Funds Boost Online Efforts in Bid for Advisers
November 5, 2001
While the Internet has proven to be something less than the dominant distribution channel many had hoped for, in the past year, funds' online initiatives have largely been directed at capturing and servicing broker-dealers, wirehouses and other intermediaries.
In 2001, funds shifted their online initiatives from servicing the retail channel with Web sites and began focusing their efforts on institutional and intermediary channels, according to a new study from kasina, a New York-based e-commerce consultant.
The report, which sums up the state of the fund industry's online initiatives, outlines how fund companies' online strategies have reflected changes the industry has undergone in the past year. While firms have shelved more ambitious online projects and those that do not have an immediate or short-term return on investment, firms continue to develop online strategies to facilitate sales and distribution, said Lee Kowarski, a kasina consultant.
More importantly, while last year firms accepted the fact that the Web was not what they had initially expected in terms of distribution, they began this year to view it more as a practical tool to reach and service customers, Kowarski said. "A number of firms have gone ahead, realizing that the Internet is not going away and to be positioned you have to spend some money," he said. "And in this time of uncertainty, people are looking for reassurance and the Web will be an important piece of that, but not the sole piece."
Tailoring Online Strategies
Not surprisingly, many firms focused on improving their online services to wirehouses, broker-dealers and other intermediary channels. While there were significant developments here, much remains that funds can do to improve their services, Kowarski said.
The advisor channel is a bit tricky to target because most broker-dealers and wirehouses have their own intranet sites and restrict what their reps can view. "Broker-dealers want to maintain control and provide all of the information that [their advisors] are seeing and there are compliance issues that could arise," Kowarski said. As a result, fund advisor sites lose importance because reps can't visit them.
In response to that, funds are reaching out to advisors using online initiatives rather than waiting for advisors to visit the funds' sites. E-mail alerts that notify advisors when a client redeems shares or that provide relevant market updates is one such method. Funds need to be careful, however, not to "spam" advisors and it is advisable that they allow the rep to choose the kind of information they want to receive, Kowarski said.
Funds are also beginning to bring specialized content to advisors. While this method is still in its infancy in the intermediary channel, funds are figuring out ways to gain access to broker-dealers and wirehouses' intranet sites in order to offer their own content, Kowarski said.
A more effective yet underutilized means of online marketing to the advisor channel is through online tools that help with the sales process or build relationships. Such tools can help the fund wholesaler work with the advisor or, alternatively, the advisor work with the client. While some funds offer such tools, most have concentrated their efforts in this area by providing sales and prospecting tools.
Online Strategies Address Institutional Sector
By far, the greatest online development the fund industry has made in the past year has been in the institutional sector, according to kasina. Last year, almost half of the firms evaluated by kasina did not have a password protected Web site for institutional investors and provided only a basic level of online service.
Prior to that, few firms even offered institutional Web sites. Viewed as a relationship-driven business, most funds considered e-commerce unsuitable for their institutional clients, according to kasina.
But it appears that belief is disappearing--some 65% of firms evaluated by kasina allow their institutional clients to view their account balances online compared to just 50% last year.
Improvements in the Retail Sector
Even though the most significant online developments took place in the institutional and intermediary channels, the number of Web sites dedicated to retail investors continued to grow in 2001. In terms of retail initiatives, most funds focused their efforts on improving their Web sites and adding online tools to help service those clients, Kowarski said. Funds began to better utilize e-mail, added online transaction capabilities and offered price updates.
The number of asset management firms with Web sites grew from 421 last year to 478 this year. While the number of firms adding retail sites appears to have leveled off compared to other years, it is a significant increase which proves that "firms accept the idea that the Web is here to stay," according to kasina.