![]() ![]() In 1988 its brokers ranked last in productivity (the amount of revenue each broker generates), and the firm owed hundreds of thousands of dollars in fines to the SEC for sales and trading abuses. At the end of the 1980s, Paine Webber was bleeding. One reason it's happening is Grano himself. "For the first time we're hearing, 'Oh, wow! These guys get it!'" says Paine Webber President Joseph Grano. Paine Webber intends to introduce its own Internet plan later this summer. In early June, Merrill Lynch announced that by December it would offer customers online trades for $29.95 (the same price Schwab charges), plus fee-based accounts that include advice and electronic trades. But the full-service firms aren't playing ostrich anymore. And E*Trade's recent agreement to buy Telebanc Financial means that, unlike either Schwab or the full-service firms, it can offer customers both banking and brokerage products online. In the first quarter of 1999, Charles Schwab gained 42% more assets than full-service Merrill Lynch. And while Paine Webber didn't exactly embrace the Internet early on, it is not turning a cold shoulder to it either.įor all the commotion about online trading, it's way too early to identify Internet winners and losers in the brokerage business. During an era when global financial behemoths began offering everything from investment banking to insurance, Paine Webber stayed small (its 1998 net revenues of $4.4 billion are only 25% larger than Morgan Stanley Dean Witter's profits of $3.3 billion), domestic (96% of net revenues are from the U.S.), and embarrassingly retail (75% of net revenues come from individual investors). But crediting only the bull market ignores several choices Paine Webber made in the early 1990s that mostly defied conventional wisdom, yet turned out to be right-at least so far. ![]() 2 in any of its major businesses, and it blundered through the 1980s as it repeatedly tried and failed to turn itself into an investment bank. To many Wall Streeters, the firm's survival represents the dumb luck of the bull market and the triumph of mediocrity. Over the past five years the stock of stodgy Paine Webber has not only kept pace with Merrill's but also trounced both the S&P 500 and the shares of glamorous J.P. Revenues, earnings, commissions, and assets under management grew at higher rates than Merrill Lynch's. ![]() The company's first-quarter earnings beat Wall Street estimates by almost 40%. Right now it's Paine Webber that's looking good. "Its reason for existence was to make others look good," says Bob Upton, senior director at Fitch IBCA. Many on Wall Street think that Marron, a serious art collector, is more interested in his Lichtensteins and Jasper Johnses than in financial planning or online trading-and that Paine Webber long ago lost its way. Its CEO, 64-year-old Donald Marron, has ruled since 1980-when the Dow was below 1000 and calculators were considered high tech. ![]() This is a firm whose lifeblood is the commissions it earns for trading stocks and bonds on behalf of individual investors. If so, the company atop the endangered-species list is Paine Webber, the nation's fourth-largest brokerage. It's obvious: Traditional brokers are middlemen on the verge of extinction. "You can add that to the long list of things he was wrong about." "We're betting on ourselves," says a confident woman in another ad. "My broker said, 'You're gonna hate online trading,'" says one man in an ad for e-brokers. (FORTUNE Magazine) – To watch the television ads for online brokerages like E*Trade and Ameritrade, you would think human brokers were overpriced, arrogant, and dumb. ![]()
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