Technology: Online advice a reality

Advisers and fund managers need to get their e-business strategy rolling as online financial advice is a reality.

Friday, February 2nd 2001, 1:16PM

by Philip Macalister

Online financial services had a bad year in 2000 with many high profile businesses not seeing the New Year in.

Online mortgage broker E-Loan, software provider Quicken, business to consumer portal E-Force came and went, while some of the existing players struggled with their business model of providing free access to managed funds.

Although many of last year’s start up operations had considerable merit, they were unsuccessful for many reasons. One is that the take up of technology has been slower than many people expected. Another is that there was an expectation that habits could be changed quickly. The reality is that at this early stage in the technology cycle providing better access to products and lower prices aren’t enough to drive online financial services.

While it was a rough year for many online financial services businesses, one thing is for certain: online financial services are a reality and they will reshape the face of investing in years to come.

The Internet is the vehicle for how much of this will happen. More and more people are using the ‘net and comfort levels are increasing all the time.

With the advent of 128 bit encryption security business can now be safely be transacted over the Internet.

Banks, sharebrokers and fund managers are now providing secure client information over the net.

The Internet and software development is already changing the way advisers run their businesses. It is allowing them to be more efficient and to spend more time with their clients.

The Internet is also making information which was previously a “secret weapon” of the advisers more freely accessible to the public.

This has allowed investors to become better educated about savings issues, thus putting more pressure on advisers to lift their game.

Where to from here?

Adviser are showing a strong preference to using the web, consequently a growing range of products and services are becoming available.

To get a feel where online financial services are going its worth looking overseas.

Like in New Zealand online financial services have been slower to take off than expected. But in the United States online advice services are already being developed and distributed over the Internet and some very sophisticated offerings are available.

Forrester Research have predicted that by 2005 over 20 million US households will have access to online advice, and over two thirds of the users of an online advice service will be investors who previously either have never had access to advice, or are regular savers to 401K super plans, or have never invested before.

The reasons why online advice will grow are related partly to the growing proportion of the population which are online, but also to the growing awareness that saving for retirement is essential.

Those same drivers are relevant to New Zealand.

Another driver that is emerging is that many large, non-traditional organisations are getting involved in this area. For instance The Warehouse is about to launch a financial services division, and it has taken over running E-Loan and Telecom is becoming active in this area through its Xtra portal.

The impetus will get a further boost when a major financial services organisation launches a massive site designed at selling managed funds and other money-type projects over the Internet.

The rise of online advice services shouldn’t be seen as a threat to traditional players, in fact they will be complementary.

Nothing will replace what Forrester calls relationship based ‘intimate’ advice.

“In fact online advice will provide considerable opportunities and drive growth in the advice industry,” BT Funds Management senior vice president Peter Horne told the Financial Planning Association of Australia’s annual conference in Melbourne late last year.

“Online financial services are just tools and investors will ultimately need someone to help them though the complexities of a detailed plan that can cover all their goals and needs.”

There is a strong argument that investors are using the Internet to research their investment options and products then making the actual transaction through more traditional mans such as advisers, banks, and brokers.

For this reason advisers and product providers and advisers need to have some form of online presence and they should try and form some sort of relationship or partnership with high profile personal investment related businesses.

Horne says “online advice will be good for the industry as a whole as it will encourage the lower balance segment of the market that would normally not have access to traditional advice to value advice processes.”

Getting mobile with data


The big area which is being hyped up at the moment is mobile technology. That is using devices like mobile phones and palm pilots to access information you now get over the Internet via a computer.

The two mobile services which are available at present via the mobile phone network are Short Message Service (SMS) and Wireless Application Protocol (WAP).

SMS is the ability to immediately send a text-based message to another device, and WAP in its most simplistic form is a simplified web browser on your mobile phone screen.

Horne says the jury is still out on how successful these services will be in the future, or how they will develop.

While the technology is nascent and unproven there are areas where it will have an impact on the next few years, Horne says.

Horne says competition will ensure that many of these services which are available now, will become free value added services provided by your phone company in the future.

Good Returns is already WAP enabled. You can access the whole site including data such as share prices and mortgage rates over your mobile phone.

The address for this service is: wap.investor.co.nz

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