Fidelity and Schwab have thrown their hats into the basket trading ring with new products -- or have they? While mainstream media reports pit the pair against Foliofn and others, the similarities may not extend beyond the words "basket portfolio."

Schwab's Washington, DC test run product of a 10-stock basket is not intended to compete with either standard retail brokerage or mutual funds.

"We think there's a lot of room on between mutual funds and stocks," said a Schwab spokesperson. "Right now, we offer a great selection of mutual funds and a full range of equities. We want to explore ways of serving clients who want the spectrum in-between."

Like Foliofn, the product is essentially self-directed, while Schwab will provide additional advice from US Trust. Furthermore, the San Francisco firm intends investors to use the investments for the "explore" portion of their portfolios, not as core positions. Although Schwab's basket presently carried a set fee, the ultimate shape and fate of the new product are both uncertain.

Fidelity's product, consisting of five to 50 stocks, set up in sector- or style-specific baskets, is aimed at active traders. Set for a June launch, the product has been developed in response to demand from Fidelity clients.

"We have around 100,000 active traders at Fidelity," said James Griffin, Fidelity spokesman. "We've heard from them that they're interested in broader products than individual securities. The clear message is that we feel the product is specific for those that are interested in individual securities: active traders."

While Fidelity's model bears similarities to Foliofn's products, it is more clearly positioned against UNX, the institutional-only basket trading platform that has so far struck the hedge fund and active trader markets.

According to Nancy M. Smith, vice president of web content and investor education, Foliofn sees these new entrants as a validation of its own business model.

"We feel it sends a large message to the entire marketplace that folios are here to stay," she said. "We were delighted to hear about Schwab and Fidelity following Foliofn's lead with their products.

Are Fidelity and Schwab copycats? It doesn't really matter. While both firms have huge customer bases and known track records to feed on, Foliofn and UNX have uphill battles both in terms of recognition and acceptance. 

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