If anyone should expect a return on an investment, it should be asset managers. So where's the return on all of the time and money fund companies have spent on Web sites and e-commerce? And given the economic slump, how long will companies continue to pump money into Internet marketing?

The return on the e-commerce investment is there, analysts say, it's just not as high as most companies had expected. And while some companies are cutting back their e-commerce initiatives, many are forging ahead with the Web as a means to save costs and to a lesser extent, generate revenue.

Most fund companies maintain that things are going well with their Web sites. In June, 51% of shareholders at Janus logged onto janus.com, and of all new accounts, 30% were opened online, according to the company. Janus, Putnam, and Fidelity all have reported that Web usage has steadily increased over the past couple of years and nothing has changed that this year.

However, increased Web traffic does not necessarily mean increased assets for the companies, according to Thomas McLaine, Internet development manager at Old Mutual. Judging just how much assets and revenue are generated directly from the sites can be difficult, said McLaine. Still, there's enough information for companies to be disappointed with the Web as a sales channel in general.

"Overall, of course, the impact of the Web is not playing out as people had imagined," said Derek Evans, a consultant at kasina, a financial services technology-consulting firm. "According to expectations two years ago, things are not going nearly as well as they had expected."

Mixed Necessity

Despite the missed expectations, Web sites and technological services have become a necessity for companies, even if it doesn't translate into revenue, according to Steve Hardy, e-commerce manager at Thornburg Investment Mgt. "It's become an integral part of the way business is done within the financial services industry. I think often [these] type of services offered on Web sites are there not necessarily because they get a lot of use, but if they weren't there they'd be noticed."

Working for the Few

Thornburg just launched a wireless account inquiry and transaction system, which only some 1% of its shareholders will use, Hardy said. "But there are shareholders coming down the line who, if we don't have it, won't invest with us even if they never use it."

Still, e-commerce budgets are coming down. At Thornburg, for example, there has been no decrease in funding for current e-commerce initiatives, but there has been a drop-off in funding for future discretionary ones, said Hardy. And companies that are continuing to spend money on e-commerce are moving away from focusing on the retail investor, said Evans.

"We have definitely seen companies reduce their budgets," he said. "But certainly all the clients we deal with are continuing to put money into improving their Web sites. And a lot of the concentration is now on improving advisor and institutional sites. There's a broad opportunity there."

During the market downturn, sites designed specifically for advisors have been a focus because fund companies are working to support the advisor business as they take on a more important role for investors, said Evans.

Companies are also beginning to focus more on using the Web as a means to cut costs. Initially, many expected the Web to take over the sales channel, but since that has not happened, companies are looking to the Internet to reduce shareholder servicing costs, particularly as margins are pressured during the downturn, said Evans.

Happy Numbers

Many companies are happy with the numbers their sites are generating, including the numbers on users who view their account balances, look at daily prices online and sign up for e-delivery and paperless statements and confirmations, he said. "I think companies are just starting to realize the cost savings that comes from that side of things."

Many firms have been forced to cut back staffing in various areas, but IT and e-commerce departments have really not been touched yet, according to Lee Kowalski, a kasina analyst. "One reason for that is that it's been taking time for companies to realize the importance of the e-business initiative to the firm."

Fund companies were slow to build staff, and indeed many remain fairly understaffed, Kowalski said. "It's very rare to see a firm that is in a position where it could trim staff and still be able to provide the level of service that they need to compete in that area."

While sales via the Web may not be the dominant distribution channel that many had predicted, innovating Web sites still has benefits and will continue at financial services firms, but with a little less gusto, according to analysts. After all, as fund marketers might say, past performance is no guarantee of future results.

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