MENLO PARK, Calif. -- E*TRADE plans to enter the defined contribution market this year with a fully integrated bundled offering including investment advice and mutual funds, and it will deliver the package to plan sponsors over the Internet.
The global online brokerage and financial services firm has been assembling components of its 401(k) offering through acquisitions and links with external firms and is taking aim at Charles Schwab & Co., San Francisco; Fidelity Investments, Boston; and other bundled service providers.
When all of the pieces are in place, E*TRADE intends to leverage the 401(k) offering through its nearly 3,500 existing corporate relationships, for which it already provides options trading, execution and record keeping.
"We will be entering the 401(k) business by the end of the year," said Amy Errett, chief asset gathering officer at E*TRADE Group Inc., Menlo Park; she is responsible for helping transform E*TRADE into a one-stop financial services company from its online brokerage base. Ms. Errett said the firm's institutional clients have been asking for a 401(k) package and E*TRADE is "very dedicated to being in this business."
E*TRADE already has most of the pieces necessary for a 401(k) financial package, and the company is putting the components in place for the self-directed employee benefit plan market. Currently, E*TRADE customers have access to online banking, insurance, investment advice, real estate loans and online bill paying services, as well as eight proprietary mutual funds and more than 5,000 external funds in addition to the online brokerage service.
Ms. Errett -- who joined E*TRADE this year after serving as chairman and chief executive officer of the Spectrem Group, Windsor, Conn., a company she founded in 1990 -- declined to provide details on the number of core fund offerings or indicate whether any additional outside service providers would be involved until the new 401(k) offering has been finalized. She said it will be unveiled this fall.
Ms. Errett said the offering will be "fully Internet-based and self-directed in nature." The advice engine is already in place following an agreement earlier this year between E*TRADE and Ernst & Young LLP, New York, to jointly establish a new company providing financial advice electronically for E*TRADE's 2.6 million customers. E*TRADE and Ernst & Young each contributed $25 million to the joint venture.
The advice service allows users access to advice both electronically, via the E*TRADE website, and face to face through Ernst & Young's nationwide network of 1,000 financial advisers.
In addition, E*TRADE last month signed a letter of intent to acquire the privately held Electronic Investing Corp., a San Francisco-based provider of personalized securities portfolios. The eInvesting service enables E*TRADE customers to buy securities in dollar denominations rather than by the share. In addition, according to E*TRADE, e-Investing service allows customers to take advantage of "innovative investment and diversification strategies" that make it easier to invest regularly across a broad portfolio of stocks.
E*TRADE currently offers its online customers eight proprietary mutual funds and access to 5,000 funds through its supermarket. The firm's Premier Money Market Fund is subadvised by Putnam Investments Inc., Boston; its seven index fund offerings are sub advised by Barclays Global Investors, San Francisco.
"Plan sponsors like the opportunities offered by the Internet, since it takes much of the paperwork and administration out of the equation and is more cost-effective for them," said Ms. Errett.
But, she said, "often plan sponsors want or need human beings to sit down with them or their participants, and we will do that."