfully expensive. But as expensive as they are, we believe it is the best way to deliver superior customer service, and we will continue to foot the bill," said Rodger Riney, president of Scottrade.

Scottrade had only about 45 branches four and half years ago, when it introduced online trading.

"When the Web came along we decided to leave the customer contact in the local offices, as opposed to doing a national call center," Mr. Riney said. "We felt that customers would get better service by someone who was given an incentive to get more referrals."

The plan seems to have worked.

Ameritrade, which ranked second in the Pacific Crest survey, had wait times of 40 seconds on the phone and 28 minutes for e-mail responses. Fidelity Investments, which ranked last of the 10 brokerages included in the survey, had average wait times of one minute and 15 seconds on the phone, and 20 hours and 53 minutes for e-mail.

Scottrade added 36,773 accounts during the fourth quarter and managed to decrease its cost for doing so - to $111.32 from $185.70. In contrast, TD Waterhouse paid $189, Ameritrade $370, and E-Trade $486, according to CSFB.

Average customer assets per account at Scottrade were $23,866 in the quarter that ended Dec. 31. There were 26,289 trades on the average day, and most of those - 24,974 - were done online.

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