OK, I admit it: I’m addicted. Hooked. Self-control zapped. Personal sovereignty surrendered. Count me among the walking wounded, or at least the perpetually blurry-eyed.
How else to explain the constant focus on all things cyberlike, with long evenings spent surfing into the far reaches of the Internet and America Online. I’m becoming my own worst nightmare: a computer nerd. A cyberjunkie.
I’m not asking for sympathy. This is a self-inflicted plague. But I am asking for indulgence. Every issue, prompted by nice paying readers sending me thoughtful e-mails, I promise to write about something other than yet more online hoopla. But as the dreaded deadline approaches, the urge overcomes.
So you can imagine the delight that came from attending this spring’s Mecklermedia Internet World in San Jos, a rush not unlike what another sort of junkie might feel from winning an all-expense paid trip to Medellin. In my years of suffering through foot-sore trade show stall browsing, I have never been to an exhibition that had more frenetic energy than did Internet World.
Clearly, big things are happening. Online is growing up, the novelty wearing off. The early technology adapters are being joined by those for whom the benefit is the only goal. Online is coming into its own as a new medium, combining information distribution (on a massive scale), the ability to link easily and interactively into communities of like-minded people, and electronic transactions.
It’s more than just content, in other words; online offers the context to understand and act upon that information. But unlike the telephone or television – which took years to be fully accepted – the velocity at which this medium is being harnessed is staggering. Maybe that’s why I’m so enthralled. And could there be anything more relevant to IROs, whose job it presumably is to communicate to a universe of similarly inclined audiences (that is, investors) with the mission of motivating them to take a specific action (buy my stock, don’t accept that proxy offer, believe that our chairman is not a jerk, whatever). Online users, for their part, want real, practical, tangible lifestyle improvement. And in the investment arena, just one booming area of online traffic, they’re getting it. Already, at this early stage of online investing, an estimated 400,000 investors have opted to go electronic. Any bets on where that trend line is headed?
This month, then, a quick overview of three online investment-management players, each with its own charted path to cyber glory.
If you’re among the million or so subscribers to the Prodigy service, Reuters Money Network, or certain others, you may be familiar with PC Financial Network, America’s largest online discount broker. With a customer base of some 150,000 investors, the network processes 2,300 trades a day. PC Financial’s parent company is the Pershing Division of Donaldson, Lufkin & Jenrette, which, through its back-room processing for regional banks and brokerages, handles an astonishing 10 per cent of all NYSE trades. This month (June), the company is set to announce that a new service will soon be available through America Online (AOL), which passed the 2.5 mn subscriber mark a few weeks back.
Like its Prodigy sister service, AOL’s PC Financial Network offering will give investors the capability to manage their invested assets electronically. Built-in screening mechanisms will present investing options based on individual specifications. Alerting services will flash relevant news straight to your screen.
Significantly, other AOL programs – like The Motley Fool personal investing program profiled here last month – will be just a few clicks away. Hence, the combination of information, peer analysis and advice with real-life trading.
‘Before, it was not easy for the average investor to get this type of information,’ says Blake Darcy, PC Financial Network’s chief operating officer (himself a former broker who ‘hated’ being what he calls a ‘pure salesman’). ‘What’s happening now is the demystification of brokerage information. We’re bringing your account information to you, and then giving you the tools to act,’ Darcy says. ‘For the self-directed investor, there is no other model around that provides that unity.’
While AOL, Prodigy and the other big consumer online services function as attractive, safe and well-ordered malls for the likes of PC Financial Network to set up shop, others are braving a ride on the Internet.
Last December, Chicago-based full-service brokerage Howe Barnes Investments launched Net Investor on the Internet. Through it, investors can trade securities, retrieve information relevant to their holdings and, the company claims, access ‘advanced information services rivalling those of an investment professional.’
Net Investor is actually linked to the bigger Portfolio Accounting World-Wide (Pawws) Internet programming area. Operating since March, 1994, Pawws is a unit of Chicago’s Security APL, which markets a software accounting package used by money managers.
Pawws says it is the first company to have fully integrated financial information, quotes, portfolio accounting and order entry in a single Internet sight. Its free quote service gets some 400,000 visits a day; and the company charges $8.95 per month for the use of its portfolio accounting system.
In March, National Discount Brokers added its shingle to the Pawws menu, with a service called NDB Online. Unlike some other Internet commercial services, NDB Online’s entire trading cycle (after an account is opened) is completed electronically, putting a premium on the data encryption technology employed.
This raises the issue of just how secure data is as its zips through cyberspace, which has become the number one topic in cyber circles. Those with a self interest in poo-pooing electronic commerce over the Net (maybe they are too busy writing memos to try something new) insist that the great mass of prospective online investors will never come to trust zapping credit card numbers or financial records through cyberspace.
But let’s get real here. My father told me 15 years ago that he could not imagine using an ATM machine to do his banking. No way. No how. Last visit home, he said that he couldn’t remember the last time he actually talked to a teller. Now my five-year-old wants her own cellular phone. Expectations really do change with the times.
As the number of potential Internet users continues to skyrocket (the big commercial online services have all added, or are about to, so-called World Wide Web browsing capabilities, bringing yet more millions into the fold), clearly a good share of them will pursue their own investing control directly, bypassing not only their storefront brokers but also the big commercial online services.
Yes, the Net is a confusing jangle for now. But remember when you had to ask the operator to place a call to London?
My current favourite Net site (if only because it’s based right here in my backwater home town of Pittsburgh) is NETworth, a financial information service that enables online investors to research mutual funds for free.
NETworth charges fees to mutual fund companies to make their prospectuses, account applications and so on available electronically. Once an individual has established a relationship with a mutual fund company, he or she can make additional purchases or redemptions through NETworth with a linked checking account. NETworth also provides access to ratings and reviews prepared by mutual fund tracking kings Morningstar.
Because Home Pages on the World Wide Web (that’s the part of the Net that has everyone so abuzz) are hyperlinked to each other, an investor electronically asking Dreyfus for information might be jumped over to NETworth’s service.
Since its launch in June 1994, NETworth has had some 500,000 visits, with an estimated core audience of 40,000-odd. It is one of the most popular sites on the entire Internet.
NETworth CEO Robert Frasca says the next logical step will be to offer the same service to large-cap companies and to traditional brokerages looking for online client management support. So when a forwarding-looking, blue chip IRO puts his or her own Home Page up, or a regional broker needs to send background information on a fund electronically, Frasca wants to be the one to actually fulfil the request and then manage the inquiry database.
Frasca, as a point of interest, came to cyber pioneering through an unusual route. A former military pilot, he flew 18 combat missions over Iraq during the Gulf War. He is nothing if not convinced of what his company is doing: ‘Every banker and broker on the planet will be doing this kind of stuff within a year,’ he says. ‘The awesome thing about financial securities is that they are pure abstract products. They are 100 per cent information-based. They lend themselves perfectly to being distributed online.’
Next month: ABO: Anything But Online.
