E*Trade is targeting the high-net worth and advisor market with a new way to work around mutual funds. To provide separate account management services to these markets, the Palo Alto-based broker has signed a letter of intent to acquire Minneapolis-based PrivateAccounts.com.

PrivateAccounts.com is one of a number of new Web-based firms that are trying to use the Web to distribute separate account management services more broadly. These sites claim that they will be able to offer these services with lower minimum account sizes than are currently offered.

PrivateAccounts is targeting individuals with a minimum of $100,000 to invest. The firm is privately held and terms of the transaction were not disclosed. The Spectrem Group acted as advisor to E*Trade on the acqiusition.

"E*Trade is continually looking for innovative ways to return more and stronger value back to our customers, while also increasing our asset base, and this agreement with PrivateAccounts certainly achieves that goal," said Christos M. Cotsakos, chairman of the board and chief executive officer, E*Trade Group, Inc. "With PrivateAccounts, we are once again giving our customers a personalized product that is intended to empower them to take control of their personal financial futures. This acquisition also clearly demonstrates how E*Trade continues to blend the power of technology and the Internet channel with personalized 'high touch' services, to drive our scalable business model for future growth and profitability."

E*Trade also said that it plans to let its customers use the service to select money managers and monitor their performance without using a financial advisor.

It will also offer a product specifically developed for financial advisors will provide a platform from which advisors can search for money managers, access research and proposal generation capabilities, and can privately label performance monitors their clients can then access on the advisor's website.

"Direct access to professional money managers is a key component of the asset-based services infrastructure that E*Trade will be bringing to its customers," said Amy Errett, chief asset gathering officer, E*Trade Group, Inc. "Prior to this offering, such access was reserved for institutional investors and individuals with over $1 million. We will be providing our customers with the flexibility associated with separate accounts, as well as access to electronic advice, the ability to create personal portfolios of securities and tax-deferred college savings products. This suite of innovative products will give our existing customers more reasons to keep their long-term investing dollars with E*Trade. At the same time, it appeals to entirely new customers who might initiate a relationship directly with E*Trade or through the business-to-business and business-to-consumer markets."

"E*Trade understands probably better than any other financial services company the real needs of today's sophisticated consumer, and how the combination of technology and human insights and service can be efficiently leveraged to meet those needs," said Doug Baker, president and CEO of PrivateAccounts. "We are very excited to be a part of E*Trade, and look forward to the opportunity to offer an even broader global customer base our service, providing direct access to top money managers and personalized investment plans."  

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