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Click Here If You Have a Million
The coming thing: Online services for the rich and ultrarich
With so many new millionaires around--Merrill Lynch and Gemini Consulting figure there are now some 7 million of them worldwide, with liquid assets of $25.5 trillion--it's no wonder that financial institutions are flocking to serve the rich and ultrarich. From the august J.P. Morgan to dot-com startups, private bankers want to let their wealthy clients view portfolios and communicate with advisers via e-mail, just like the hoi polloi do at E*Trade.
But the Web's new private bankers also hope their array of Internet offerings will hook rich, do-it-yourself investors into lucrative face-to-face relationships for estates, taxes, and other concerns too complex to handle without human guidance. If you have a portfolio of $3 million or more, for instance, it's highly unlikely you'll be able to manage every aspect of your financial life without going offline for help.
Web private bankers are creating sites with three investor types in mind: do-it-yourselfers, investors who want to work with an adviser to validate investment choices, and delegators--those who want someone else to take care of their finances for them.
The Web sites' main market is self-directed millionaires with assets of $1 million to $5 million. That's the target of J.P. Morgan's Morgan OnLine and a soon-to-be-launched Goldman Sachs venture, GS.com. Many of the millionaires these sites intend to attract are tech-savvy and ''expect to remain in control of the management of their financial lives, even as the demands and nuances of managing that wealth increase in complexity,'' says Shaw Lively, a financial services analyst at International Data Corp. in Boston.
Other financial institutions that either have or are working on Web offerings for wealthy individuals include full-service brokers Merrill Lynch, PaineWebber, and Morgan Stanley Dean Witter; such discount brokers as Fidelity Investment's Powerstreet and Charles Schwab; and private banks, including U.S. Trust and Bessemer Trust. The wealthier you are, the more online services you'll receive.
ON CALL. In addition to the regular fare offered to the masses, you will qualify for a host of other services. All aim to provide comprehensive portfolio reporting and analytics, including cost basis, net loss or gain, and sector weightings. They will also offer transaction data for each account and an ability to see all your accounts together. In addition, expect to see analysts' research, initial public offering calendars, free or discounted stock trading, and referrals to other wealth-management advisers. Most sites give special 24-hour phone service for high-net-worth individuals.
J.P. Morgan figures that 1.4 million U.S. millionaires will want to manage their own portfolios via the Web. And Morgan OnLine does a good job of letting investors do just that. In a departure from the other private banks and brokerage firms, Morgan doesn't require your assets to be housed at the bank to use their time-tested financial models and analysis.
To gain entry to the service, you will have to put up a minimum $10,000 deposit and pay an annual fee of $2,500. For those with $1 million in assets, the cost of 0.25% is cheap. The account allows investors to get a consolidated view of all their assets, regardless of where they are held or managed. You have to key in all the relevant financial data--a laborious task. But once you do, Morgan OnLine will perform a comprehensive portfolio analysis.
While many of the other private banks and brokerages don't charge for their online service, they do require you to keep a significant chunk of your assets at their institution. What's more, their services typically don't provide the same turbo-charged analytics you'll get at Morgan OnLine.
For example, the diagnostic section of the program runs an investor's portfolio through several steps--cash position, asset allocation, concentrated position, executive stock option model, equity diversification, and fixed-income diversification, among them. Then it recommends what actions, if any, the investor needs to take.
DIAGNOSIS. When I ran my portfolio through the program, I learned that my assets were properly allocated and that I didn't have any positions that were more than 5% of my portfolio. I also found that I was well-allocated between small- and large-cap stocks, international and domestic equities, and that I was not overweighted in any industry sector relative to the Standard & Poor's 500 Index. I was, however, overweighted in both growth stocks and cash.
For investors who like to have a hand in their portfolio management, dot-coms are rushing to meet their needs. They want to be middlemen between you and professional money managers. Brokerages and private banks already offer matching services, but they don't yet allow you to monitor portfolio performance via the Web.
The new startups, scheduled for launching later this spring or early summer, will let you monitor performance constantly. Fees for the matching service vary, but they generally start at around 150 basis points for the first $250,000, decline in stages to 100 basis points--and become negotiable at $4 million under management. RunMoney (www.runmoney.com) is targeting individual investors. Envestnet (www.envestnet.com) is taking a different tack: It's selling a matching service and Web access to financial advisers who have $100 million under management. Clients whose advisers use Envestnet will be able to see their portfolios online.
Startup VIP Private Capital (www.vipprivatecapital.com), is attempting to build an online private bank from scratch. A division of Toronto-based Royal Bank of Canada, it will try to match people with $500,000 or more with independent money managers. The service plans to expand into other private banking services, such as helping clients shop for loans and mortgages. It will give clients the convenience of reaching a personal wealth adviser via e-mail, telephone, or video via the Web. Clients will be able to monitor accounts and trade online.
At the upper-upper-bracket end is myCFO (www.mycfo.com), which will cater to people with $10 million and up. High-tech entrepreneur James Clark, founder of Silicon Graphics, Netscape, and Healtheon, is behind this venture. The site is being launched piecemeal, with the investment advisory service due in early summer. MyCFO intends to consolidate online all of an investor's financial-service needs, from accounting to taxes, investments, insurance, trusts, and estates.
Clients will also get personalized service from an individual. MyCFO has recruited managing directors from a number of top accounting firms. The cost of the site is dependent on the complexity of an individual's investments.
MyCFO, Morgan, and others are just the first generation of wealth-management sites. Their aim: Use technology to improve the hand-holding that rich investors have come to expect. Even in egalitarian cyberspace, money talks.
Best Bets
Unlike other private banks and brokerage firms, Morgan OnLine allows you to apply its time-tested financial models and analysis to your entire portfolio by depositing only $10,000 and paying an annual fee of $2,500. By keying in relevant financial data, you can get an action plan--if one is needed--for all your assets no matter where they are held.
