Filed under: Rumors, Products and services, Consumer experience, Rants and raves, Competitive strategy, Marketing and advertising, Stocks to Sell
No joke, does E*Trade Financial (NASDAQ: ETFC) have a purpose? I recently received an offering from E*Trade Financial promoting stock and options trading per transaction of $6.99 to $9.99. It offered 100 free trades to open an account. The problem is that I’m already getting free trading from several bank brokerage accounts.
If I wasn’t getting the free trades from my current accounts, there are competitors with better rates anyway. What is E*Trades competitive advantage? If it’s not price, or size, or breadth of services, or physical branches or branch locations, how does it intend to distinguish itself? It does not offer in-depth research or anything not readily available elsewhere. In fact, if I was to go by what I received, it offers far less.
I’ve read many stories that question E*Trade’s survival. In the literature that I received soliciting my business, I think it did a very poor job of convincing me it has a purpose for existing. Its beginnings as a web-based company were cool, but now each financial institution is on the internet.
On November 29, E*Trade announced that Citadel Investment Group was investing 2.5 billion to add needed liquidity immediately. It also has reshuffled management. Quoting from the article: “E*TRADE’s core business is strong,” stated Mr. Lilien. “This transaction with Citadel isn’t only a major vote of confidence from one of the world’s leading financial institutions but also grants us to directly address customer concerns and get back to our real business, which is providing industry-leading products and services to our customers.”
I think it should have pointed out the “industry-leading products” in the promotional material. From my perspective, Citadel may be positioning itself to be a part of some bigger M&A activity. Those who have recommended E*Trade sell itself no doubt have come to a similar conclusion. I have to believe that such discussions are ongoing and that the only thing yet to determine is the time line and how much the acquirer will pay per customer. ETFC closed up on Monday to $4.34, +5.08%.
To verify my track record, including bad calls, read Chasing Value and Serious Money.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
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