Part 1 : On being an online broker

Jim, when you took SloanSecurities online, what was your thinking and motivation?
SloanSecurities had been an investment bank for 10 years - before our online capabilities we had no retail business at all, and our customers could not buy stocks from us. We decided that to grow much more quickly, we needed that capacity. At first we looked at adding brokers, but that didn't satisfy our needs.

We wanted our customers to be customers of the company, and not have a broker, or middleman, in the middle. Also, because we have clients all over the U.S. and worldwide, we wanted to be able to service that clientele cost-efficiently.

What are the key challenges you've had to master to build a successful *online* brokerage?
Creative use of our technology to originate unique products and providing superior services have been the keys to our success. Coming from an investment banking background and not a retail brokerage background gave us certain advantages.

In investment banking, you work with CEO's and owners of companies. You take their phone calls and answer their questions right away - or you lose the business. Consequently, excellence in service was already the culture of the firm and it has stayed that way.

Our clients don't wait on hold for 10 minutes - they get right through. Our e-mails get answered quickly and once we have an account, we rarely lose it. I was commenting to our Director of Operations, how nice it is to see all the accounts transferring in to us from other firms, and hardly any transferring out.

In building a successful online brokerage, it is important to have a number of key elements. For instance, our webmaster is simply the best. We partner with other websites by providing our trading services on their sites, and our webmaster is fast and efficient in implementing the technology to make it happen. Our site is updated constantly in real time and our webmaster does a terrific job.

Another difference at SloanSecurities is that we don't believe in the general online mantra of speed is everything. We believe getting it right is more important. The Internet is a marvelous tool to use for growing a business, but sound business principles still apply.

Another element is to listen to your clients; they will teach you a lot about what they want. Our philosophy is to provide excellent services and products that our clients want and for which we charge them a fair price.

There are dozens of online brokerages listed on various investment sites - would it be fair to lump them all into one category, or are different brokerages serving different markets with different products?
The online brokerage industry isn't so different from many other industries. Take, for instance, the general brokerage industry. Did you know there are now over 5,800 registered broker-dealers in the United States? There are only about 150 online brokerage firms and if you eliminate some that have only very limited niches or are not much of a factor, you cut that list in half very fast.

Considering how fast the industry is growing, that is actually not a lot of companies. Compare it to the thousands of new websites competing for business in many other categories. Now the big difference is that six companies presently have about 85% of the daily online trading - almost all of it being individual retail trading.

Some of these firms have grown so fast that their customer services and infrastructures have lagged behind. Also, they have generally focused their attention on the general individual accounts, which is a very large market and a rapidly growing one. But there are differences between many of the online firms, and some have innovative products worth investigating.

As an example, SloanSecurities recently signed an agreement with JagNotes.com, a new financial news network, that will be broadcasting live on the Internet. Our clients will be able to come to our site, watch the financial news live, and then trade in their accounts. We believe we can help our clients by providing the best and most current information possible all in one place - SloanSecurities.com.

Continued...