Online Brokers To Meet Demise, Says Forrester

“Net brokers have slid from enviable near-profitability in 2000 to staggering losses,” says Forrester analyst, Charlotte Hamilton. “To survive, firms must abandon the mirage of a profitable compromise between aggressive customer growth and tough cost cutting. Break-even can only be achieved if brokers choose between either a high-cost, high-revenue strategy justified by only serving frequent traders or a low-cost, low-revenue strategy to serve the growing ranks of infrequent traders.”

The report says the large banks should fold their brokerage sites into multichannel banking offerings in order to cut costs and to serve infrequent traders with a more simple service. Such services could earn E10 per customer by 2005, Forrester predicts.