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Re: Fwd: Rule Maker: American Express Changes Fees


-----Original Message-----
From: G Gainer <ggainer@yahoo.com>
To: hpd@woodland.org <hpd@woodland.org>
Date: Thursday, September 28, 2000 8:57 AM
Subject: Re: Fwd: Rule Maker: American Express Changes Fees

>I e-move (if I may) that we stop any action to
>switch brokers, and reevaluate choices at the
>next meeting.
>--- Kathe428@aol.com wrote:
>> Anybody else read this?  ..any thoughts on
>> this?
>> ATTACHMENT part 2 message/rfc822
>> To: kathe428@aol.com
>> From: The Motley Fool <Fool@MotleyFool.com>
>> Reply-to: The Motley Fool <otto@Fool.com>
>> Date: Wed, 27 Sep 2000 16:52:46 -0400
>> Subject: Rule Maker: American Express Changes
>> Fees
>> <HTML><PRE>
>> <FONT COLOR="#000000" SIZE=4><B><a
>> href="http://www.fool.com/m.asp?i=136745">The
>> Motley Fool</a>
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>> Rule Maker: American Express Changes Fees</B>
>>  <FONT COLOR="#000000" SIZE=3>
>> <b>Online brokerage customers are upset about
>> the company's new fee structure. Phil Weiss
>> blames the management.</b>
>> <FONT COLOR="#000000"
>> COLOR="#000000" SIZE=3></B>
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>> By Phil Weiss
>> Wednesday, September 27, 2000
>> Recently, <B>American Express</B> (NYSE: AXP)
>> <A
>> changes to the fees charged to customers of
>> American Express Online Brokerage. Today I'm
>> devoting the column to my reaction to these
>> changes as a shareholder, as well as what it
>> says about the company's management.
>> American Express <A
>> its online brokerage service about a year ago,
>> offering free trades for account holders with
>> balances exceeding $100,000, and free "buys"
>> for account holders with balances between
>> $25,000 and $100,000. Trade commissions were
>> $14.95 for sales by the latter group of account
>> holders, as well as all trades for those with
>> account balances less than $25,000. This fee
>> structure positioned the company as one of the
>> lowest-priced discount brokers in the
>> marketplace.
>> If you take a stroll over to our <A
>> Brokerage Center</A>, you can pull up a <A
>> showing how American Express Brokerage compares
>> to some other discount brokers today. Here is a
>> summary of the primary policy changes that have
>> been made:
>> -If your account balance is more than $100,000,
>> you're now allowed only 10 free trades per
>> month.
>> -If your account balance is between $25,000 and
>> $100,000, you're now allowed only 3 free "buys"
>> per month.
>> -All trades that are not free are subject to a
>> commission of $19.95.
>> -All limit orders are subject to a commission
>> of $19.95.
>> Some of you might be wondering why I've chosen
>> to write about this here. Is it because of the
>> impact these changes have on the account that
>> my investment club recently opened with
>> American Express? No. It's not because of the
>> impact on our Rule Maker portfolio costs,
>> either. (The Rule Maker portfolio is also
>> maintained by American Express.) Based on the
>> way these portfolios are managed, the
>> modifications won't have much impact. Both
>> portfolios typically purchase at market price
>> and trade infrequently. I suspect that this is
>> the case for most investors with a long-term
>> approach to investing.
>> I'm writing this column because the changes
>> leave me with concerns about American Express'
>> management.
>> In August I wrote a Motley Fool Research <A
>> discussing <B>General Electric's</B> (NYSE: GE)
>> approach towards moving its businesses to the
>> Internet. My opinion is that GE is doing a
>> great job converting its business from an old
>> economy model to a new economy one. Before
>> making the switch, GE tries to learn as much as
>> it can about what its customers want and how
>> its competitors could destroy its business.
>> From what I've seen, it looks like American
>> Express rushed to get its online brokerage open
>> before it fully understood the related business
>> model. You could argue that the reason for the
>> changes is to combat the efforts of day-traders
>> using it to cut costs.
>> Why do I say this? A few months ago, the policy
>> was changed to charge commissions on same-day
>> buys and sells of the same security, a
>> technique favored by day-traders. Many of these
>> trades were also likely to have been limit
>> orders, which are more expensive for a
>> brokerage to process. Now American Express has
>> decided to charge for <I>all</I> limit-order
>> trades.
>> My view is that, unlike GE, American Express
>> failed to consider the impact day-traders would
>> have on a business model it most likely created
>> to court long-term buy-and-hold investors.
>> Based on a discussion I had with the company
>> about this issue last Friday night, these
>> changes should also provide some additional
>> revenue to upgrade the services it can offer to
>> its customers. That actually sounds good, but
>> I'm not so sure. The problem is that the switch
>> has likely cost the company a lot of
>> credibility with customers and shareholders.
>> From what I can tell from my survey of the
>> Fool's message boards, many people moved their
>> accounts to American Express Brokerage because
>> of the free trades. (Check out the following
>> links for discussion board posts.)
>> -<A
>> -<A
>> -<A
>> -<A
>> -<A
>> -<A
>> I realize companies are in business to make
>> money, but I think these changes go too far.
>> Worse, it hints American Express didn't think
>> the issue through, or simply planned the move
>> all along. Free limit orders were totally
>> eliminated. In an era when most brokers have
>> been lowering commissions, American Express
>> <I>raised</I> them.
>> Worst of all, I think the changes were a
>> violation of the trust that exists between a
>> company and its customers. It's hard not to
>> have the perception that a "bait-and-switch"
>> strategy was used to attract as many new
>> customers as possible, while all along the plan
>> was to pull the rug out from under them with
>> changes like these once the accounts were
>> established.
>> When I called the company I was also told that
>> complaints about the changes outnumbered
>> positive reactions by about 20 to 1. This is
>> also something that troubles me as a
>> stockholder. The likely outcome of these
>> changes is that, if they are not either
>> rescinded or modified, American Express will
>> lose existing accounts and/or attract fewer new
>> accounts.
>> In addition, the changes to the fee structure
>> make American Express' position in the
>> marketplace hard to characterize. Previously, I
>> would have classified it as a low-cost
>> provider. Now, it's not quite an
>> <I>expensive</I> provider, but it's not cheap
>> either.
>> The bottom line is that American Express
>> management is guilty of some missteps. By
>> apparently failing to fully understand the
>> nature of online trading from the get-go, it's
>> made changes that could result in lost
>> business. It also raises questions about the
>> management
>=== message truncated ===
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