As brokerage firms are swiftly taking advantage of the Web and have done so more quickly than their banking and insurance company brethren, the question arises: will brokerage firms become the pulse of the marketelectronically combining insurance, banking and brokerage in one central hub? Adam Schneider, partner with Deloitte Consulting, seems to think this is more than a possibility.
Now that the Glass-Steagall Act has been repealed and the three are legally allowed to enter each others businesses, which institution will take control? Schneider says that if you take a look at the landscape today, using services on the Web is much more compelling in the brokerage industry than the banking or insurance industries. That is, in part, because the securities industry is ahead of the game technologically, but it is also simply because there is more happening in the securities market on a day-to-day basis, giving the consumer more of a reason to return to its Web site day in and day out. The market goes up and down, things change from day to day...and lets face it trading gets your blood going, Schneider says. How many people do their banking online? he asks. Exactly.
He predicts that the big retail brokers will now acquire or start banks. He jokes, who better to compete with? If you had anyone to compete with, youd first pick insurance companies and then youd pick banks, too, right?
E*Trade has already acquired Telebank, and since WS&Ts conversation with Schneider, Merrill announced that it would be creating its own commercial bank. He also points out that he understands that traditionally people like to separate their money by savings, retirement and brokerage. Its a change in the consumers mind to combine them together, but, come on, of course its going to happen. Its the natural evolution of securities asset management.
The technology is there to make it happen. Its just a matter of getting the consumer used to doing everything in one place. The technology to make all accounts electronically eligiblewhatever the type of accountwas created a few years ago by Schwab, Schneider says.
Next upbrokerages could add electronic bill presentment and payment to the mix. Banks have the edge in that arena right now, but if they dont get it right someone else will.