LAS VEGAS, Nev.-Since the burst of the Internet bubble, investment companies' enthusiasm for web-based applications and the potential for technology to help grow their business has steadily deflated.

And so has their investment in technology, leaving service providers fighting for their fair share and scrambling to prove their relevance.

"We're at a crossroads, and metrics are the only way we're going to get ourselves out of it," said Michael Ma, a principal at New York-based consulting firm kasina.

For the past five years, mutual funds' technology budgets have been relatively stagnant, rarely swinging up or down more than 10%, according to Ma. Furthermore, the compensation of employees who work on the electronic commerce side of the business typically lags their old-fashioned brick-and-mortar counterparts by 15%, Ma told attendees at the National Investment Company Service Association's Technology Summit here last week.

Part of the reason is that during the advent of the Internet, companies rushed to develop web pages and then celebrated as they tracked tons of new traffic. But in the end, this traffic failed to generate significant sales.

Today, most fund executives don't consider technology to be an important part of sales growth. In fact, in a survey of fund executives asking them about the most effective way to increase business, 90% said they trust wholesalers, while only 5% considered the web to be a useful method.

"At the end of the day, we all get paid [for assets under management]," said Vince Pellegrini, managing director for marketing and consumer technology at Chicago-based Nuveen Investments.

Nonetheless, technology can help boost those assets, Pellegrini and other panelists argued, so long as it is focused, relevant and designed with the end user in mind.

"Act like a wholesaler," advised Neal Zamore, vice president for e-commerce for OppenheimerFunds in New York. Too often companies design their interfaces based on the way their businesses function, rather than how their salespeople and end customers do. Successful software programs and user portals do not bombard viewers with information but are intuitive, Zamore said.

In the old days, companies would roll out a web application for wholesalers based on how much it might cut costs, with little regard for the user. What firms learned is that if that application disrupts the way the wholesaler would otherwise do business, he or she will not use it, and there are no savings realized. On the other hand, if a simple application that was once done over the telephone is adapted to the Internet, the savings per transaction might not be as great, but wholesalers will be more inclined to use it, and the return on investment will add up.

That said, the same application might not make sense to all customers. "Don't treat everyone the same," Zamore warned.

Oppenheimer divides its financial adviser audiences into three broad groups: "focused reps," who sell Oppenheimer Funds, "growers," who sell some of the company's funds but have the potential to sell more, and "prospects," who do not sell the company's products at all. The content directed at each is tailored accordingly, adding what Zamore called "currency" to the content of the company's web pages.

Oppenheimer tracks the type of content the adviser is viewing, the order in which they typically view it and the point at which they either send an order ticket or leave the site, to inform what type of message it sends.

"If it's smart and about what they're doing, and putting out a relevant message, it'll probably be more read," he said.

Because the web is a more efficient method of communication, the company must then focus on driving customers to it, said Sean Kellenberger, director of mutual fund services at The Hartford Mutual Funds.

At the Hartford, call center representatives often refer investors to the web for future reference. And each of the 1.8 million pieces of mail the company sends to customers each year includes some type of information about web accessibility, whether emblazoned on the envelope or included on a separate sheet inside, Kellenberger said.

The campaigns have been both successful and instructive. Web usage has gone up 125%, while call volume has dropped 17%. But what officials at The Hartford did not expect is that the duration of each phone call has increased 5%, and so has the cost.

That's because there are certain applications no web form can handle, such as individual questions about how an investment or product may affect a particular customer's tax bills.

As a result, The Hartford has learned that they need a different type of call center representative, perhaps one with more expertise, training or experience, and even a different compensation plan. Such planning will help the telephone and Internet services work in concert, rather than conflict.

The Hartford has turned to technology not only to attract new assets, but to retain those they have, whereas in the past, the company shortsightedly focused on net positive inflows, Kellenberger said.

"Data is just data, and if you don't apply and analyze it, it just sits there. It's not information," he said. By analyzing how and when customers are using the Web, the company can anticipate needs and direct the correct message to the appropriate audience.

At the Hartford, such initiatives have lead to an 8% increase in retention across the company's mutual fund business.

Nuveen also applies technology to help retain assets. The company uses a program on top of its customer relationship management (CRM) software that helps track all communication, whether e-mail, web visits, telephone calls or mailings, between clients and representatives. The program can then offer estimates on potential revenues delivered or sales patterns exhibited by the client.

The program also generates a list of topics a Nuveen rep can discuss with the investor during future visits. Once again, paying attention to patterns pays off, Pellegrini said. In fact, the system has, in some cases, helped Nuveen close successful sales on new products between 12% and 25% of the time, he said.

"Customers don't mind being sold something if it's useful, if it's relevant and if it's helpful," Pellegrini commented. "If we understand the business needs and apply the technology, very good things can happen."

(c) 2006 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

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