Quick & Reilly Undercuts Competition With On-Line, No-Frills Trading

Quick & Reilly Group, the discount brokerage being bought by Fleet Financial Group of Boston, moved this week to slash the cost of an on-line trade to a new low.

Quick & Reilly created a no-frills Internet subsidiary, Suretrade Inc., advertising a fee of $7.95 per 5,000 shares. That undercuts the previous low of $8 charged by Ameritrade, a deep discounter based in Omaha that recently reduced the fee from $12.

The Suretrade operation, based in New York, will give Fleet a toehold in a fiercely competitive part of the securities business. The banking company may also gain useful strategic insights from the Internet brokerage market, which researchers say has attracted more customers than mainstream on-line banking, spurred in part by the price war.

"Fleet went into this deal looking for Quick & Reilly to be on the cutting edge in terms of the delivery of brokerage and investment services to individuals," said Thomas F. Theurkauf, an equity analyst with Keefe, Bruyette & Woods, New York. "On-line trading is just that.

"This is the kind of access to growth that Fleet was looking for at Quick & Reilly," he added.

The plan for Suretrade was in the works when the discount shop was in acquisition talks with Fleet and the bank gave it the green light, said a spokesman for Palm Beach, Fla.-based Quick & Reilly. The merger is expected to close by yearend.

The current wave of on-line price-cutting began last month when established discounters Quick & Reilly and Fidelity Investments cut their Internet trading fees to a minimum of $14.95. In contrast to Suretrade, customers of those brokers can go to branch offices and consult with financial advisers.

Quick & Reilly's offshoot is designed for the "serious do-it-yourself electronic trader," said Don Montanaro, president of Suretrade. He was also involved in the development of QuickWay Net, Quick & Reilly's existing on- line service.

The "real difference" between Suretrade and its parent's conventional line of products and services "is access to humans," Mr. Montanaro said.

However, investors through Suretrade can initiate trades at touch-tone telephones for the same $7.95 fee that applies to Internet trades-and in cases of emergency there are brokers on hand, the executive added. But "if you don't have an e-mail address you're not opening an account with Suretrade."

Amid the price-cutting, competition is sure to remain treacherous, said Michael Gazala, an analyst who tracks on-line brokerage for Forrester Research Inc., Cambridge, Mass.

Mr. Gazala said some providers might go as far as to eliminate trading fees, profiting instead from the information they gather that enables them to sell other financial services. With Fleet coming into the Quick & Reilly picture, "they're going to be selling brokerage products, bank products, insurance products. They're going to be a one stop shop where consumers can get all their financial needs met."

Also this week, Suretrade unveiled a television and print advertising campaign to tout the new brand name. The ad agency is Wieden & Kennedy of Portland, Ore., renowned for its work for Nike.

The firm also does on-line advertising of its fee schedule. That campaign is being handled by CKS SiteSpecific.

TV spots will run on cable channels, print ads in the financial press. Quick & Reilly and Suretrade officials declined to comment on the advertising budget or on how much the parent is investing in Suretrade.

Mr. Gazala said Ameritrade and Palo Alto, Calif.-based E-Trade Group spent $20 million and $25 million respectively on their current ad campaigns. Given Suretrade's choice of agency, it may well be paying more, he said.

Mr. Gazala questioned whether consumers will be able to distinguish between Quick & Reilly's QuickWay brand and Suretrade.

Richard H. Evans, a former banker and brand consultant who heads Evans & Associates of Weston, Conn., said the unique branding for Suretrade may be appropriate now. But after the merger, Quick & Reilly, Suretrade, and Fleet will probably have to come up with a different approach. "Eventually they're going to have to bite the bullet and put it all under one umbrella," he said.

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