American Express Financial Advisors of Minneapolis is launching a combined brokerage and mutual fund service in an effort to compete with full-service brokers and mutual fund sellers E*Trade of Menlo Park, Calif., and Charles Schwab Investment Management of San Francisco.
The new service, the American Express Diversified Portfolio Service, requires investors to deposit a minimum of $50,000 in a wrap-fee account for an annual fee of 1.25 percent or less, depending on the amount of assets under management. The fee gives investors access to stocks, bonds and more than 500 mutual funds, along with investment guidance and the right to make 30 mutual fund trades per calendar year and six to ten brokerage trades per calendar year.
Next year, American Express plans to add a no-load variable annuity and universal life product to distinguish its service from competitors, said Sarah McKenzie, vice president for wrap and trust services at the firm.
American Express came up with the concept of offering clients mutual funds and stocks without sales commissions when it conducted focus groups in early 1998, said McKenzie.
"The first thing they called for was mutual funds and the second was stocks and bonds," said McKenzie.
American Express has offered products with a variety of pricing structures but the most comparable product to the Diversified Portfolio Service is a mutual fund wrap product the company has offered for the past three years, McKenzie said. It now has $8 billion of assets under management. The firm has more ambitious plans for this new product, however, because it anticipates a combination of mutual funds, stocks and bonds will "strike a chord with consumers," McKenzie said.