Business COVER

Point-and-click portfolios

Tracey and Duane Wood launched a mutual fund revolution

SARAH SCOTT January 26 1998
Business COVER

Point-and-click portfolios

Tracey and Duane Wood launched a mutual fund revolution

SARAH SCOTT January 26 1998

Point-and-click portfolios

Tracey and Duane Wood launched a mutual fund revolution

SARAH SCOTT

It began, like many an odyssey, with one seemingly simple wish. All Tracey Wood wanted was a chance to work at home in Georgetown, Ont., a bedroom community 45 minutes from Toronto, and be close to her two young children. No more long commutes downtown and 15-hour work-days as a law clerk. No more warp-speed struggles to fit the kids into a hectic schedule. So she and husband Duane, a soft-spoken derivatives analyst, put their heads together and cooked up an at-home business idea that now looks more visionary and daring than even they imagined: a mutual fund information centre on the Internet. From personal experience,

36-year-old Tracey knew how frustrating it was to find information about mutual funds to buy for the couple’s retirement portfolio. And Duane, although he had no formal computer training, could see the dazzling possibilities of the Internet as an inexpensive way to communicate large amounts of information about investing.

Their timing was impeccable. In the three years since the Woods launched their Web site, The Fund Library, it has grown to become Canada’s busiest Internet site for mutual fund information, claiming more than six million pages viewed per month by an estimated 250,000 people. The Woods have a youthful staff of 22, revenue from mutual fund sponsors topping $1 million per year, and big plans for the future. Long gone is the original basement home office in suburbia. Currently in corporate offices in west Toronto, the Woods are now looking for grander digs in the heart of the financial industry. None of which has brought the cozy life Tracey imagined when she quit her job as a law clerk, but she certainly is not complaining: “It’s been wonderful, the most amazing few years of my life.”

The Woods, after all, soon found themselves running something akin to the first hot chocolate stand at a large ice rink. In the three years the Fund Library has been operating, mutual fund assets in Canada have doubled to $287 billion. With more than 1,500 funds to choose from, keeping tabs on the performance of a typical portfolio can be an onerous task. Fortunately, the Internet has turned out to be admirably suited to the needs of a discerning group of investors who want to take charge of their own retirement planning. At the Fund Library, unit-holders can find a storehouse of up-to-the-minute information about almost every fund in Canada, along with sophisticated tools to examine the performance of mutual funds and compare them with others in the marketplace. Investors can call up customized reports on their own mutual fund portfolios and use the site to find a financial adviser, or explore links to other Web sites and on-line chat groups of fellow investors.

Fund companies, all trawling for new customers, have duly taken note. Thirtythree of them, representing 90 per cent of Canada’s mutual fund assets, now pay monthly fees of up to $5,000 each as designated sponsors of the Fund Library. So far, they are appealing to a small fraction of fund investors: a survey last March by Toronto-based Marketing Solutions suggested that less than 10 per cent of fund holders use the Internet to seek out information about their investments. But the ones that do surf the Web have much in common. According to a survey last summer of Fund Library users, the typical visitor is a 42-year-old man with a post-secondary degree who has more than $50,000 invested in mutual funds. It is, as Tracey Wood suggests, a “beautiful” target audience.

Still, it is a fledgling field in Canada. According to industry analysts, the Internet attracted only about $5 million worth of Canadian advertising revenue in 1996, says John Chaplin, president of the Internet Advertising Bureau of Canada, a new industry association. But those revenues could grow exponentially if Canada follows the lead of the United States, where Web advertising revenues jumped to $600 million in the last six months of 1997, more than double the amount in the same period a year earlier.

The potential for continued growth is now luring some high-powered competitors into an arena that the Fund Library once called its own. Last October alone saw the launch of three rival sites. The Globe and Mail of Toronto, after trying unsuccessfully to buy the Fund Library, set up its own site, GLOBEfund, to capitalize on the newspaper’s in-house wealth of business information. Investors can search GLOBEfund for published articles and background profiles on the funds and use tools to analyze and chart funds that interest them. The site’s operators say it attracted more than 200,000 visitors in its first two months of operation, “exceeding our hopes, let alone our expectations,” says Lib Gibson, vice-president and general manager of Globe Information Services, the newspaper’s electronic arm. She has already found two major banks to sponsor the site and is scouting for more.

On the day after the Globe launched its site, the Quicken Financial Network was set up by Rogers Communications Inc., owner oí Maclean’s, and Intuit Canada Ltd., a leading purveyor of personal finance software. Quicken is designed as a comprehensive source of information on personal finance—from mutual funds and stocks and bonds, to loan and foreign exchange rates. It combines news from such sources as Maclean’s and Canadian Business magazines with a variety of on-line calculators to compare loans and make plans to get out of debt. It cost “millions” of dollars to set up, general manager Peter O’Brien says, but with six advertisers signed up so far and 324,000 pages viewed last December, the site expects to turn a profit by its second year.

The third new competitor, i/money, similarly bills itself as a “one-stop shopping” site where investors can not only learn about the full range of financial services but shop for them as well. The site can even function as a personalized news service, churning out stories that could affect an individual’s investment portfolio. But since its launch in October, i/money has been hit by technical difficulties. “Performance is slow because we’ve been bombarded with interest,” said the site’s chief technology officer, Michael Lee. The owners— the site’s own employees plus Bayshore Capital, a Toronto-based venture capital firm—hope to recoup their investment by getting financial institutions to pay fees each time visitors use the site to make purchases. Fifteen institutions have signed up so far.

Tracey and Duane Wood profess themselves unfazed by the new competition. With almost a three-year lead over their rivals, they have established their site as a leading source of mutual fund information on the Net. And unlike their competitors, the Woods have already overcome a host of growing pains, expanding in step with the needs of their clients. In fact, their home business took its first few halting steps in the realm of faxes, not Web sites. In the summer of 1994, Tracey had met with a group of financial advisers who were looking to satisfy their clients’ demands for stock market information by fax. A light turned on in Tracey’s head when someone mentioned mutual funds. Why not, she wondered, set up a fax-on-demand information service about mutual funds?

After a few weeks of discussion, they acted. In early November of 1994, they sent their proposal to 20 mutual fund companies. To their astonishment, 11 said yes. There was a huge task ahead— they had promised to launch the new service in January, and for starters they would have to buy thousands of dollars worth of equipment and learn how to use it. But they soon faced an even bigger problem: they could not get enough telephone lines into their little house, or any other location in Georgetown. With five weeks to go, the Woods had to rent out their family home, find another one closer to Toronto that could handle 22 telephone lines, and find a nanny for three-year-old Michael and his six-month-old baby sister, Madison. “It was completely insane but we did it,” says Tracey.

Yet just as the Woods were launching their fax service,

Altamira Investment Services Inc. of Toronto was busy establishing its own Web site, the first of its kind in Canada. Duane was amazed by how simple and intuitive a tool i was. And unlike say, a fax service, it was a cheap way to put out information since there was no need to set up and maintain an expensive mechanical infrastructure.

The Woods’s revenues now top $1 million a year

So the pair switched gears.

Duane took time off from his regular job, bought some computer books and plunged into the task of setting up what became the Fund Library. The couple spent $5,000 on computer equipment and saved money by doing the programming themselves. “I guess I’m just a self-learner,” said Duane. By the time they launched the site in April, 1995, the couple was working 18-hour days—scarcely leaving enough time for the kids. They decided to hire help, rent office space and make the company bigger.

Additional obstacles soon arose. Their initial fax clients, a dozen mutual funds, were skeptical about the Internet. “They just didn’t get it,” said Tracey.

The Woods spent the rest of the year trying to prop up their fax-on-demand service without spending on advertising. Simultaneously, they struggled to get the Fund Library established, hanging on in the hope that Internet surfers would begin flocking to their site. By June of 1996, surfers collectively checked out 250,000 pages on their Web site. The number swelled to 1.2 million in July when the Woods launched an updated version of the Fund Library and by last winter, according to Tracey, climbed to more than five million pages viewed per month.

Having established a following, the Woods now face a more prosaic challenge common to all businesses—generating more revenue. The Woods do not want to let their mutual fund sponsors buy overt advertising for fear of losing their reputation as an unbiased source of information, so they are looking to banks and telephone and computer companies to buy space. It is a tough sell, because many companies do not have a separate budget for something as nascent as Internet advertising. “Everyone wants a deal because they’re just trying it out,” said Tracey.

Finding them on the Net

Personal finance Web sites:

• www.fundlibrary.com

• www.globefund.com

• www.quicken.ca

• www.imoney.com

does it help * that GLOBEfund and | Quicken are out hunting N for advertisers from across 2 the financial spectrum, including £ mutual funds. Which raises a ques-1 tion: will there be enough advertising | and sponsorship money to support them 3 all? It is not clear yet. Altamira, for instance, is “ only interested in sponsoring the biggest site, which at the moment means the Fund Library. “It’s going to be a hard job for someone else to come in and catch up,” said Altamira’s communications director, Caroline Doyle. Others are not so sure. “There’s room in the marketplace for all of them,” said Edward Boyd, director of new media technologies at Young & Rubicam Canada, one of Canada’s largest ad agencies. Given the “thirst for knowledge and a hunger for better understanding” of the mutual fund business, he says “anyone putting content out and talking to people in this category is visionary.” The Internet, Boyd adds, offers “an amazing way to speak to prospects who are already interested” in the product.

The Web sites’ backers are all talking about the “phenomenal” traffic on their pages and, not surprisingly, sound confident about their chances of luring advertising and sponsorships. “The more the merrier as far as I’m concerned,” boasts Quicken’s O’Brien. At the Fund Library, “we’ve seen no diminishing of our traffic” since GLOBEfund and Quicken joined the fray, said Tracey Wood. “In fact, November was our strongest month ever. Either they’re getting new clients, or people are using both.” Not that Tracey is getting the domestic tranquility she once coveted. She and Duane have managed to set aside two three-hour blocks of time for their children each day, but there is always lots of work to do after the kids are tucked in each night. “My mind doesn’t stop working on this,” said Tracey. “Ever.” □