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The Internet and Your Clients
The following article is taken from Insights Quarterly, a Schwab Institutional newsletter designed to share expert commentary and industry insights with independent Investment Managers.
Need to Strengthen Your Relationship With Your Clients? Use the Internet
Nearly 48% of upper-income Americans are "wired" and generally use the Internet at home.* Yet, at the end of 1998, just one Investment Manager in five affiliated with Schwab Institutional had his or her own Web site,** suggesting an underdeveloped opportunity to reach affluent investors and possibly enhance practice growth.
The Future is Now-Why You
Need a Web Site
As individuals become more comfortable using the Internet, the number
of households managing their assets online is expected to grow to 9.7
million in 2003 from 3 million today. During
this same period, total assets managed online are predicted to increase
eightfold, to more than $3 trillion from $374 billion.*** Where will this
growth come from? Active, self-directed investors have already largely
migrated to discount Web brokerages, according to Forrester Research,
Inc. As a result, the bulk of new online investors will be drawn from
today's core delegator groups-long-term investors and infrequent traders
working toward retirement and other long-range financial goals. "All segments
of the high-net-worth market are using the Internet, and its value as
a financial resource will continue to increase," concluded a report on
high-net-worth individuals from LifeSpan Communications, Inc. For Investment
Managers, the Internet is a key opportunity to connect with affluent investors;
without an Internet presence, they risk losing contact with important
clients.
Clients Want to Know More, Not Do More
Internet investors are seeking greater involvement with their portfolios,
but not total control, said Forrester analyst James Punishill. "Very few
people are really willing to do it all themselves without any help, or
to give all their assets to someone to manage without question. The Web-for
the first time-allows investors to find a middle ground," he continued.
To serve this growing need for involvement, many Investment Managers have
their own Web sites for a variety of client-related purposes, including
prospecting, client communications and client service. Some managers who
already operate their own Web sites have had success, while others report
mixed results. A key source of that differentiation, experts say, is the
quality of the sites themselves. Successful Web sites clearly depict your
investment management services to all prospects while providing information
that is highly relevant to affluent investors' special interests.
Get Attention by Addressing Investor Needs
A Web site can be effective in targeting your prospecting efforts. A section
of the site aimed at doctors or lawyers, for example, might focus on long-term
wealth building. One directed at senior corporate executives might highlight
strategies to effectively diversify the risks of a concentrated holding
of company stock. Your site can also be used to focus on specific services
that make your firm unique, such as fiduciary services to trusts and endowments.
Many prospective clients prefer the anonymity of the Web. "It's a non-threatening way for investors to learn about what your firm has to offer," said Paul Gunter, Vice President of Sales for LightPort.com, a Web design firm. "Many high-net-worth individuals don't like to broadcast their intentions."
Some practices anticipate using their Web sites for gathering qualifying information from potential clients. Information gathered online can be acted on more quickly and efficiently, according to Brian Roberts of Nelson Capital Management, a $600 million practice in Palo Alto, California. "We are adding to our Web site the ability to take information directly from online forms and prepare individualized plans," he said.
Using the Web to Solidify Relationships
Many Investment Managers find their Web sites to be ideal tools for providing
clients with detailed and up-to-date information on their portfolios.
"We provide this service now on about 10% of the sites we run for Investment
Managers, and 20% to 30% expect to have it in the next year," said Matt
Smith, Executive Vice President of AdvisorSquare, Inc., a Web design firm.
For some Investment Managers, putting client data online is an essential part of their high-touch relationship building. "Our browser-based interface allows our institutional clients to check on their portfolios for information they may need for tax or cash-flow management," said John Gould of Schafer Cullen Management in New York City, which manages $1 billion for trusts, endowments, retirement plans and other institutions. "They were calling for that information anyway, so now they appreciate that they can get what they need faster and more efficiently."
Your clients may not need real-time access to data, but online access to statements can be a convenient way for clients to stay informed. "We not only put the statements online, we taught our clients how to use the system," said Todd Bauerle of Bauerle Financial, a boutique manager serving retirees in central Florida. "We wanted our clients to see that we were on the cutting edge-and it worked. It's been a great relationship-building tool."
Using the Web to Open New Doors
Some Investment Managers have used the Web to create services that generate
revenue streams separate from their core practices. One of the first to
move in that direction is Ronald W. Rogé, principal of R.W. Rogé & Company,
Inc., in Long Island, New York. Rogé recently began selling a standardized
portfolio-allocation recommendation on his Web site.
"I felt bad turning down clients that don't fit the typical high-end profile of my practice," Rogé said. "We now offer do-it-yourselfers an asset allocation and performance model that we update regularly for investors to follow. They can sign up for it right on our site."
Web Sites-The Bottom Line
Market dynamics are leading many investors-even traditional delegators-to
seek online involvement in the management of their assets. Competitive
pressures are pushing Investment Managers to develop better prospecting
techniques, increase the efficiency of their client service and provide
added value in their investor relationships. Investment Managers who build
Web sites can position themselves to better meet the increasing demands
of the "connected" client.
This article and opinions therein are for general information only, and are not intended to provide specific advice or recommendations for any individual or situation.
* Source: "Falling Through the Net: Defining the Digital Divide," National Telecommunications and Information Administration, U.S. Department of Commerce, July 1999.
** Source: Schwab Institutional Research, April 1999.
*** Source: The Forrester Report, Forrester Research, Inc., March 1999.
