A tall, trim young man, Thom Prudente, called the class to order. "Today, we're going to learn about advanced option strategies, right?" The room sank into anxious silence. Had I wandered into the new movie Boiler Room? Then, Prudente smiled and said: "Just kidding." Chief of the Charles Schwab office in Melbourne, near my Florida home, Prudente was about to lead me and five other amateurs in a decidedly basic seminar about online investing.
Schwab calls these sessions WebShops. Since October, nearly 30,000 clients and prospects nationwide have attended, and by yearend Schwab aims to host 210,000 more. Why? Brokers big and small, full-service and cut-rate, are struggling to win--or keep--your assets. They think elaborate education programs give them an edge. "Having clients who feel confident only contributes to a stronger relationship," PaineWebber spokeswoman Donna Peterman told me.
Usually free, these sessions take time and often prompt a follow-up call from a broker. So, wondering whether they're worth your trouble, I recently tried two distinct approaches: first, Schwab's WebShops, which I sampled in three branches with different broker-instructors; and second, a pilot program of online seminars offered by PaineWebber (table). Overall, both programs proved thoughtful and well-delivered. But each also came strewn with subtleties that you should heed closely.
Prudente's lesson, for example, was clear and crisp, including the best four-sentence explanation I've heard of "beta," a measure of risk. He also made a couple of startling overstatements. Prudente showed a Web page with the firm's "Equity Report Card" on America Online--"everything you're ever going to want to know about AOL. You're getting opinions from all the analysts." Yes, Schwab's report card is a good starting point. But would you trade AOL based on this summary alone? I'd want to dig deeper.
This matters because most investors I sat with in WebShops had never traded online before. In Pasadena, Calif., for example, printing executive Rima Ashkar told me the hour led by instructor Diana Love was well worth it: "I guess I need to spend some time on my own now, but this is a good start." Yet I had to wonder where the gentle herding we got might lead. Love showed us Web links to research on industries, saying: "I imagine the technology sector is where everyone would want to go and look." Maybe, but maybe not if they were looking for cheap stocks. When one man asked for "streaming" quotes, a feature demanded by active traders, Love told him Schwab couldn't help--even though it had recently agreeto buy CyBerCorp, which specializes in just that. Love later told me she felt the client was not ready. She may be right. On the other hand, why not sort that out with him?
PaineWebber's pilot cyber-seminar, a 23-minute slide show with strategist Mary Farrell on how the firm uses demographic and technological themes to pick stocks, had the benefit of being available at all hours from any computer. But it's best for the wired elite. Via my slow, 32k hookup, I heard Farrell speak on the computer speakers and saw 31 slides flashing her key points. But without a faster link I couldn't get the video of her and had to settle for a still photo. It felt like Marconi's first transmission.
Despite that, and whether or not you buy the firm's bullish outlook, Farrell's talk struck me as a terrific lesson in how investors might think their way to a coherent strategy. All that was missing were names of stocks she likes. To see a list of 31 picks, including Nextel and Tiffany, you must give your name and number so one of the firm's 7,576 brokers can reach you. What's wrong with that? Nothing, necessarily. Just remember, when you go to school on Wall Street, the tuition bill may come due after graduation.
Questions? Comments? E-mail email@example.com or fax (321) 728-1711