Bank of Montreal's plan to offer online services in conjunction with walk-in centers may be a smart move considering that the online sales channel for mutual funds has withered in recent years.

Stung by declining markets and increasingly overwhelmed by the complexities of stock options, retirement plans and tax concerns, investors increasingly have flocked to intermediaries --not Web sites--to make sense of it all.

"It is a shrinking niche of the market," said Matt McGinness, an analyst at financial research and consulting firm Cerulli Associates. "The bulk of investors are using some measure of advice and guidance, even if it's only for validation of their strategy."

In 1995, firms were getting about 64.2% of their total assets through direct sales channels, which included Web sites, local branches, mail and call centers. The balance came from some brand of intermediary, such as a financial adviser, wrap program or supermarket, McGinness said. By 2000, those firms had begun eschewing online distribution to the point where 54.6% of their net new assets were coming from the direct channel and 64% of their net new assets were coming from intermediaries.

The shrinking online market is also reflected in the fact that many firms have shifted or are planning to shift all of their funds to load products that are sold solely through intermediaries. Credit Suisse and Zurich Scudder have done so. And, as the fund complex INVESCO announced last month that it would do the same, the firm's president, Ray Cunningham, said, "For some time now, the fastest growing segment of our business has been the broker/adviser channel, with virtually all of our new net flows coming from financial advisers."

Now, what's left of the online market for funds are investors who trade regularly, many of them market-timers, who aren't interested in advice, and semi-affluent investors who aren't easily daunted by the prospect of navigating volatile markets, McGinness said.

But McGinness said a strategy that involves both walk-in centers and online operations can be effective. Indeed, Charles Schwab said last year that 80% of its new accounts were opened via walk-in branches and 80% of its transactions were conducted online.

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