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Brokers keep developing tools but can investors handle them?

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Good piece by David Bogoslaw at Bloomberg Businessweek on all the new technology/trading development going on in the online brokerage space.  It’s a well-researched piece and does a great job of going through each online brokerage (including the smaller startups) and outline what they’ve been working on.

Some of the interesting functionality profiled in the article includes:

  • shareable, backtestable stock screeners (TradeKing)
  • expanded 3rd party research (RiskMetrics available at Fidelity, Seeking Alpha at E*Trade, Ned Davis at Schwab)
  • Exceptional volume scanners (LiveAction at tradeMONSTER polls for unusual activity in the options market)
  • more complicated buy/sell triggers (a few brokers)
  • social media integration (most of them)

The Bloomberg Businessweek article ends with

With individual investors still spooked by the market meltdown of 2008-09 and by the sudden plunge in major indexes on May 6, the advanced tools that online brokers are providing could be a carrot that draws more people back to stocks—and gets them back in the habit of trading online.

Online brokerages misguided

I’m not so sure about this.  The online brokerages continue to develop tools and underinvest in education.  It makes sense — frequent traders are their bread and butter and in a commoditized space of trading, tools are one way (services are another) that help to differentiate.

Still, the average investor will never use these advancement and even if he/she could figure out how to use them, he still can’t answer whyAutomated professional-grade advice is what these platforms should be advancing if they want to really capitalize accounts leaving traditional brokerages.

Source: Online Brokers Upgrade Retail Investor Tools (Bloomberg Businessweek)

photo courtesy of D’Arcy Norman

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