By James Langton

(September 17 – 10:20 ET) – There’s still a role for full-service advisors in the retail securities business but that role will diminish in the future, says Hardwick Simmons, chief executive of Prudential Securities Inc. He was speaking yesterday at the annual Securities Industry Association conference in Chicago.

Prudential was the first U.S. firm to introduce a fee-based option for its clients earlier this spring. The rise of the Internet was a factor in that decision, says Simmons. The Net is fundamentally changing the economics of the business, he says. “Intermediaries will have to prove their value or get out of the way, and we are classic intermediaries.”

Within five years Simmons sees U.S. retail trading volume evenly split between discount and full-service brokerage, yet he expects that 80% of brokerages’ revenues will still come from the full-service side, and only 20% from the discounters. He believes that the firms that best integrate the traditional full-service advice business with an online business will be the big winners in the securities business. “Whoever links the FA’s desktops with the client’s has the key to technology going forward, and the key to account consolidation” he says.

Simmons says that the quality of advice will have to get better to deal with more sophisticated clients. Bona fide financial planning advice will be key. “We can no longer allow individuals to suffer the vagaries of individual financial advisor performance.”

Prudential is developing algorithims that will allow it to automate some of its advice giving, and Simmons admits that ultimately this advice may be pushed straight to the client, bypassing the financial advisor.

Prudential is also introducing in-branch service specialists who monitor, contact and hand-hold new client accounts along with the individual financial advisor for 35 days after opening the new account.

Simmons says one of the biggest challenges is getting financial advisors to buy into the new strategy – that they must focus on advice and service rather than trading and assets. At Prudential the firm is subsidizing advisors for 12 to 18 months as they transfer their account bases onto their new system.