CMGI of Andover, Mass., the Internet venture capitalist, is joining forces with Diversified Management Resources, a Boston mutual fund consultant and executive search company, to provide Internet services to the mutual fund industry that promise to revolutionize how the industry communicates with its customers.

The alliance, announced last month, aims to hasten the end of the use of paper as the industry's primary form of marketing and providing shareholder communications.

The alliance will be between SalesLink, a CMGI subsidiary and an e-commerce service and fulfillment company in Charlestown, Mass., and Diversified Management Resources.

The alliance, details of which have been kept vague by its principals, is particularly intriguing because of CMGI's reputation for investing astutely in Internet companies. CMGI, whose stock is traded on the Nasdaq stock exchange and has been snatched up by portfolio managers of several Internet mutual funds, has an equity stake in many well-known websites and Internet businesses. These include the search engine Lycos, GeoCities, a site that allows people to create personal websites, Raging Bull, a personal finance website known for its bulletin boards where people chat about stocks and mutual funds, and, an online vitamin and supplement store. Both Lycos and GeoCities are publicly-traded companies.

SalesLink and Diversified are expected to create online products and services for both mutual funds and variable annuities. The pair is using CMGI's presence in the world of e-commerce to promote its new venture. But, the new enterprise has no name, and as of yet, has not released a single product.

The new partners declined to say exactly how the partnership will be operated.

"Frankly, it's going to blow a lot of people out of their chairs with what we're doing," said Raymond O'Brien, senior vice president of SalesLink. O'Brien said his company is already discussing, with several of its 35 mutual fund and financial services clients, providing e-commerce services through the new partnership. Three have already expressed an interest in using whatever services the alliance will provide, O'Brien said. But neither he, nor Charles O'Neill, chairman of Diversified, would disclose the names of the clients or what types of services they were promising these clients.

"We have very specific ideas that we're not ready to talk about," O'Neill said. O'Neill and O'Brien have known each other for about 20 years through a number of business and personal associations. The two said that informal discussions about the partnership began about a year ago and a formal agreement was signed just over two months ago.

The idea for the new venture grew out of the belief that the Internet has the ability to drastically change the fund industry, they said.

"We all recognized that the Internet is going to play a large role in the way that business is going to be conducted. (We said), we should look at putting together a whole new paradigm for the mutual fund industry," O'Brien said. While O'Neill and O'Brien did not offer much in terms of details of the deal or any of their services, it is clear that they intend to change the way fulfillment is done and how fund websites service investors and advisors.

SalesLink now provides mutual funds with print fulfillment services and both men believe that electronic fulfillment would drastically reduce fund company operational costs.

"There is a level to how much money people can spend on (print) marketing materials, the value of which is never understood," O'Neill said. It is clear that electronic fulfillment services would be a big part of this new partnership, whatever shape it takes, the pair said.

One need only look at the websites with which CMGI is involved to see how future fund websites might look and how the partnership might change e-commerce.

The key to a good website is making it indispensable to the user, said Hans Hawrysz, president of strategic planning for CMGI.

"The critical question is really one of frequency," Hawrysz said. "How do you get them to stay and how do you get them to come back again?" One method is to provide the site with a lot of personalized content, he said. Also, a site should give users the power to communicate with one another and "express their needs," said Hawrysz.

Raging Bull, for example, does this with online bulletin boards. Website users can converse about their favorite stocks by posting messages to each other. The Raging Bull site also offers stock and fund quotes and editorial content. (The Raging Bull site, however, was never mentioned as a prototype for any fund company site.)

"So many Americans are interested in the market, and they want to stay in touch all the time," Hawrysz said. "Who is it that people are going to turn to as a source of financial information?" O'Neill and O'Brien believe that the fund industry will be very interested in the alliance's services because it will offer a full range of services. Currently, many companies have to pull together advertising agencies, consultants and information technology companies to service their e-commerce.

"There are some firms that do parts of that very, very well," said O'Neill. "We think that we have the resources to really integrate all of those functions together." O'Neill and O'Brien also said they will seek customers among both the direct and broker-sold marketplaces. Too often, the Internet is positioned as a threat to the financial intermediary when it can become a great communication tool, they said.

"I see fabulous opportunities for the financial intermediary distribution channel," O'Neill said.

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