Fund Shops Not Hip to Web 2.0: Missing Out on Rich, New World Brainstorming
January 4, 2008
Asset management firms are missing out-big time-on the benefits of Web 2.0 tools, such as blogs, wikis, mashups and social networking sites, by waiting for other firms to take the first step, kasina maintains.
"We have seen tremendous conceptual interest in Web 2.0 from asset managers, but very little in the way of implementation," said Lindsay Geimer, a consultant at kasina and an author of "The Asset Manager's Guide to Web 2.0."
"There is a lot of fear out there when it comes to managing user-contributed content," Geimer said.
After reviewing more than 100 asset management websites, kasina found three that use blogs for an external audience, only a few that use mashups to display information and limited adoption of RSS feeds, podcasts and webcasts. None of the sites incorporated wikis or any type of social network on their sites.
"From a compliance standpoint, no one is doing much yet because they don't see their competitors doing anything," Geimer said. "Firms seem to be in a wait-and-see mode where no one wants to be the first to take the plunge."
Compliance and technology issues pose a real challenge, but firms can assuage their fears by practicing with these tools on their own intranet systems-which are not subject to the same regulations-prior to or instead of making them public, kasina said.
Wiki software, for example, allows anyone who meets a required access or permission level to add, delete or change content on a site. By limiting who has access and by monitoring and tracking the changes they make, IT departments can keep tabs on wiki content.
Two old-school firms are, in fact, at the forefront of these experimentations. Vanguard has turned its intranet, CrewNet, into a resource for its 12,000 employees. Employees can collaborate on ideas, share information on customers, locate an in-house expert and customize their site, including e-mail access, news feeds and a calendar. And TIAA-CREF is about to unveil a public social networking site covering all aspects of retirement, not just money matters.
"Web 2.0 is about harnessing the power of the masses," said Matthew Nelson, senior analyst of investment management for TowerGroup, at an Investment Company Institute conference in Washington last year.
The power of wikis resides in the people who constantly add, change and correct its content, Nelson said, citing the free online encyclopedia and database wikipedia.org.
The true spirit of Web 2.0 is to allow everyone to make changes and hope that good users will correct the mistakes of others, Nelson said, but such openness is unrealistic in a private company or firm where so much is at stake.
By protecting content behind a firewall and making sure only employees can access the wiki, a company can keep out vandals while fostering idea sharing and knowledge management.
Internal online forums like wikis and blogs can allow select groups from within a firm to communicate and collaborate on projects. An example is a wholesaler blog with important, timely information posted by sales management, with the ability for users to post comments and other updates, kasina said.
Mashups are another untapped resource, kasina said. A mashup is the combination of two or more web applications into a single hybrid tool, such as the combination of sales reporting data with Google Maps to allow wholesalers to better plan adviser visits within their territories.
Mashups can be created quickly and easily and be shared with colleagues. If a user comes up with an improvement and shares it with the group, everyone else can switch to the new mashup, possibly eliminating the time and expense of new software upgrades.
"Web 2.0 has completely changed the consumer experience and is already disrupting enterprise software," Nelson said. "CIOs should embrace the movement and look for internal and external opportunities."
The kasina report suggested Web 2.0 features could easily combine product information, mapping software, portfolio holdings, news feeds and market information into an enhanced product profile that could be further improved and adjusted to a user's personal preferences.
Users are already adapting to the Web 2.0 lifestyle, with more than 100 million blogs on the web and more than one million blog posts every day, kasina said. More than 50% of the content on the web is user-generated, and visits to social networks like MySpace and Facebook recently overtook visits to web-based e-mail services.
"From a user perspective, the benefits of Web 2.0 are obvious and compelling, and this will eventually force the hand of the asset managers," Geimer said. "The firms that solve the challenges first will have created a meaningful, competitive advantage.
"Asset managers are in a bind," she continued. "The compliance challenges aren't just paranoia; they're real. But if their advisers can't find the experience they want on the asset manager's website, they will start to migrate elsewhere."
If you lock a site down too tightly, you won't get social interaction, but a commercial site that is inherently different than a social blog, said Terry Jones, founder and former CEO of Travelocity.com, also speaking at the ICI conference.
"Consumers are nervous, particularly around online banks, of phishing sites," Jones said. Banks, fund companies and other secure sites need to take precautions to protect themselves and their clients from phishers-people who attempt to take information through fraudulent and criminal methods-but there are programs out there that can allow innovation and protection, he said.
Many fund companies and asset management firms are not offering Web 2.0 products because they are "hiding behind regulations because they haven't purchased the software they need," Jones said.
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