A few virtual brokerages are deciding that they need real branches to woo new customers and increase access to services.
According to a report by Forrester Research, the Cambridge, Mass.-based Internet trend tracker, E*Trade, Datek and Web Street all have plans to add physical sites to complement their Web site brokerages. The move signals that online-only firms believe locations are critical to their survival, Forrester says.
In May, E*Trade acquired Card Capture Services. The company operates 8,500 ATMs nationwide, which E*Trade will convert to financial services kiosks offering brokerage and banking services.
E*Trade CEO Christos Cotsakos said in closing the deal that he expects the kiosks will revolutionize the industry the same way ATMs changed banking. He noted that the portals will "provide branded physical touch-points for services without an investment in traditional brick and mortar."
Datek will open an investor center on each coast this year and as many as 25 in the next three years, Forrester says. It will reportedly use the centers to attract customers by demonstrating its Web site and holding investment seminars.
Expanding from one branch in Beverly Hills, Calif., Web Street is opening locations in the financial districts in San Francisco, Denver and Boston. Next up are New York and Chicago branches, then several international sites, including Paris, Frankfurt and Hong Kong, according to the company.
In announcing the plan, Web Street CEO Joseph Fox admitted that online-only brokerage service "remains a slightly impersonal experience."
"These financial service centers will provide that level of satisfaction, trust and comfort with an online brokerage firm that consumers are still looking for," Fox added.
The Forrester report supports such moves among online brokerages. Online leaders Charles Schwab & Co. and TD Waterhouse open more than 50 percent of their new accounts at their branches. And both firms also see an increase in transactional activity from existing customers when a branch is built in their area.
Therefore, the research firm expects "a rash of branch building" among virtual brokerages. But Forrester notes that opening branches isn't cheap and smaller players may sell out to larger firms that already have physical locations.