Computerized Investing > January/February 2006

On-Line Discount Brokers 2006

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The past few years of AAII’s Broker Guide saw a consolidation trend with 77 on-line discount brokers featured in 2002, 62 in 2003, 54 in 2004 and 47 last year. This year, however, the guide features 46 firms, only one less than last year. In the past, many brokerage firms were forced to merge or be acquired by other firms as well as cut costs and reduce staff in order to survive. This trend seems to be cooling, but mergers and acquisitions are still commonplace.

Heightened competition has led many brokers to become niche players in order to differentiate themselves. Brokers seeking active stock traders have a different cost structure, research offerings and order-entry process than a broker acting as a one-stop center for investors seeking banking services, financial planning and management of varied portfolios of stocks, mutual funds, and bonds.

Figure 1.
Growth of On-Line

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