Schwab.com Executive Summary (Part 1)

Business Model Support

The table in Appendix I provides a summary of the key functionalities from the web sites for Schwab.com, E*Trade.com, Ameritrade.com and Merrill Lynch using the investment cycle per the Stanford case and other meaningful business model elements.

Both Schwab and Merrill Lynch provide services to their customers for each step of the investment cycle as described in the Stanford case entitled: “The Charles Schwab corporation.” The level of service depends on the amount of assets owned by the customer and the frequency of trades that the customer is expected to execute during the year.  Personal advisors are used extensively for the most affluent, i.e. assets in excess of $2 million.  Customers with less than $2 million will still have a personal advisor from Merrill Lynch, but may have an independent advisor through Schwab’s RAI network.

Among the four firms, both E*Trade and Ameritrade are similar in that they provide a means for a knowledgeable investor to place orders to buy or sell financial instruments in an open market.  Both E*Trade and Ameritrade appear to pursue customers that value execution of orders and account maintenance with limited information via market news, real-time quotes and streaming video.  Little or no information or decision support is provided to the customers for developing the investor’s financial goals, portfolio strategy or tactics to attain these goals.  Although E*Trade provides access to 3rd party personal financial planners and an asset allocation tool as a fee-based service.  This allows investors to make their own investing decisions as well as seek investment advice if it is necessary.

Appendix II provides select screen snapshots from each of these firms that provide a description of what is their business model and what customers they are seeking via the product or service offerings.  Based on the four websites that were reviewed, E*Trade has the most user-friendly features for the online investor.  The main page shows most of the products and services offered by the company.

 

Web Functionality Schwab.com E*Trade.com Ameritrade.com Merrill Lynch
Investor Financial

Goals Assessment

Yes, Independent

Advisor

Yes, Independent

Advisor

No Yes, Personal Advisor
Investor Financial

Portfolio Development

Yes, Independent

Advisor

Yes, Independent

Advisor

No Yes, Personal Advisor
Market News

Availability

Yes Yes Yes Yes
Market Quote

Communication

Yes Yes Yes Yes
Market Research

Performance

No No No Yes
Investor Financial

Strategy Establishment

Yes, Independent

Advisor

Yes, Independent

Advisor

No Yes, Personal Advisor
Investor Financial

Tactics Development

Yes Yes No Yes
Investor Financial

Orders Executable

Yes Yes Yes Yes
Order Routing to

Exchange(s)

Yes Yes Yes Yes
Orders Fulfillment in

Financial Market

Yes Yes Yes Yes
Completed Order

Confirmation

Yes Yes Yes Yes
Investor Account

Reporting

Yes Yes Yes Yes
Investor Tax

Accounting Calculation

Yes Yes Yes Yes
Investor Account

Performance Tracking

Yes Yes Yes Yes
Individual & Business

Offerings

No No No Yes
Segmentation of

Customers by

Asset Class

Yes No No Yes
Affluent Customer

Services Offered

Yes No No Yes
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