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Looking for a place to manage all your finances online? If you're like an increasing number of
new millionaires, the idea of managing a seven- or even nine-figure portfolio over the Web
doesn't seem intimidating at all.
Though rich people have traditionally delegated their wealth management, many
self-made multimillionaires are much more comfortable with high-tech--rather than
high-touch--financial services. For one thing, many of them are younger and made their
money in the technology sector.
A growing number of old-line private banks are touting their full-service Web accounts,
from white-shoe investment bank J.P. Morgan--where they hardly let you in the door if
you have less than $5 million to your name--to ultra secretive Delaware-based
Wilmington Trust.
If you don't come from big money, you may never even have heard of Wilmington
Trust. For roughly a century, this company has held the assets of industrial giants and
the richest American families in trust, a custodial arrangement that, among other
things, allows Wilmington to manage investments and create a comprehensive estate
plan. Wilmington is about to launch beta testing for its new trading Web site.
Wall Street titans Merrill Lynch and Morgan Stanley Dean Witter both offer their
proprietary initial public stock and bond offerings to their online customers. What's the
catch? Supply is limited so you probably won't get a big enough allocation to add
another zero to your net worth.
And then there's myCFO, the brainchild of billionaire Jim Clark, who made his first fortune
bringing Netscape public in 1995, launching the dot-com craze. This may be your kind of Web
site--if you've got millions to burn and footing a $25,000-a-year retainer seems painless.
Whatever your situation, check out our reviews of these five Web sites. One of them may just
be right for you, as long as you're rich.
www.morganonline.com
The classic blue-blood bank, J.P. Morgan has been managing the wealth of American corporations and affluent
families for more than a century. But when online trading became the rage, Morgan fell behind
Wall Street rivals Merrill Lynch and Morgan Stanley Dean Witter. In March, the firm launched
Morgan OnLine.
Its main selling point: J.P. Morgan research and tools. Essentially, the firm has put the electronic
asset modeling tools that have long been available to its private bankers on the Web. Though you
can already find most of these tools for free online, such as calculators to estimate your future
financial needs, Morgan bankers tout the interconnectivity of their system--if you change one
feature on your financial plan, it automatically updates the others. It's up to you to decide if that's
worth the annual $2,500 retainer.
The minimum deposit is $15,000. This account offers online trading, but clearly it's not priced
for daytraders, who chase after bargain-basement commissions. The hefty annual fee covers the
first 24 trades, and after that online trades are $30 a pop.
Morgan executives estimate that about 20% of new millionaires would prefer to manage all of
their finances online, without contacting a personal broker. And that's what you get with a Morgan OnLine account. There's the standard customer call-in center, but you won't get your own private banker. The cost of a full-service Morgan account generally starts at $15,000 a year.
Morgan reaches for the masses
Internet strategy, tech investments aim to broaden
bank's market
by Stephen Gandel
The conference room floor of one of the latest
e-brokerage start-ups has friezes on its wood-paneled
walls, fine china in glass cases, and waiters in formal
wear roaming the corridors.
The Park Avenue digs seem out of the norm for a
dot-com. But then, this isn't just any Internet start-up.
It's Morgan OnLine, the cyber-offspring of J.P. Morgan &
Co., which hopes to offer its private banking services,
historically reserved for multimillionaire clients, over the
Internet to customers with brokerage accounts starting
as low as $10,000.
The new site is part of a broader initiative at J.P. Morgan,
which is known as the banker of choice for the superrich
and the largest institutions, to use technology to expand
beyond its traditional customer base. Along with
establishing Morgan OnLine, J.P. Morgan has
committed $1 billion to a newly created unit, called
LabMorgan, that will invest in start-ups that are
developing ways to open capital markets to more players
through the Internet.
"We see opportunities to scale the businesses that we
traditionally have offered only to the largest institutions,"
says Peter Maillet, managing director at LabMorgan.
Continued diversification
One such investment is in Market Axess, which is
developing a distribution system for large bond sales
over the Internet. Another investment is in a company
developing a Web-based version of Morgan's own risk
management system, to be offered on a fee-for-service
basis to smaller institutions that previously couldn't
afford Morgan's services.
With the new efforts, J.P. Morgan is attempting to
continue its diversification beyond corporate lending,
which for a long time was its bread and butter. Like its
banking rivals Citigroup and Chase Manhattan, Morgan
has been working to decrease dependence on that
increasingly competitive and decreasingly profitable line
of business. Today, revenues from lending make up
about 20% of the company's sales, down from 33% five
years ago.
Lags rivals in underwriting
Meanwhile, investment banking activity is growing. Last
year, J.P. Morgan was the fifth-largest adviser for
worldwide mergers and acquisitions. Its underwriting
business is also growing rapidly. In the first quarter of
this year, Morgan generated $260 million in fees from
corporate debt and equity underwriting, up from $186
million a year earlier.
But that still significantly lags the take at rivals such as
Goldman Sachs and Morgan Stanley Dean Witter, which
each raked in more than $750 million in underwriting fees
in the first quarter.
And while the shares of Morgan Stanley Dean Witter and
Merrill Lynch have more than quadrupled over the past
five years, Morgan's have merely doubled.
"There was skepticism among investors about Morgan's
ability to develop an investment bank and decrease its
dependence on lending," says Doug Eby, president of
Robert E. Torray & Co., a Bethesda, Md.-based
investment manager, which owns Morgan shares. "They
seem to have made strides, but the question at this
point in the cycle is, have they run out of time?"
Morgan is hoping that its commitment to new ventures
will finally change investors' perceptions.
Different from the rest
To date, Morgan OnLine is the investment bank's most
ambitious effort to take advantage of opportunities
created by the Internet. J.P. Morgan says its service
differs from its rivals' because it is based on portfolio
management rather than just on-line trading.
"We have the leadership with clients who have accounts
of $15 million and up, and we are trying to extend that
leadership to an audience of people with $1 million or
more," says Albert Bashawaty, managing director at J.P.
Morgan Advisors Inc. "We are taking our private banking
services and making them available to a wider audience."
Along with portfolio tracking, Morgan OnLine's system
evaluates the user's financial plan to see if it meets that
person's goals. And as the portfolio changes with the
market, the system will send e-mail alerts when the
allocations seem to be getting out of whack. "The service
will give you the probability of hitting your goals over the
course of your life," says Mr. Bashawaty. "We wanted to
build a service that was based on advice."
Still, Morgan is staying competitive on price. The service
costs $2,500 a year, but the first 24 trades are free, and
the firm is recruiting corporate partners to pony up the
annual fee as a perk for their employees.
"It is really a unique product and I'm excited about
offering this as a benefit to our people," says Arthur
Mirante, chief executive of real estate brokerage
Cushman & Wakefield Inc., which is providing its
professionals the service at a discounted rate. "I plan to
be a user."
Going rate for trades
After the initial 24 free trades, Morgan will charge a flat
commission of $29.95 per trade, on par with what Merrill
Lynch charges its on-line customers and what such
discounters as Charles Schwab and TD Waterhouse
charge for off-line transactions.
To promote Morgan OnLine, the investment bank
launched a mass advertising campaign, only the second
in its history. Commercials will appear on ESPN and
CNN, as well as on Web sites Bloomberg.com and
Silicon Investor. Billboards are in the works.
J.P. Morgan also has hired a team of financial planners
to serve the new clients through an 800 number. The
professionals will be on call to dole out portfolio advice
24 hours a day.
"They are developing ways to move downmarket in the
wealth segment," says Diane Glossman, a bank analyst
at UBS Warburg. "It is an interesting experiment, but I'm
