Schwab Launches Initiative To Educate Online Traders

In response to the U.S. government’s suggestion that online investment firms take responsibility for educating consumers about the benefits and pitfalls of trading stocks on the Internet, Charles Schwab announced today that it will conduct more than 20,000 educational seminars at various Schwab offices throughout the United States.

The WebShops series, consisting of 13,600 workshops at 325 Charles Schwab branches, will feature online trading specialists from Charles Schwab to explain how the Internet can help them plan, research, trade and manage their portfolios.

Another 6,400 other workshops on a variety of online trading issues are also scheduled. Over the course of the initiative, Schwab hopes to reach 240,000 people.

“If you give investors the right tools, they are more empowered to make better investment decisions. Today’s investors realize the power of the Web to help them invest wisely, but many are reluctant to take the next steps. WebShops are designed to show that the Web is a tool you can easily master,” said Chairman Charles Schwab.

Irrational Exuberance?

However, the U.S. government is more concerned about those inexperienced traders who may be lured by the simplicity and glamour of Internet trading into taking risks they do not know about.

A dramatic increase in first-time investors in 1999 prompted the Securities and Exchange Commission (SEC) earlier this year to threaten regulatory crackdowns if online trading firms do not do a better job of educating new investors.

From 3.7 million online accounts in 1997, the business had boomed to 9.7 million by the second quarter of this year, the SEC said.

Schwab’s own research, conducted by Harris Interactive, also supports the need for an education initiative. Only 23 percent of investors that use the Internet for other purposes buy and sell stock online, the survey said, but 56 percent said they are likely to start trading on the Web if they given some instruction first.

The Harris survey of 2,239 Internet users in November showed that many people still want some hand-holding by a broker as a safety net.

Despite the SEC’s warnings about the Internet’s dangers, however, a significant number of potential investors are still showing interest in getting into the Web trading game, Schwab says. Of those surveyed, 15 percent said they plan to start investing online within the next year and another 15 percent plan to begin within the next five years.

Charles Schwab & Co. serves 6.2 million active trading accounts with $592 billion (US$) in customer assets. In the online world, the company leads the Forrester Research Power Rankings list of the top five online trading sites, ahead of Merill Lynch, DLJ Direct, Fidelity and TD Waterhouse.