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Schwab trading system threatens discounters

Small discount brokers are facing a threat to their future business following the launch of the first touchtone trading system by Charles Schwab Europe.

Charles Schwab, formerly Share Link, is rolling out a system that will let investors carry out automated share dealings using a phone keypad.

Many IFAs believe the move represents the first stage in a push by the big discount brokers to grab a bigger share of the market.

Chase de Vere investment director Graham Hooper says discount brokers face several threats from fund managers and more efficient US and overseas discount operations.

He says: "Schwab could come in and do the job and wipe all the others out.

"In the US, it offers no-load on mutual funds, as well as service, valuations and efficient admin. It gives that little bit more but also has huge economies of scale and a massive advertising spend."

He also argues that product providers are becoming more hostile to discount brokers.

The Schwab launch comes just two weeks after Fidelity struck a blow for fund managers against discount brokers. Fidelity announced it would start to mail marketing literature direct to the clients of execution-only brokers.

But Hargreaves Lansdown joint managing director Peter Hargreaves warns that operations such as Schwab&#39s touchtone system could also be a threat to IFAs. He believes advisory brokers could be forced out of business by execution-only brokers.

Charles Schwab Europe president Mark Collier says: "We have led the way in the

US and we aim to give our customers the same here in the UK. We are convinced that the new system will become the preferred option for retail investors."

Investment, p24

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