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Funds Urged to Develop Advisor Strategy


NEW YORK - Fund companies need to develop an online strategy to help financial intermediaries use the web as a tool to service their clients and develop closer relationships with them in addition to using the traditional methods of fund distribution, according to industry executives. The executives spoke at a conference here last week on electronic distribution and marketing for mutual funds sponsored by the Institute for International Research of New York.

The financial service firms that are successfully offering products and services online are using a variety of methods to distribute their products, said Charles Roame, the managing principal of Tiburon Strategic Advisors, a market research and consulting agency in Tiburon, Calif.

"Consumers are not looking for online-only offers," he said. "The multi-channel players are getting all of the assets."

The vast majority of investors are using a variety of methods to open new accounts, receive advice and track performance, he said. Fund companies need to continue to offer their traditional methods of servicing clients, but they also need to provide online tools for the fastest growing distribution channels - discount brokerage firms and registered investment advisors, he said.

Between 1994 and 1996, discount brokerage firms experienced 35 percent growth while registered investment advisors had 28 percent growth, making these the two fastest growing channels, he said.

The fund industry could learn a lot from the online strategies of the brokerage industry because the fund industry is likely to follow the same path, Roame said.

In order to compete, brokerage firms have been forced to adjust their strategies. E*Trade of Palo Alto said nearly a year and a half ago that it would conduct business strictly online, but the firm has recently backed away from that position and has opened investment kiosks in shopping malls, Roame said. The move highlights a phenomenon in the brokerage industry in which firms that offer their services through both clicks and mortar platforms are generating the most business. Although investors may not open an account online, they may check account balances or make subsequent investments online, Roame said.

"There are Merrill Lynch branches that are bigger than all of E*Trade," he said. "This is a multi-channel American [investor]. The web is not a stand-alone channel."

A similar trend has emerged in the fund industry, where traditional no-load firms are starting to offer their products through financial intermediaries.

Even though more financial advisors are turning to the web to gather information about mutual funds, only a small percentage of funds are answering advisors' needs for online information, said Steven Miyao, senior vice president of kasina LLC, an Internet consulting company in New York. Only 420 fund companies have websites and of those, approximately 25 percent have websites for financial advisors, he said.

By providing research and marketing tools that can assist registered investment advisors with their business, a fund company can significantly increase its odds of selling through that channel. A majority of registered investment advisors use the web to conduct research that will help them serve their clients and developing a website that provides them with that information will be a great boost to a fund company, Roame said.

Providing tools that help advisors give customized information to their clients is an effective method of targeting the advisor market, said Neal M. Epstein, vice president of Putnam Lovell Securities of New York.