Discount brokerage services at banks and thrifts are catching on

The banking industry may have had its share of troubles lately, but a lot of people still seem to feel pretty comfortable with their local bank or savings-and-loan. This is one possible explanation for the rapid acceptance of banks and thrifts as places to buy and sell stocks, even though most did not offer this service six months ago.

For the past several weeks, banks and thrifts have been signing up more than 10,000 discount brokerage accounts a week, according to Discount Brokerage Advisory Services Inc., a firm that advises banks and individuals on this business. So far, the firm reports, more than 2,000 banks and thrifts are offering this service, where customers can save up to 70 percent of the cost of full-service brokers.

This rapid expansion, however, does raise some questions: Are banks and thrifts safe places to buy stocks? Can they handle the paper work and keep accurate, up-to-date records? Can they afford the added expense?

For the most part, independent observers say, the answers to these questions are all ''yes.''

''I think the discount brokerage business is relatively safe for the banks,'' says Sandra Johnigan, cochairman of the thrift group at Arthur Young & Co., the accounting firm. ''All they can do is nothing more than the customers tell them to do.''

Carol M. Finnegan, vice-president of United Business Service in Boston, and editor of the service's financial planning bulletin, agrees. The banks and thrifts should not have a problem with the paper work and record-keeping, she says, because they don't handle it in the first place.

''They really aren't involved in the 'back office' side of it,'' she points out. ''And they wouldn't be involving themselves in the trading of the stocks and bonds.''

These trades and the back office work, she notes, are handled by established brokerage firms working under contract to the banks and thrifts. The brokerages include Fidelity, Source Securities, the Pershing division of Donaldson, Lufkin & Jenrette, and Federated Services. Also, INVEST is serving several thrifts, but its charges are slightly higher because it has a central research department that produces advisory positions and papers. Individual INVEST brokers, however, do not give advice. And Bank of America customers can use the bank's Charles Schwab brokerage division.

''The banks are doing their thing and the brokers are doing their thing,'' adds Ellis Ratner, executive vice-president of Discount Brokerage Advisory Services. ''They're really quite separate,'' even though the brokerage sales desk is in the bank, he said.

Some of the larger banks, working through their trust departments, are doing their own paper work. For a long time trust departments have been allowed to buy and sell stocks for their well-to-do customers, and these departments have simply expanded to include discount brokerage. This expansion, however, may prove costly.

''My only caution,'' Ms. Johnigan at Arthur Young added, ''would be the cost to the banks. If they don't understand the costs involved, this service can be expensive, with no real profit to the bank. For some of them, it could be a loss leader.''

That, however, is precisely why many banks and thrifts like their new brokerage services: They bring in customers. Even if discount brokerage doesn't bring in a bundle of money, bankers figure, it will bring in people who can open checking and savings accounts, take out loans, and do all the other business that helps banks make a profit.

For customers, an additional margin of safety comes from the insurance on all brokerage accounts. Brokerages managing these accounts, Mr. Ratner points out, are covered by the Securities Investor Protection Corporation (SIPC), a federal agency that insures accounts up to $500,000.

There were some start-up problems several months ago, such as customers not receiving proper confirmation of orders, he notes. But since then most of the problems have been resolved. In fact, Ratner knows of only one unresolved customer complaint about a bank discount brokerage service.

Whatever precautions a customer needs with these services, then, are much the same as with any discounter. First, shop around. Make sure the savings advertised apply to you. If a broker says they can save ''up to 70 percent'' on commissions, that is the maximum savings given to the largest and best accounts. But if your account is small, the savings may only be 30 or 40 percent. In this case, you may find the money spent on a broker who follows your account more than makes up for the higher cost.

As with any broker, keep your own records of all trades. You should know how much each trade was for, and the prices of the stocks when you made purchases or sales. If there are any differences between your records and the statements coming from the bank brokerage, check them out immediately with the individual broker handling your account. If you don't get satisfaction there, you can talk to someone at the host bank or write the brokerage's main office or the SIPC.

If you would like a question considered for this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115 . No personal replies can be given by mail or phone. References to investments are not an endorsement or recommendation by this newspaper.

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