There is considerable room for improvement in how institutional investment companies present themselves to investors over the Internet, according to a study by kasina, LLC, an e-commerce consulting company, of New York.
The institutional asset management industry has been too slow to take advantage of the Internet to provide additional service and to prospect, said the study, released last week. The industry instead has focused its technology resources on the retail market.
Thirty institutional asset management firms participated in the study.
Despite having over $5 trillion in assets, institutional investors do not have Internet access to services not available off-line, the study found. Only 33 percent of the asset managers surveyed provide the ability for investors to check their account balances online, as compared to 100 percent of the largest retail asset managers, according to the study. Only 28 percent of the asset managers provide institutional prospects with an explanation of their firm's services.
"The results of the study are certainly surprising," said Lee Kowarski, a consultant with Kasina. Considering the amount of assets invested in institutional accounts, it is surprising how few services are provided by institiutional asset managers over the Internet, he said.
Institutional asset managers customarily have relationship managers who are available to investors, said Kowarski. Institutional managers are concerned that providing Internet services would interfere with that relationship. Customers might feel as though they should not bother their relationship managers, he said.
"On the institutional side, the feeling has always been that this is a personal relationship that they have and they want the customer to be calling whenever they have any questions," he said. "They want to be available to address those questions, to make [customers] feel welcomed and make them feel serviced in the best possible way." Firms are just beginning to realize that they can use the Internet to supplement that relationship rather than replace it, according to the study.
Eighty percent of institutional managers described their investment philosophy or investment process on their web pages, the study found.
Sixty-five percent of the companies with institutional asset manager pages, identified them as such. At the other companies' websites, visitors could not tell when they were on the institutional pages.
Fifty-nine percent of the web pages had performance information. Fifty-seven percent had the history of the company. Fifty-five percent had the amount of institutional assets managed. Fifty-two percent had representative categories of clients. Fifty-two percent had a password-protected section. Thirty-three percent provide their clients with a means of checking their account balances.
The top five websites in the institutional asset management industry are: Barclays Global Investors, INVESCO, Morgan Stanley Dean Witter, Putnam Investments, and Vanguard, according to the study.
Among the criteria used to rate the web pages were availability of information and whether that information was easily accessible.
The best sites have basic fund information as well as the company's history, investment philosophy and investment strategy, said Kowarski. They also provide account services online so that investors can check their credit balances and, in some cases, conduct transactions.
The top five sites have also done a good job branding the site, so that prospective investors can understand what the firms are trying to provide, who their clients are and why individuals should invest with those companies, he said.
The study proposes five steps institutional asset managers could take to improve their websites. First, companies without institutional sites should create them. Then, the site should have a company's investment philosophy clearly described, a representative client list, assets under management and a mechanism by which prospects can request a call from an institutional salesperson. The site should also have account access, performance reporting and investment advice.