SAN FRANCISCO -- Aiming to capture retail customers who have stayed on the stockbuying sidelines, Wells Fargo & Co. on Monday launched an online service that allows them to make dollar cost-averaging investments without using Wells Fargos online brokerage.
The service, called Wells ShareBuilder, is a partnership with ShareBuilder Securities Corp., a subsidiary of privately-held Bellevue, Washington firm Netstock Corp. It targets retail investors that want to buy individual stocks but do not have large initial sums to invest by allowing them to select the stocks and the amount of money they wishes to invest periodically - even if that amount can only buy a portion of a particular company's share.
The service does not require a minimum balance but charges a $2 fee for every stock purchase Wells ShareBuilder makes on behalf of the client, or $1 for custodial accounts.
The bank and Netstock have agreed to jointly market the site, and Wells Fargo will take a portion of the revenue that is generated from its customers, said Daren Kloes, marketing director at the Bellevue, Washington-based brokerage. The bank also owns a minority stake in Netstock Corp. said a release.
Dan Burke, brokerage analyst at Gomez Advisors in Waltham, Mass., said Wells Fargo has more to gain over the long term from the new customers that ShareBuilder will attract than it does from the short-term revenue. Despite the fact that those who initially use Wells ShareBuilder are not likely to be initially profitable for the bank, as the customers assets build up over time they will likely use more and more of the banks services, he said.
Wells Fargo has the luxury of waiting for these relationships to mature, Mr. Burke said.
Netstock has already created similar Web sites with about half a dozen mid-sized regional banks and 60 credit unions, but the deal with Wells Fargo is the companys biggest yet, said Mr. Kloes. Kloes would not reveal either Netstocks number of accounts or its assets under management, other than to say that the company has more than 100,000 accounts.
The deal could be the impetus that brings Netstocks year-old ShareBuilder into wider public view, said Greg Smith, senior research analyst at J.P. Morgan Chase H&Q in San Francisco. It will almost certainly lead to similar deals with other banks or brokerages down the line either for Netstock or for its main competitor, BuyandHold.com, Mr. Smith said.
Through Wells Fargo, Netstock will have the opportunity to attract the banks 2.5 million online customers, Mr. Kloes said. There is a major synergy possible there, Mr. Kloes said.
J.P. Morgan Chase H&Qs Mr. Smith said that ShareBuilder is different enough from Wells Fargos brokerage operations that it will pose no competitive threat. In fact, using ShareBuilders investment method at a traditional brokerage would be was too expensive to be practical, Mr. Smith said. The fees would kill you, he said.
As an added carrot to attract customers, both companies in a release said that anyone who signs up before February 28 will have their account credited $50.