Full-service brokerage firms stay inventive

Andrew Leckey

February 12, 1993|By Andrew Leckey | Andrew Leckey,Tribune Media Services

It was 15 years ago that asset management accounts first combined a money market fund, securities and checking services into a package featuring a handy monthly statement.

Since the hefty 10 percent returns of money market funds made the 5.5 percent offered on bank investments look pitiful, investors flocked to convenient new "all-in-one" accounts at brokerage firms.

These days, returns of 3 percent or less from money market funds have made the "sweep" of dividends into them a considerably less important event.

The multitude of firms offering asset management accounts must invent features and trim fees to attract customers. The number of new accounts at full-service brokerage firms is growing modestly. Aggressive discount brokerage firms have stolen some of their thunder by eliminating fees.

In either case, the account benefits the firm because it gets investors to consolidate holdings and encourages more transactions. But should you decide on one of these accounts, be sure it fits your goals.

"It's easy to build up unnecessary cash balances with these accounts because all the cash just dumps into them and sits," says John Markese, president of the American Association of Individual Investors, headquartered in Chicago. "On the other hand, you do have this big pot of cash that also enables you to buy securities or other investments quite easily."

All have taxable and tax-free money market choices into which account money can be swept, as well as specialized tax-free money markets tailored to certain states. They offer access to their own stock and bond funds and myriad others.

Additional features vary.

Merrill Lynch, originator of the Cash Management Account that started it all, requires a $100 annual fee and $20,000 minimum in cash and securities. There's a Visa debit card (or, for an additional $25 annual fee, Visa Gold), access to automated teller machines, hard copies of checks returned on request and a full-service broker relationship.

"We opened 350,000 new CMAs last year, an increase of 8 percent, so they are not stagnating," says Gerald Cremins, director of asset accumulation services for Merrill Lynch & Co. "The big difference between our account and those that don't offer full service is that we help the client choose the most appropriate investments."

Meanwhile, the Ultra Service Account from Fidelity Investments has no annual fee, a $5,000 minimum, Visa Gold debit card and ATM access. You don't receive hard copies of checks, and there's no full-service broker.

"Our new account levels grew 200 percent last year, and our assets 23 percent, and we get most of our accounts from former Merrill Lynch customers," observes Joan Bloom, marketing manager with Fidelity. "Most important features are discounted commissions and the absence of monthly or annual account fees."

At discounter Charles Schwab & Co., the Schwab One Account also has no annual fee and a $5,000 minimum. There's a Visa debit card, ATM access and 24-hour trading access, but no hard copies of checks or full-service broker.

"One reason Schwab One Accounts grew 46 percent last year is that 100 of the 600 mutual funds available require no transaction fees," says Leslie Dixon, senior marketing manager of Charles Schwab & Co. in San Francisco. "A big feature is the automatic daily sweep that takes in new capital gains, interest or dividends and puts them into whatever interest-bearing account chosen."

Dean Witter Active Assets Account has an $80 annual fee,

$10,000 minimum, ATM access and a full-service broker, but no hard copies of checks. There's a 24-hour line for customer account information.

"There is greater investor awareness of the benefits of consolidating assets in one location and paying just one fee," says Thomas Borden, spokesman for Dean Witter Reynolds Inc. in New York. "New Active Assets Accounts grew by 19 percent last year."

At Citibank, the $125-annual-fee CitiGold account bucks the trend toward lower minimums.

"To qualify, you need $100,000 in cash, securities and credit (higher in New York, at $150,000), or $250,000 if first mortgages are also included," says Maria Rullo, spokeswoman for Citibank.

"CitiGold account holders appreciate that they can go to Citibank locations around the world and encounter the same reception they'd get at their local branch," she says.

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