Mediaboss Marketing

By John McCrank

NEW YORK (Reuters) - Discount brokerages, once the domain of do-it-yourself investors looking for cheap trades, are increasingly getting into the personal advice business, filling a void for middle-class investors left by big, traditional brokerages.

Fee-based assets at discount brokerages like Charles Schwab Corp, Fidelity Investments, TD Ameritrade, and E*Trade Financial, grew by a compound annual rate of 19 percent from 2008 to the end of 2010, versus 14 percent at so-called wirehouses such as Morgan Stanley, according to research firm Cerulli Associates.

"A large part of the growth that we've seen in these firms and also the future growth that we're projecting is going to be linked to their ability to deliver advice programs," said Katharine Wolf, associate director at Cerulli.

Even Charles "Chuck" Schwab, a pioneer in offering cut-rate commissions to people making their own investment decisions, said he uses advisers to manage his portfolio.

Much of Schwab's growth in the self-directed space came during the bull market from 1983 to 2000, when picking winning stocks was likened to throwing darts at a board. In the dozen years since then, the equity markets have been volatile, but have basically come out flat.

"Investors are increasingly saying: 'It's more complicated than simply going to a website, picking out some stocks, buying them and hoping they go up,'" Walter Bettinger, chief executive of Schwab, said in an interview.

Schwab has been offering advice to investors for the past decade, a point it has highlighted since 2005 with its "Talk to Chuck" advertising campaign.

Clients of the San Francisco company, which reported overall assets of $1.81 trillion at the end of February, have added an average of $1.5 billion a month for thelast 14 months to Schwab advisory programs, with most coming from self-directed accounts.

FILLING THE VOID

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Schwab, E*Trade et al outpacing traditional brokers