Online Securities Trading

Paper Summary:

In this article, the writer notes that the combined effects of financial services companies striving to drop the cost of providing customer service and the significant rise in individual investors' interest in taking control of their own investments continues to increase the use of online securities trading. Further, the writer points out that many individual investors rely on the Internet as a means of learning as much as they can about specific investments before executing a stock or bond trade online, and this factor alone is changing the landscape of financial services. The writer discusses that financial services firms are walking a fine line between automating transactions by putting powerful investment tools in the hands of individual investors, while at the same time educating them of the financial benefits of long-term investing. The writer concludes that individual investors have more control over their funds than ever before, yet with that freedom comes a high level of responsibility to make sure the advice, applications and tools they gain access from financial services firms are in fact the best match with their investment needs.

Outline:
Executive Summary
Technological Implications of Online Trading
The Ethics of Enabling Online Trading
Online Trading as a Service Strategy: Inevitable?
Assessing Online Trading and the Individual Investor
Improvements for Online Trading as a Self-Service Strategy
Conclusions and Recommendations

From the Paper:

"Financial Services firms are pursuing a wide variety of online services strategies to reduce the cost per transaction, and this cost reduction strategy is creating a series of Web-based applications that have rich functionality and features previously only brokers had available. The costs of having individual investors speak with investment representatives is significantly higher than having the question respond to or transaction completed online. As a result of the cost reduction benefits of these online strategies, financial services firms are adopting them for all segments of customers. This technological shift to online investment advice and transaction tools is being influenced by the major unmet needs of individual investors for expertly-written content on the one hand and greater control over their investments on the other. Financial services firms segment their customer bases by their net worth and projected lifetime customer value, and the lowest-value customers are routed to Web-enabled suites of applications and content portals. Those customers that have the potential of generating a higher lifetime value for the financial services firm, and as a result they are provided a higher level of service including a dedicated account representative. This segmented approach to delivering service is proving to be profitable for financial services firms."

Sample of Sources Used:

• AMR Research (2003) - Configuration is the Heart of Customer Fulfillment for Complex Product Manufacturers. AMR Research Report. Monday March 31, 2003. Retrieved from the Internet on April 19, 2007 from: http://lwcresearch.com/filesfordownloads/ConfigurationIstheHeartofCustomerFulfillmentforComplexProductManufacturers.pdf
• Columbus (2001) - Defining Your Direction In Guided Selling. AMR Research Report. October, 2001. Retrieved from the Internet on April 19, 2007: http://www.lwcresearch.com/filesfordownloads/DefiningYourDirectioninGuidedSellin.pdf
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