Thursday's deal between U.S. Trust Corp. and Charles Schwab Corp. could usher in the next wave of consolidation in financial services, but its real significance may be that it highlights the muscle that on-line brokerages have amassed.

In just a few short years, new-era Internet companies have evolved from potential takeover targets to buyers of powerhouses of the old economy, as evidenced by this week's blockbuster media deal between America Online and Time Warner Inc. Schwab's plan to purchase U.S. Trust shows that the shift is also evident in financial services.

U.S. Trust may have as much to gain from the deal as Schwab. Private banks are increasingly under pressure to modernize or risk losing customers to Wall Street firms, such as Merrill Lynch & Co., that already offer affluent clients electronic as well as face-to-face banking and investment services, bankers and consultants said.

"Private banks have not focused a significant amount of resources on technology," said Michael E. Gazala, an analyst at Forrester Research in Cambridge, Mass. "But the mix of the affluent is changing dramatically. The banks have to reestablish their markets, and they're not going to get their clients by going to the country club anymore."

The list of potential on-line partnership candidates includes many of the oldest U.S. private banks: Glenmede Corp. in Philadelphia, Bessemer Trust Co. in New York, Brown Brothers Harriman & Co. in New York, Wilmington Trust Corp. in Delaware, and Northern Trust Corp. in Chicago. A relative newcomer, Boston Private Financial Holdings, has also been cited as vulnerable, consultants and analysts said.

Though on-line brokerages' stock prices have retreated from peak levels in 1999, a handful of firms are seen as possible acquirers, consultants and analysts said. They include E-Trade in Menlo Park, Calif., and TD Waterhouse in New York, as well as the on-line operations of big mutual fund companies such as Fidelity Investments and Vanguard Group.

Analysts and consultants said those brokerages may have little choice but to round out their offerings now that well-established Wall Street brokerages such as PaineWebber Group, Morgan Stanley Dean Witter & Co., and even Prudential Securities are offering electronic services to the affluent.

For both sides, the issue is how to attract and capture the fastest-growing segment of the affluent market, the first-generation millionaires who made their fortune in the new economy and the baby boomers who stand to inherit trillions.

Schwab has been a master at capturing customers but like other discount firms it needed to take big strides to offer the types of estate planning and advisory services that attract this market niche. "The wild frontier is this market of new millionaires," said Jeff Benjamin, a consultant at Cerulli Associates. "The on-line companies are realizing that full service is the way to go."

At the same time, these potential customers may not think about taking their business to a private bank, because such services were never part of their family histories.

Timothy L. Vaill, chairman and chief executive officer of the holding company for Boston Private Bank and Trust, said Thursday's deal "may make the rest of our industry wake up."

"The problem with anyone in this business is how to you get in front of the customers," Mr. Vaill said. "You have to be much more aggressive now. One-third of our business in the future is going to be electronic."

"For E-Trade, Vanguard, TD Waterhouse, this [high-end] market is the aspiration," said Jaime Punishill, a senior analyst at Forrester Research in Cambridge, Mass. "They're mainstreaming.

Some private banking companies have begun to look at the issue. Northern Trust plans to offer online stock trading later this year. Last year Boston Private Bank launched "e-privatebanker," its own on-line capability that allows money transfers and bill payment but not stock trading.

Omaha, Neb.-based Ameritrade on Wednesday launched a service that lets customers aggregate on-line banking, brokerage, and insurance account access. The service, offered by a subsidiary, OnMoney in White Plains, N.Y., is not just for Ameritrade customers, a spokeswoman said.

Analysts said the combination of on-line brokerage and private banking does have its pitfalls. Younger customers tend not to be concerned with classic private banking services, such as estate planning, analysts said.

"The difference is a lot of the pure dot-com brokerage firms don't have a lot of clients that are natural candidates for this kind of wealth management," said Guy Mozkowkski, managing director of equity research at the Salomon Smith Barney unit of Citigroup Inc. "It's not the same client - it's younger."

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