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Online Investors Grow More Demanding

NEW YORK - As online investors become increasingly demanding, fund companies must continually upgrade their websites and adjust to those demands. That was the consensus of industry executives at a meeting here last week of the National Investment Company Service Association of Wellesley Hills, Mass. Executives discussed changing investor behavior and how companies can meet service expectations of customers who buy shares online.

"The Internet has really affected investor behavior because there is a lot more information in investors' hands," said Dahnielle Schmidt, vice president of e-commerce at BISYS Funds of Little Falls, N.J. "Now people have access to personal information online and can get it very quickly." E-commerce and financial services has evolved very quickly, said Schmidt.

"At first, the Internet came out and financial companies were interested in getting their name on the web," she said. "They wanted to take all the information they already had in their marketing materials and get it online so investors could get to it sooner, quicker without having to call in or wait for it to come in the mail."

The next step was giving investors the opportunity to interact with their websites and financial companies began providing access to personal information, she said. That was followed by online trading, which has grown 87 percent in the past year, according to Schmidt.

As a result, online investors have become more demanding, according to Schmidt. They are also more confident and more experienced than offline investors. Fifty-four percent of online investors consider themselves experienced investors while 17 percent of those who do not use the Internet to trade consider themselves experienced, she said.

Sixty-eight percent of all mutual fund households use the Internet for financial service-related activities, said Jeff Naylor, account manager at SunGard Investor Accounting Systems of San Mateo, Calif.

"The most telling statistic that shoots us into the future is that a huge number of young adults are displaying a real affinity for financial services on the net," said Naylor. "They tend to be four or five times more likely to interact with mutual fund companies online. As those investors continue to mature, and with the bounty we have in our economy these days, those individuals will become a force to be reckoned with."

Instant gratification was one of the expectations that conference participants said companies must address. Websites must provide prices instantaneously and account information, according to speakers.

"The 24/7 mindset of the Internet is real and it's something we have to address in our operations," said Naylor. "Being able to give out one's account information is critical. If you're in a situation where you're not able to give that information immediately, you put yourself in a situation where you might not be able to capture a sale because you're forcing that shareholder to come back to you a second time."

Websites must also be easily understood and usable. Navigation tools and capabilities such as sites remembering' investors' information are important to incorporate, according to the speakers.

"Those technologies are not only becoming easily implemented, but they are becoming the norm ... and we need to be on that bandwagon," said Naylor.

At the same time, websites do not replace personal customer service, and in some cases, they may create an even greater need for live customer service.

"We have to design sites with a service model in mind," said Rob Legasey,

managing director of NewRiver Investor Communications of Andover, Mass. "If you put a customer at a website, you then have to let them [have] access [to] customer support in a variety of ways - telephone, online chat, email, etc. You have to give the customer the ability to get help while on the website because if you don't, then they go away from your site and it's going to be very difficult to get them back."

Another expectation of online investors is that valuable content will be provided, speakers said. Electronic statement delivery, investment-related documentation, calculators and allocation models, and planning software are all important capabilities, they said.