DIY managed funds online
Good Returns' writer Ann Cunninghame checks out the online brokers offering discounted entry into managed funds.
Tuesday, September 26th 2000, 8:32AM
by Paul McBeth
Investors prepared to poke around online have an increasing number of ways to save themselves most or all of those hefty entry fees. There are now a bunch of websites that offer discounted access to the likes of unit trusts, super funds and insurance bonds as well as a range of financial information.
What they won't get is advice: these sites are primarily for the do-it-yourselfer. And, so far, they won't get access to any listed funds either (although that's something MoneyOnLine are considering - see below).
Meanwhile, the people offering managed funds online count on trail fees for their income and perhaps some increased publicity for their other business activities. As you'll see in our round-up of a number of sites, they've had different motivations for setting up on the 'Net - and some very different results.
Who: John Carr and John Commins, directors
Since when: Funds offered since late 1996
What's available: More than 300 unit trusts, super funds and insurance bonds. Also UK authorised unit trusts (Baring, Henderson Investors) bond and capital note issues etc as they become available. Entry fees are rebated unless fund manager doesn't pay trails, in which case MoneyOnLine keeps part/all of the entry fee.
While the funds currently offered are all unlisted, Commins says that could change. "At this point, we don't have a share brokerage facility, but that's something we're looking at and we're in discussion with a member of the New Zealand Stock Exchange at the moment. It's a very crowded market, very competitive."
"We also have an online transaction and registry system, iExchange. We see an opportunity in the next three to six months for a lot of the companies not listed on the NZSE to have their shares traded there."
Response so far: Commins says the site really didn't get going until early 1998 and, since then, they've lined up $25 million worth of investments. "We now have well over 1,000 active investors and a rapidly growing online user base. We'll send out a bulk email to 6,000 or 7,000 people once or twice a week - and maybe only one or two people will unsubscribe."
Marketing: "In the last year we've spent a lot of money on advertising, and the enquiry level has improved immensely." Commins says that's mostly been in print media. "The message has to have a benefit that's quite clear, and one of our marketing planks is clearly the pricing."
Is it worth doing? "Yes. The rate of growth is now (such) that we're confident that it could become quite profitable." Is it currently profitable? "Right now, no."
www.fasttrack.co.nz
Who: Glenn Hanna
When site to be launched: Later this month
What will be available: A couple of hundred unit trusts, super funds and insurance bonds from New Zealand fund managers along with a few Aussies. No entry fees, unless there's a restriction by the fund manager.
While Hanna is New Zealand operations manager for Morningstar, this website's his own baby (however, fasttrack.co.nz will carry a link through to Morningstar fund data). Hanna said he had some spare time after completing a graduate finance diploma, wanted to set up his own small business and had experience and contacts he could put to good use.
Hanna says he's tried to set up the site so people can find out "all they need to know" about investing and then link through to a range of funds. There's general information about markets and about investing, links to managed funds data, a questionnaire on risk and information for investors to design their own portfolio.
Response so far: Hanna says he's already generated enough business to cover his development costs, even though the site's not yet live.
Who: John Reuhman, director of nzij.co.nz, director of the New Zealand Investment Journal, principal of Wellington-based sharebroker Reuhman & Co
Since when: funds available online since mid 1996
What's available: "Every fund that's registered in New Zealand." The no-advice managed funds investment service is called Free Entry and is accessed on nzij.co.nz.
Response so far: "Very good. We get 70,000 sessions a month: that's about three quarters of a million hits." And that was about all he'd say.
Marketing: "It markets itself. It's very well known. Viral marketing - you find it by researching the web."
Who: Peter Hensley, The Money People, New Plymouth
When site launched: 1997, coinciding with his first book
What's available: nearly 30 funds, with the selection updated monthly. Entry fees are discounted back to one per cent (from an average five per cent).
Hensley says he set up the site to appeal to New Zealanders who wanted to do it themselves and could invest at a discount. "In each asset class I only offer three funds so as to remove some of the confusion." There are also balanced funds and specialised sector funds. "I've limited it purposely to New Zealand dollar-denominated funds that are hedged, so the punter is not going to get burnt."
Hensley says there's research to show that 90 per cent of people with over $100,000 to invest seek advice. "So these (sites) are limited, I believe, to the smaller investor."
Response so far: "It gets about 400 hits a day, and that's been building since we started. On average, there are six requests for investment statements a week and about ten per cent convert."
Marketing: includes through his own books and articles in publications such as Investigate. "I started off putting it (the site address) on the back of supermarket coupons because I wanted to market it away from the Internet. That was very effective when I did it, but there was also a cost. I get more exposure from the monthly article I write for Investigate."
Do you think it's been worth it? "Yes, I do. I put it forward mainly as another educational tool for investors - a large part of the site is educational." While expensive to set up, site hosting is not a major cost and he manages it himself.
Who: Charles Drace, executive director Charles Drace Investment Consultancy, Christchurch
When site launched: Three years ago
What's available: A range of New Zealand and Australian unit trusts super funds and insurance bonds: no brokerage and no advice.
Response so far: 40 investors
Marketing: "The cost of promoting it was so great and the return so long away..." Charles says he ran ads in a financial magazines and also took out a banner ad online on a unit trusts information page "I paid $3,600 for a year and had no response."
Has it worked? "Not really." Will he keep it going? "It doesn't really cost me anything to run. I've often thought at some stage I'd find a better way of marketing it. I do think that there's a role (for such a service)".
Paul is a staff writer for Good Returns based in Wellington.
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