Throughout his career, John Story has made an art of making nimble moves on the cusps of major changes in the investment management industry.
His first was to switch from the retail brokerage to the institutional side of the business in 1974, upon passage of the Employee Retirement Income Security Act.
"ERISA changed the business significantly because that legislation required corporate America to change the way it invested pension funds," said Story in a recent interview. "Clearly, the management of large pools of retirement funds would be impacted, so I moved."
Next, at Alliance Capital Management of New York, Story became captivated by mutual funds.
"There were so many stocks out there that people became confused," said Story, who became senior vice president and chairman of Alliance Australia, Canada and Japan in 1989. That led Story to his next position, in 1993, as executive vice president and partner in charge of new products at Montgomery Asset Management of San Francisco, where he was in charge of developing new products and where he helped pioneer "multi-channel distribution" of mutual funds.
"I became convinced of the power of mutual funds and became completely committed in 1993," he said.
Story's latest move in August was joining X.com, a full-service Internet financial services start-up in Palo Alto, Calif., founded by a 28-year-old with no experience in the financial services industry.
"I think you would agree, that if you look at the Internet's impact on investing and where it will be in 2002, it will be huge," Story said.
Story became executive vice president of X.com and president of the X.com Asset Management subsidiary because X.com promises to package mutual funds unlike any other company, he said. Elon Musk, the founder and chief executive officer of X.com, is a software genius who has already made $300 million on Zip2 Corp., an Internet road direction business, Story said. X.com's plan is to offer clients fully-consolidated financial statements reflecting their entire net worth - including debts, real estate and holdings at competitive financial firms, Story said.
Musk describes X.com's business plan as "nonlinear thinking."
"You have product and data silos in existing financial organizations but an Internet start-up can do some very interesting things," said Musk. "To have someone's entire financial wealth on a single statement sheet - loans, mortgages, insurance, bank accounts, mutual funds, stock holdings - is revolutionary."
If Musk could create software to give people point-to-point directions on a map, surely he is capable of creating software that can give people a comprehensive picture of their true net worth, Story said. It is this key feature - consolidation and simplification - that Story believes will attract customers. In fact, unlike supermarkets that offer hundreds of funds, X.com will initially offer only six to eight mutual funds. These will include a S&P 500 fund, a U.S. aggregate bond fund and a high-yielding money market fund.
The key is to "meet investors' core needs in a very user-friendly way that integrates with their other financial planning needs," including banking, brokerage, credit cards and insurance, said Story.
Story feels particularly comfortable about his latest career move because he has spent the past year as an independent marketing consultant to mutual fund firms.
"I had been preaching about the revolution in the financial services business, not really knowing what that was until I met Elon," said Story. "X.com fits very well with how I feel the business will move in the future."
However, even though Musk has demonstrated tremendous business acumen in selling Zip2 to Compaq Computer Corp. of Houston, Texas for $300 million, starting a mutual fund company entirely from scratch is not without its risks, Story said. But with what he views as X.com's novel approach to service and his own extensive distribution experience, Story is confident X.com will be as successful as Zip2.
Story plans to build X.com's mutual fund business "through the Internet as our main distribution system, word of mouth, and a well-conceived advertising strategy which we will implement next year," Story said.
The investment advisor to X.com's funds, which will be launched by year-end, "is an extremely well-known, large money manager with a long history whose experience we can talk to, and whose reputation gives instant credibility," Story said. He declined to name the adviser, however.
X.com currently has 25 employees and plans to have more than 100 by year-end, according to a company spokesperson.
