ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, May 23, 1996 TAG: 9605230061
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: ASSOCIATED PRESS
Charles Schwab & Co., Fidelity Investments and Merrill Lynch & Co. plan to spend about $1.5 billion this year - much of it on technology - to stay competitive amid the stunning growth of the Internet.
Executives at the three financial services giants, speaking Wednesday at the Investment Company Institute's annual conference, described vastly different approaches in dealing with the rise of the Internet in their business.
Charles Schwab, chairman of the San Francisco-based investment firm that bears his name, said 20 percent of its business already stems from electronic entry of stock and mutual fund orders.
``That has grown very fast,'' said Schwab, who added his firm expects to spend $100 million on technology.
Later this year, Schwab plans to accept electronic payments from customers for the purchase and sale of stock, mutual funds and other securities. The Securities and Exchange Commission has allowed funds and brokerage firms to post a prospectus, a formal sales document for stocks and bonds, on the Internet and recently allowed trade confirmations to be sent via e-mail to customers.
Schwab predicted the Internet and other computerized communications would ``represent 30 to 40 percent of order entry in the next four to five years.''
His company, the nation's largest discount broker, is geared more towards the do-it-yourself investor, providing a wide variety of investment options without the research and investment advice of traditional full-service brokerage firms.
Merrill Lynch, by contrast, faces the challenge of convincing investors to pay extra for its investment advice and research - in the form of full-service commissions - when the Internet and commercial on-line services provide a wide array of market data, investment tips and other information free, or at very low cost.
Merrill Lynch executive vice president John L. Steffens said his company's role is to make sense out of the information overload facing individual investors and help them devise retirement or college savings plans.
``We see our professionals as the ultimate search engines, so to speak,'' Steffens said, a reference to the popular research tools used to navigate the World Wide Web.
His firm plans to spend $900 million on all technology, chiefly to integrate the numerous sources of investment information available to Merrill Lynch researchers and brokers on their desktop computers.
Steffens warned about the considerable hype surrounding the Internet, and suggested it could lead to more impulsive investing. He cited a trend in the markets in the last half of 1995 when money was flowing out of international mutual funds and into technology funds ``at absolutely the wrong time.''
``Being able to make fast executions is not necessarily going to be synonymous with making good and long term investments,'' Steffens said.
Despite his misgivings, Merrill Lynch soon plans to launch an Internet service that will give clients electronic access to research, banking services, stock quotes and account statements. They also will be able to send electronic mail to their financial consultants.
Edward Johnson III, chairman of the nation's largest fund company, Fidelity, said his company plans $500 million in capital expenditures, much of it for new technology and computer systems.
LENGTH: Medium: 69 linesby CNB