By the end of the year 2000, more than 6.5 million US households will have traded through 13 million online brokerage accounts, according to eMarketer, which projects 17.4 million US households trading through 31.3 million online brokerage accounts by 2004.
eMarketer’s eInvesting Report also predicts assets in online mutual fund accounts to total $400 billion by 2004, a 267 percent increase over projected $109 billion at year-end 2000.
Other findings from the report include:
- 600,000 users will have used online account aggregation services by the end of 2000, and that number will modestly increase two-fold each year, reaching 9.6 million by 2004
- 900,000 investors will have used online advisory services by year-end 2000, with 9 million predicted to use them by 2004, with 65 percent going through employee-sponsored plans
- Online advice will serve mostly as a complement to human advisors as factors such as trust and validation of information available on the Web outweigh the Internet’s convenience as a delivery channel.
“While the Internet will play a significant role in disseminating information to investors, it will remain a complementary tool for those investors who, in our opinion, are wise enough to seek investment advice from professionals,” said Paul Milligan, eMarketer’s Senior Analyst of Financial Services.
Financial institutions jockeying to become a one-stop financial source are looking toward account aggregation as a key to securing future customer loyalty, according to a report by Jupiter Research. However, lack of features, low consumer interest, and nonexistent industry standards should cause financial institutions to take a conservative approach in adopting aggregation technologies.
Jupiter believes online financial households (households that research, manage, or purchase financial products online) that use personal financial management (PFM) software serve as an excellent proxy for understanding future online adoption behavior. Of the 13 million online financial households, 4.7 million currently use PFM software to help manage their online finances. Of this online PFM base, fewer than one million households (or ten percent of all online financial households) use the account aggregation functionality that is bundled with this software.
“If personal finance techies have yet to buy into this technology, there is little chance of near-term adoption by the population at large,” said Robert Sterling, an analyst with Jupiter Research. “The issue is that current scraping-based aggregation has so many limitations that it is nothing more than a grandiose balance-check feature. It is incapable of achieving unified access to long-term keeping of transaction records that consumers and institutions will find truly valuable.”
In its report, “Account Aggravation – Stumbling into Screen Scraping,” Sterling found that financial institutions must add features such as keeping long-term records of tax lots, securities pricing, and reorganization data for account aggregation to offer significant value and encourage online customers to adopt these services.
Sterling also said the lack of industry standards for account aggregation presents a risk that data pirates and identity thieves can successfully pose as customers. Industry standards must focus on data file formats, structured data transfer environment, and certification of a limited number of entities to act as data go-betweens.