The fund management industry is fast catching up with its broking and banking counterparts in the race for cyberspace.
"We're expecting a big jump in activity this year," says Kathryn Dioth, Internet marketing manager at BT Funds Management, a pioneer in taking fund management online. "It's clear that today's investors are among the most Internet savvy of the community. The online push is coming from consumers and their financial advisers who are developing an increasing appetite not only for managing their investments online, but also for transacting."
In fact, the biggest challenge for the fund managers, according to Dioth, is not breaking a lack of consumer confidence in transacting online, but rather ensuring that they have the right back-end technology to deliver the goods, especially at the transaction level. BT Funds Management, she says, has been "lucky" in this sphere, with its high-level technological team having taken BT Funds Management's online capability to the transaction level last November. Estimating that only some 50 per cent of the current 400,000-plus BT investors have access to the Internet, Dioth says the company is "delighted" with the log-on of some 8000 members since.
"Individual investors," she says, "can now make additional investments and withdrawals, view investment balances and transaction history, consolidate accounts, and switch between funds. Investors can do this on their own or together with their adviser in the office. The only restriction that consumers still face is that they can't go in cold and make an investment off the site, because of current prospectus requirements." But, she believes there will be radical changes in the next few months as the Australian Securities and Investments Commission (ASIC) moves to pass enabling legislation. "This will radically cut investors' turnaround time even more, as they will be able to also set up their funds online."
Martin Crawford, general manager, marketing at MLC, the main financial services arm of the Lend Lease Group and another pioneer in the financial services online push, believes fund managers' relative lack of an online presence has more to do with evolutionary trends than slowness on the part of the managers. "The industry is now seeing the advent of the mature rather than the leading-edge Internet user," he says. "In the US, online investment was led by the share traders, driven by price, control and convenience. That was the entry point, but the Internet is now getting more attention from users who are interested in online investing, admittedly for similar reasons, but more importantly have a balanced view of the form their investments should take. They are interested not only in stock trading, but also in including managed funds in their investment portfolio mix. In two years we see this market being far bigger than online broking."
The Lend Lease Group's focus is on an ambitious long-term financial services growth strategy, most recently evidenced in its agreement with ninemsn.com.au, which links Lend Lease's online investment service, yourpropserity.com.au, with the ninemsn.com.au investor site. "Profiling tools enable online investors to create a 'shopping basket' of funds in which they wish to invest," says Crawford. "As a preferred partner of ninemsn, yourprosperity now has a new distribution channel for retail and wholesale managed funds.
"In addition, through our mlc.com.au site, launched some six months ago and already boasting up to 40,000 registered users, MLC gives investors and advisers access to e-commerce capabilities, up-to-date portfolio values, simple yet comprehensive reporting and enhanced customer service. Adviser-driven, the emphasis is on facilitating a triangular relationship involving the investor, the adviser and MLC to give clients a consolidated view of their investments."
While BT Funds Management and MLC are among but a handful of fund managers ahead in the online race, others are moving into the "reflective" or second level of online development, providing information and enabling investors to view their balances online. These are, however, few and far between, including just some 20 of the more than 200 fund managers currently operating in the market. In addition to their sites, most of these also offer access via their connections with the Web-based e-Portfolio viewer, the online component of InvestmentLink, an industry-wide service established in 1994 to provide the financial services sector with secure and easy access to a centralised, consolidated source of managed fund data. e-Portfolio's download capability allows users to refresh portfolio information, which can be readily integrated into their desktops or portfolio management systems.
Many more investors will now also be able to access their portfolios and balances online, following the latest online initiative from direct marketer of managed funds Neville Ward Direct, which is making a branded version of the e-Portfolio viewer available to its clients. "Some 5000 of our clients are already registered," says Neville Ward's Brian Cordingley, "and we will start promoting the new service to our entire 40,000-strong client base once we have finished allocating the initial 5000 passwords."
Lester Wills, assistant general manager, funds management, of global financial services company Mercantile Mutual, says its 500,000 customers will be able to access their account balances "in the next few months", and this will be followed by a number of product-specific online initiatives. "This marks the next step in our online development," says Wills. "We already make an extensive amount of information and services available to our members, not least of all through our links with financialpassages.com.au, which is getting more than a million hits a month."
St.George Bank is now "looking very closely" at taking its online fund management services forward. A pioneer in online banking services, the company has, perhaps surprisingly, not mirrored this spirit in its online fund management initiatives, which so far are only at the "reflective" stage of development, offering information and portfolio access online. Although not wanting to give reasons, a company spokesman said this was now being "looked at very closely" with plans in the pipeline for fund management marking the next phase in the company's online thrust.
Like BT's Dioth, Neville Ward's Cordingley believes the online move is being driven by demand from clients. "Today's predominantly young, Internet-savvy investors increasingly want timely access to their financial reports, and are big on convenience and cutting costs," he says. "This is forcing fund managers and brokers not only to move into Net-driven technology, but also to make increasingly sophisticated offerings." He says Neville Ward Direct is trying to encourage more clients to join the e-Portfolio system, but believes that security issues may still be proving a deterrent for some companies and consumers alike. Dioth believes that, in addition to the technology requirements, it is perhaps the long-term nature of a managed fund investment, and hence the lack of need for speed, that has kept the industry from rushing to get online.
For MLC's Crawford, it's more about an evolutionary process. "We are seeing a maturing of the online financial services industry from just cheaper online broking to mature online investing, which will ultimately include do-it-yourself super online," he says. "It's a natural progression."
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.