Capital Markets

Going Direct

Companies can hand off direct purchase plans to brokerage firms, saving the cost of doing it themselves.
John P. Mello Jr.October 1, 2000

Investors who participate in direct purchase plans tend to be long-term investors, which is attractive to companies, especially in these volatile market times, when long-term investment dollars are at a premium.

The problem with these plans is that they can be expensive to run. It costs a company an average of $15 a year to maintain each account in a plan, according to BuyandHold, an online brokerage firm, in New York, that caters to long-term investors.

“What BuyandHold has done is take all the good that exists in dividend reinvestment plans and stock direct purchase plans and moved it into this century,” observes Peter E. Breen, CEO and co-founder of the firm.

By steering investors to BuyandHold, which was launched last November, companies can remove the burden of administering their plans off their backs. Companies such as The Walt Disney Co. and Sallie Mae have created links from their Web sites to BuyandHold, where investors can open an account with a balance of as little as $20 and trade twice a day for $2.99 a transaction.

Better yet, because BuyandHold is a brokerage, investors can invest in companies without direct stock purchase plans as if they had them. “We walk and talk like a direct investment plan because we allow people to buy shares in dollars and on a periodic basis,” Breen explains. “But we also allow you to buy shares of a company like Cisco Systems Inc., which doesn’t have a direct stock purchase plan.”