Personal Finance: Internet Investor

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LATEST FIGURES from the Association of Private Client Investment Managers and Stockbrokers show the number of private investors dealing over the Internet increasing substantially. Online trades 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 really surprising.

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

The impact of stamp duty at 0.5 per cent and dealing costs have always meant that investing less than a four-figure sum in an individual share may be seen as an uneconomic exercise. Given the widely preached and accepted belief of spreading risk in a balanced portfolio, investors may assume they would need to stake a minimum of pounds 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 in the UK market. A year later it was 1.6 per cent. At this early stage of the online evolution, providing you shop around, you may still find cheaper execution-only deals over the telephone. But none of the telephone services provide the corporate information and share price performance data now available from online execution-only brokers. Less than two years ago you would have had to pay at least pounds 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 to offer 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, having been running on a trial basis. Deals on this new live service, DLJdirect, start at pounds 15. Other services will follow, among them Freeserve's online brokerage service. Freeserve's Money Channel, run by, 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 Marathon and Mesirow Financial. Freeserve has what's known as "first mover advantage" in the free ISP market despite ever stiffening competition, most recently with the launch by AOL of its free ISP Netscape 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.


Robin can be reached at