Last October, Morgan Stanley Dean Witter souped up and reorganized Morgan Stanley Dean Witter Online (www.msdw.com), formerly Discover Brokerage Online, under the appropriately named umbrella "ichoice." The name sums up nicely the opportunity, as well as the problems, with this full-service firm's online offerings. And what goes for Morgan Stanley goes as well for Merrill Lynch (www.ml.com).
Both firms have several sites and multiple types of accounts that, while certainly offering the advantage of choice, are difficult to untangle, let alone compare. For someone going to the firms' homepages with the idea of setting up an online-trading account, all those options make for immediate headaches.
Both Merrill Lynch and Dean Witter offer three main accounts, all with different pricing and different types of relationships with brokers. They include a full-service brokerage account with online access, a pure online account (with no broker), and a hybrid account, where high-net-worth clients get a broker's advice but can also execute unlimited trades online for a single annual fee based on total assets.
CHORUS OF BELLS.
The two firms are also in the process of standardizing tools and features for different types of accounts, which should help minimize some of the confusion. And they're in a horse race for adding new functionality. Currently, they have lots of the same bells and whistles, including real-time quotes; limited access to initial public offerings; software that allows for simple, automated stock analysis; and electronic bill paying. Morgan has a couple of additional features that may be important to some customers: It offers extended hours and wireless trading, neither of which Merrill makes available.
As for the user experience, Merrill's design comes across as more high tech, with a slicker interface and more use of multimedia. Its multicolored navigation bar is easy to fathom and use. Many investors, however, may prefer Morgan Stanley's design, which is more streamlined and seems better geared to experienced traders. I found its navigation, which has many more immediate options than Merrill's and is done in different shades of blue, a bit confusing at first. But once investors learn the site, it would allow for fewer clicks to get to many areas.
Perhaps most important, Merrill includes much more in the way of advice and guidance for self-directed investors. The site has a note on online investing that explains a lot of the risks without being too scary. It has a worthwhile "Frequently Asked Questions" section that clearly explains margin rules and a privacy section that explains how the firm will use information. Perhaps self-servingly, it has a page explaining the benefits of using a broker. Morgan Stanley also checks to make sure that investors meet suitability requirements and explains margin rules, but it uses more legalese and has fewer avenues for investor education.
RESEARCH OPTIONS.
Merrill has also done more to restrict small investors from signing up. You need $20,000 to open a self-directed Merrill account, whereas Morgan Stanley requires $2,000. Both firms make you send in a signed hard copy of the application and wait a week or so for the account to be activated.
The type of research that's available is a key differentiator for the two firms. Merrill, which covers more companies than any other full-service brokerage, provides its own research to all clients, as well as free stock reports from Standard & Poor's (a division of the McGraw-Hill Companies, as is Business Week). Morgan Stanley clients get the firm's analyst reports for free only if they have an account of more than $100,000. Otherwise, they're charged a fee depending on how many reports they want. For example, five stock reports cost $10 a month. Morgan Stanley also provides earnings projections from Zacks.
It's mainly in the noninvesting areas of the sites that the two firms differ. Always on the lookout for a good bargain, I was captivated by Merrill's shopping area, which has an attractive rewards program for clients who use their Merrill credit card to buy goods online. Morgan Stanley recently unveiled a tax center that many investors will find helpful.
For investors, the key choice is not really between the two firms, whose sites are still in flux, but what kind of account and relationship with a broker you prefer. For now, no matter which firm you choose, you practically need a financial adviser to help you make that decision -- which may be one of the points these full-service firms are trying to make.
Copyright 2000 , by The McGraw-Hill Companies Inc. All rights reserved.
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