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Andrew Rafalaf
Andrew Rafalaf
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Schwab w/o Wires

Online Brokerage Begins Beta of Wireless Trading

Charles Schwab & Co. has always been viewed as somewhat of an innovator-an assertion that is not entirely correct. The brokerage-with "Chuck" leading the way-is quick to identify emerging trends that were initiated by smaller upstarts, and then pours an unfathomable amount of resources to become the leader in whatever arena that might be. As Douglas Corning, director, electronic brokerage, was quick to point out at February's Securities Industry Association's Internet Update Conference, "The early bird might get the worm, but it's the second mouse that gets the cheese."

Schwab first exhibited this propensity to adapt and conquer with the discount brokerage in the 1970s. Then came the online brokerage. Today, it's wireless trading.

This model sell-side firm-of-the-future has taken its first steps into the largely uncharted waters of the wireless world, beginning the beta test of its wireless trading product on February 14th. This Valentine's Day gift-a sign that Schwab really loves ya'-was only unveiled in a few areas, says Bob Taylor, who is heading up the wireless initiative. The nationwide release is set to begin by the end of this quarter.

Of primary importance to Schwab has been getting its customer service representatives up to speed. The beta test, which will come to account for about 100 to 200 Schwab clients, has been unfurled in San Francisco and Orlando, the two sites where customer service employees have completed their wireless education. Schwab estimates that 60% to 80% of its customer service calls will be related to hardware and network problems, and Schwab may rely on Aether Technologies-its wireless application development and networking partner-to handle these tech-related queries.

Taylor explains that "internal customers," or Schwab employees that are also active traders, have been using the product for some time, but the beta really represents the first time outside customers will have access to Schwab's order execution, research and analysis through the wireless medium. When the brokerage completes the beta, sometime in March, it is planning to first offer the wireless service to its select group of Pinnacle customers and then to its Platinum group.

"We really want this to be a soft launch," Taylor explains. "The big splashy ads won't begin until the May/June time frame, and you'll see it come out with a bunch of advertising/marketing things around customer offers for the active trader segment. The big message is, we're doing a lot of things for active traders."

Schwab will open up the wireless service to its entire client base sometime in June or July, but Taylor says he doesn't believe that this product is really one that the general investor will be interested in...yet.

Customers can currently trade via 3Com Palm 3x's and 5x's equipped with a Minstrel modem. Schwab is planning to provide access via Research In Motion's RIM 950 pager in May, which also operates over the BellSouth network. Concurrently, the firm is looking at the Palm 7, smart phones loaded with HDML (handheld development markup language) and "even smarter phones" equipped with WAP (wireless application protocol).

Each, of course, represents its own challenges. While the Palm 7 seems like a natural fit with the other Palm products, Taylor is quick to point out that it operates over 3Com's Palm.net, which will require Schwab to develop a PQI, a tiny applet that will run on the Palm 7. He admits that Schwab is pushing off the Palm 7 launch because it provides less network capacity and fewer inherent functions, and is more expensive than its current offering. He expects, though, that service on the Palm 7 and the smart phones will be released by the end of the year.

Taylor adds that Schwab is currently partnering with many other telecom players like AT&T, Sprint, Ericsson and Vodaphone for the smartphones, which will first be previewed in Hong Kong in May or June.

For the PDA and RIM 950 product, Schwab has worked with Aether Technolo-gies, which specializes in fat-client application development, though, something that is decidedly different than the thin-client applications found on smart phones.

"We focused on the fat-clients to get the product out, and then in parallel, we brought to bear some of the other players to start working on those other things," Taylor says.

Taylor does not discount working with Aether in the future on thin-client technology, pointing out that Schwab has been more than satisfied with the vendor's work to date.

Will Schwab be able to handle the onslaught of calls and questions from new wireless users? Will limited wireless network capacity prevent investors from deferring to wireless trading? Will a malfunctioning PDA turn an investor off from the medium? Schwab has quite a bit to prove over the coming months, but given its past performance, you would be hard pressed to discount them.

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