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Electronic Delivery Said to Need Marketing

MIAMI - Disseminating information electronically is becoming increasingly important for mutual fund companies to retain customers, capture assets and reduce costs. It is not enough, however, for companies to simply install systems and software which enhance websites and customer services.

Now that electronic document delivery has been approved by regulators, one of the main challenges for mutual fund companies has become gaining shareholder consent to receiving information online. An aggressive program to achieve that goal is essential. That was one of the main points of executives discussing

how to increase the electronic distribution of mutual fund information at the National Investment Company Service Association's operations conference here last week.

Electronic delivery has the potential to tremendously reduce costs throughout the industry, according to Rob Legasey, managing director of strategic relationships of NewRiver Investor Communications of Watertown, Mass. The industry spends about $1.15 billion for paper communications, a conservative estimate, according to Legasey. The cost of industry-wide electronic communications would be about $573 million, about half that for paper communcations, he said.

In total, 68 percent of fund shareowners use the Internet, according to Legasey, citing statistics of the Investment Company Institute of Washington, D.C.

"That means that the pure technology process has already happened," he said. "Now we've got to give them the utility and the access."

"Electronic distribution provides speed, cost effectiveness and flexibility," said John Bourke, vice president and general manager of advanced output solutions at PFPC of Wilmington, Del. "It is a new communication avenue that is expected by customers, demanded by the marketplace and complex to implement."

Although the marketplace may demand electronic delivery, it can still be very difficult to gather the necessary consents from shareholders to provide it, according to Legasey. Companies need to take an aggressive approach and implement a marketing plan that focuses specifically on consent collection. NewRiver, through its alliance with DST Systems and several other service providers, has obtained permissions from approximately one million shareholders since it began offering electronic delivery of documents a year ago. That is well short of the five million consents NewRiver had projected within that time. (MFMN 2/5/01)

"Electronic delivery is not something consumers need," said Legasey. "Initially, you have to emphasize the benefits. Over time, they'll realize the utility."

An important aspect of a consent marketing plan is targeting the right audience.

"If you look at some of the statistics, you might want to target specific groups," said Legasey.

Younger and higher income shareholders are the major users of the Internet, according to Bourke. More than 50 percent of Internet users are between the ages of 16 and 45, he said. About 91 percent of shareholders with incomes over $100,000 use the Internet versus 47 percent of those with incomes of $25,000 or less.

Companies will need to use customer services and e-mail campaigns as part of effective consent marketing strategies, according to Legasey. Employees talking to shareholders is the best opportunity to educate clients on the value of electronic delivery, gather their e-mail addresses and get consents, he said. E-mail can be an effective consent collection tool because it is so easy for customers. Regulations allow consents to be delivered by e-mail.

There are advantages to electronic delivery for both financial intermediaries as well as individual shareholders and they can be stressed with both groups, according to Bourke. One of the easily marketable advantages to having online statements is that it lets companies offer financial intermediaries information to be used with their customers directly. That is something for which financial intermediaries are constantly asking, according to Bourke.

As with any new service that a company is trying to market, employee training is very important, said Legasey.

"We've got to take the time and spend the money to educate employees about what electronic delivery is about," he said.

One of the major challenges to developing a consent collection plan is deciding how to develop your website accordingly, said Legasey.

"Everyone has a development list for their website that's a mile long and getting priority there can be a major problem," he said.

Marketing for consent is not a one-time event and companies must treat every communication as a consent opportunity, according to Legasey.

"This is going to take [companies] three to four years," he said. "It's a long term deal, not a quick fix, and you've got to understand that. Companies have to deal with this as a real campaign and a long term process."

Right now, consent information is fragmented and used by single companies as proprietary data. Although it probably will not happen any time soon, sharing consents such that one consent would apply to all financial relationships of a customer could be helpful to the industry, according to Legasey.