Fidelity, Putnam, Franklin team up to challenge Vision

Three of the mutual fund industry’s biggest players – and fierce rivals on many fronts – have joined forces to form an Internet portal aimed primarily at independent broker-dealers.

Fidelity Investments, Putnam Investments and Franklin Resources Inc. are mounting a major competitive challenge to an existing portal, known as Vision. The parent of Janus Capital Corp., another major fund group, has a major stake in that site.

The new portal, called AdvisorCentral, gives advisers one-stop access to 45 other fund companies.

Together they represent nearly 40% of the roughly $1.5 trillion in assets that have been sold through brokers and other go-betweens.

The website was launched with PFPC Worldwide Inc., a Wilmington, Del., transfer agency owned by PNC Financial Services Group Inc.

rising role of advisers

Advisers can use the website, advisorcentral.com, to open accounts, trade shares or view their clients’ investments with any of the participating fund companies.

The initiative is the latest sign of the growing role that advisers are playing in the sale of mutual funds.

The portal rivals Vision, which is operated by DST Systems Inc., a major provider of record-keeping services to fund companies. Stillwell Financial Inc., the company that owns Janus and the Berger Funds, is DST’s biggest shareholder, with a 33.1% stake.

DST of Kansas City, Mo., has been offering its portal to independent broker-dealers since 1998.

The portal, which also features access to account information and transaction capabilities, has 151,000 registered users and funds from 261 families.

The families include AIM Management Group Inc. in Houston, MFS Investment Management in Boston and OppenheimerFunds Inc. in New York.

Right now, advisers are likely to register to use both AdvisorCentral and Vision. And why not? Both portals are free, and together they offer access to the vast majority of U.S. fund companies.

The challenge that DST faces, however, is keeping its fund companies from also joining AdvisorCentral. So far, only AIM has elected to position itself on both portals.

“We really want to make sure we are available wherever the adviser wants us to be,” says Margaret Vison, director of e-commerce at AIM. “If the adviser wants us on one platform, we will be there. If they want us on the other platform, we will be there too.”

likely winner

If other fund companies agree, it will certainly diminish the need for two portals. And considering that Fidelity and Putnam, both in Boston, and Franklin in San Mateo, Calif., have agreed among themselves not to join Vision, DST will likely wind up on the losing end of that battle.

“The marketplace is going to ultimately decide which portal delivers information in the most efficient and competitive way,” says Joseph T. Grause Jr., chief executive of AdvisorCentral LLC, the independent company formed to run the new portal. “Frankly, our goal as a business is to attract users of Vision as well as unaffiliated fund companies – and there are still many dozens of them out there – to use our portal.”

Kyle Mallot, a client services officer at DST, concedes that AdvisorCentral is a “formidable portal.” DST isn’t doing anything new to maintain exclusive relationships with its fund companies – nor is it expecting many of them to join the new portal, he says.

“So far, that has not occurred, and we have not been given any indication from any of our customers that they plan to do so,” he says. “Our plan is to not give our clients any reason to want to do anything more than Vision.”

Next month, DST will unveil a new offering that will allow advisers more flexibility in how they manage their clients’ portfolios on Vision. The offering, being tested by a handful of advisers, will enable users to arrange information exactly the way they want to see it, as opposed to how the fund companies choose to present it, says Mr. Mallot.

“It is going to take our site to a completely different level,” he says.

Of course, whether advisers will embrace either portal remains to be seen.

Patricia Brooks, a Methuen, Mass., broker with Boston’s Linsco/Private Ledger Corp., one of the nation’s largest independent broker-dealers, has access to a similar service developed internally by LPL. She also uses Vision and says she will probably register with AdvisorCentral.

“Sometimes it’s just easier to pick up the telephone, call the fund company directly and say, `What are my clients’ assets at these days?”‘ she says.

Nevertheless, the launch of AdvisorCentral highlights the growing role financial advisers play in selling mutual funds and other financial products as the number of wealthy individuals increases. Even less-wealthy individuals are willing to pay for professional advice these days – thanks, no doubt, to the market’s recent downturn.

Industrywide, long-term-fund shares that were sold directly to retail investors accounted for 16% of fund sales in 2000, down from 23% in 1990. Meanwhile, sales of funds through advisers and other third parties or to institutional investors rose to 84%, from 77%, according to the Investment Company Institute.

Just last week, Denver’s INVESCO Funds Group announced plans to stop selling its funds directly to investors without a sales charge. Starting in March, new customers will be able to buy its funds only through advisers and retirement plans.

other participants

American Century Investments in Kansas City, Mo., Scudder Investments in New York and Strong Capital Management Inc. in Menomonee Falls, Wis., are among other fund companies that have recently started selling some or all of their funds through advisers.

The founding fund companies maintain that AdvisorCentral will increase exposure to independent broker-dealers, both for them and the fund companies that chose to participate. They contend that it will put those advisers on more equal footing with large brokers or banks that already have access to sophisticated fund trading and information capabilities through proprietary networks.

It’s also likely to save fund companies the cost of developing their own adviser-oriented websites.

“The role of the fund company website is going to change as independent advisers go to platforms like this,” says Lee Kowarski, a consultant at kasina LLC, a financial services Internet consulting company in New York. “The roles of the individual websites are going to be much more sales and marketing oriented.”

Ken Rathgeber, chief operating officer at Fidelity Investments Institutional Services Co., which caters to advisers, played down the notion that the new portal would make the fund companies’ existing portals less relevant.

“Our individual website will still have a lot of marketing material on it,” he says. “It’ll still be there for any of our clients who want to come in and use it to both transact and look up account balances.”