Marsico Capital Management of Denver, Colo. began offering investors the ability to open new accounts online earlier this month, making it one of the first funds to do so. The company is currently offering the service on its website through Sunstone Technology, a back office service provider based in Milwaukee, Wis. Executives from Marsico declined to comment.
Marsico joins INVESCO, also of Denver, as one of the first funds offering investors the ability to open accounts online, according to Mim Allison, Sunstone's president. INVESCO uses its own technology to provide the service, the company said.
While many companies offer investors the ability to perform a variety of transactions online, opening new accounts online is a new service, Allison said. INVESCO was the first company to begin offering the service in October.
Sunstone invested over $1 million in technology and software upgrades in order to offer the new service, which it launched March 1. The service allows Sunstone's clients to provide a variety of online services to their investors. Investors can get copies of statements and prospectuses, check account histories, receive trade confirmations as well as open new accounts online.
The new service is provided via a hyperlink on each funds' website. When an investor clicks on an icon, a separate web page is downloaded from Sunstone's servers. The web page is customized for individual fund companies and the information an investor requests.
Investors fill out an online application including credit card and bank account numbers and Sunstone completes the order, Allison said.
Fund companies pay an initial set up fee and a $7,500 monthly service fee, Allison said. Fees vary depending on the size of the company and the services it provides online, Allison said.
DST Systems, another back office service provider based in Kansas City, Mo., launched a similar service six months ago. Although the service includes opening new accounts online, no fund company is offering the feature through DST, a spokesperson for the company said.
Clients using Sunstone technology include Wasatch Advisors of Salt Lake City, Utah, Van Wagoner Capital Management of San Francisco and Bramwell Capital Management of New York. Marsico is the only client that allows investors to open accounts online.
Although Marsico is the only fund company, besides INVESCO, allowing investors to open accounts online, Allison expects the number of small fund complexes doing so to grow because it is a cheaper method of opening accounts online, than through supermarkets.
"It costs fund companies less to service shareholders directly versus the supermarkets," Allison said. "There is a benefit there because [investors] don't have to pay the 25 to 35 basis points to work through a supermarket." And, because Sunstone is providing the technology, its clients do not have to invest heavily in technology and software and they can provide investors with online funds that charge between 10 and 20 basis points, Allison said.
Opening new accounts online has not caught on with many funds because many companies lack an online strategy, according to Steven Miyao, senior vice president of strategies for kasina, an e-commerce consulting company in New York.
Fund companies are also wary of online services because they are afraid they will encourage market timing, according to Bill Meyer, vice president of information and communication management at Sunstone.
"They are frightened because you make it easy for [investors] to get out of the funds," he said. "We will want to watch for instances of market timers."
Security is another concern, he said. Investors are hesitant to provide bank account and social security data online and fund companies are concerned about protecting that data from computer hackers, Meyer said.
While there are some lingering concerns, opening new accounts online will become commonplace in the next couple of years, said Miyao and Allison.
