PSSSSST! YOUR BANK OFFERS ONLINE TRADES; DON’T PASS IT ON: BANKERS LOW-KEYING SERVICE TILL THEY CAN IRON OUT KINKS

Hoping to hang on to customers itching to invest on their own, banking companies are offering a very unbankerly service: online securities trading.

First Union Corp. of Charlotte, N.C., which declined to discuss details, confirmed that it’s the latest to start a pilot program to give its customers the tools to become cybertraders.

BankAmerica Corp., Wells Fargo Corp., Wachovia Corp. and other banks are offering online trading mostly as a defensive move, hoping to keep assets from walking out of the bank with their online-oriented owners.

For now banks are keeping quiet about their services, refraining from big promotions like those of Charles Schwab Corp. and E*Trade Group Inc., discount brokers that have spent millions on TV ads showing everyman and -woman making a killing on the Internet.

Banks want to make sure their computers can handle the demand, because a glitch during feverish trading periods could cost a bank thousands of customers. They might decide not only not to trade there, but also not to make deposits, get mortgages or take out another type of loan.

Moreover, it’s unclear whether online trading is the growth market that conventional wisdom suggests (See story on Page 11).

“They have a handicap,” says Ken Hoffman, president and managing director of Optima Group, a Fairfield, Conn., consulting firm specializing in bank brokerage and mutual funds. “Banks have been less aggressive than they should have been in letting people know they’re active in the retail investment business.”

Banks, like brokerages, fear undermining their own sales staffs with online trading, but at the same time worry about entrepreneurial customers taking a hike with their assets.

Banking companies approach online trading in three ways. Some, like Wachovia in Winston-Salem, N.C., start online brokerages from scratch. Others, such as Fleet Financial Group Inc. of Boston, which bought discount broker Quick & Reilly in 1997, acquire online traders. Still others take the easy way out with a website link to a virtual broker. That’s what Bank One Corp. of Chicago does, letting E*Trade and DLJdirect (under the name of Oneinvest.com) handle the business.

“We’ll start marketing when we’re sure we have the capacity,” says Lawrence G. Baxter, executive vice president for digital financial services at Wachovia. “We see it’s a huge part of the future but we want to get there in a measured and carefully balanced way.”

hopes for one-stop shopping

Banks believe the best way to compete is by targeting current customers. They operate on the theory that deep down, consumers want to keep as much of their financial business as possible under one roof. It’s the one-stop-shopping model that has guided banks in their forays into mutual funds and other non-traditional services.

Wells targets its online banking customers, by, among other things, placing ad banners for the nine-month-old investment service on its web page.

“We have a customer base that we have a relationship with,” says Jennie LaSalle, vice president of online brokerage for the San Francisco bank. “They trust our ability to deliver our services online.”

Kelly Doherty, an executive with BankAmerica of Charlotte, N.C., agrees that changing perceptions is a major challenge.

“The thing we struggle with the most is the mystique of a bank,” said Ms. Doherty, senior vice president of electronic commerce for brokerage at NationsBanc Investments Inc. Online, a unit of Charlotte-based BankAmerica. “People wonder if an investment firm affiliated with a bank has everything a regular investment firm has to offer.”

One way to dispel such skepticism is through marketing. BankAmerica intends to launch its first significant promotional effort for its service this year and Wells plans to step up its efforts.

The banks declined to disclose details of their plans but in all likelihood they won’t be on the same scale as the blitzes by Schwab and E*Trade.

“They’ve certainly been out there promoting their products to the general public,” Ms. LaSalle says of the discount brokerages. “They have a little bit of a jump, but I don’t think it’s a significant advantage at this point.”

Advisers could lose if bankers turn their customers into do-it-yourself investors. Sid Blum, president of Successful Financial Solutions in Northbrook, Ill., has no immediate fears but cautions:

“Anything that pulls business out of the total pool has an effect. Over time could they siphon off business from the adviser community? It’s a possibility. It depends on how aggressive they are.”