Internet Investor

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The Independent Online

Latest figures from the Association of Private Client Investment Managers and Stockbrokersshow the number of private investors dealing over the Internet increasing substantially. Onlinetrades jumped in the second quarter of the year to 51,000, from 29,500 in the previous quarter.Given the rising number of brokers making services available on the net this is perhaps not reallysurprising.

Latest figures from the Association of Private Client Investment Managers and Stockbrokersshow the number of private investors dealing over the Internet increasing substantially. Onlinetrades jumped in the second quarter of the year to 51,000, from 29,500 in the previous quarter.Given the rising number of brokers making services available on the net this is perhaps not reallysurprising.

What may be more significant is the average value of online trades in the three months to June. At£4,730, the value of the average online deal is much lower than the £6,444 average fortrades through other execution-only brokers.

The impact of stamp duty at 0.5 per cent and dealing costs have always meant that investing lessthan a four-figure sum in an individual share may be seen as an uneconomic exercise. Given thewidely preached and accepted belief of spreading risk in a balanced portfolio, investors may assumethey would need to stake a minimum of £1,000 each in not less than five different shares.

In the second quarter of 1998, Internet share dealing was 0.1 per cent of all private client trades inthe UK market. A year later it was 1.6 per cent. At this early stage of the online evolution, providingyou shop around, you may still find cheaper execution-only deals over the telephone. But none ofthe telephone services provide the corporate information and share price performance data nowavailable from online execution-only brokers. Less than two years ago you would have had to payat least £30 a month for this quality and quantity of information.

Among Apcims members, 83 per cent now have a website and 37 per cent already have plans tooffer online dealing. I wonder about the business plans of the 63 per cent who don't!

Next week, US brokerage Donaldson, Lufkin & Jenrette's UK online service goes fully live, havingbeen running on a trial basis. Deals on this new live service, DLJdirect, start at £15. Otherservices will follow, among them Freeserve's online brokerage service. Freeserve's Money Channel,run by UK-iNvest.com, already hosts 29,000 portfolios from registered users.

Freeserve is working hard to justify its extravagant stockmarket valuation and, this month,announced plans to launch its own broking service in conjunction with US firms First Marathonand Mesirow Financial. Freeserve has what's known as "first mover advantage" in the free ISPmarket despite ever stiffening competition, most recently with the launch by AOL of its free ISPNetscape Online. However, Freeserve does not hold this position in the broking business.

For investors and users of online broking, increasing competition among brokers can only be good.

DLJdirect: www.dljdirect.co.uk

Robin can be reached at RobinAmlot@aol.com

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