While most mutual fund marketers have set aside a portion of their budgets for Internet-based advertising and marketing, TD Bank has taken things a step further with the launch this RRSP season of Canada’s first Internet-based mutual fund.
The TD ‘eFund’ completed its national rollout last month. To date, it is the only Canadian fund sold exclusively over the Internet. The fund charges about half the fee investors would normally pay if they bought a similar fund through a bank branch. It also offers e-mail investment advice and live Web-chat.
‘To retain our current customers and attract the growing number of Web-savvy investors, we have to be able to offer them investment vehicles in the manner they are demanding – and they are demanding it over the Web,’ says Patricia Lovett-Reid, TD Asset Management director of communications.
As the Canadian mutual fund market continues to consolidate, marketers are scrambling for ways to entice new investors and retain their current clients. While the market rebounded somewhat – February saw the strongest mutual fund sales in nearly two years, with $6.5 billion in net sales – last year investors redeemed a whopping $1.3 billion, according to the Investment Funds Institute of Canada.
About 40% of eFund’s investors are new clients who have not transacted business with TD bank before, says Lovett-Reid.
The TD bank has long positioned itself as a leader in online financial services. Its Internet discount brokerage, TD Waterhouse, is huge, with more accounts than its three Canadian competitors combined.
However, investors are not flocking to the Net to determine where to invest their RRSP dollars, says Al Hay, president of Toronto-based Burwell Hay Market Research.
Only 13% of those surveyed said they logged on to the Internet to investigate RRSP investment opportunities. While this figure has doubled since 1997, it still represents a small minority of investors.
‘Canadians still prefer to talk to their financial advisors face to face rather than log on to the Internet,’ says Hay.
That is reflected in the advertising strategies of many mutual fund marketers. Even for TD’s eFund, promotion on the Internet has taken a back seat to more traditional forms of advertising, says Angel Kasparian, TD Asset Management director of marketing.
While there was some limited banner advertising, the lion’s share of the budget went to print ads in The Financial Post and The Globe and Mail’s Report on Business with support from advertising in computer publications.
‘It is still a big question how effective the Web is in marketing our products,’ says Kasparian. ‘We are not sure how we can translate the clickthroughs that we get into money in our pocket.’
That’s a sentiment echoed by other mutual fund marketers.
Virtual bank ING Direct introduced its first line of mutual funds earlier this RRSP season. While the funds are not yet sold over the Internet, ING plans to add that capability soon, says Stacey Grant-Thompson, ING senior vice-president of marketing.
While ING’s Web site is highlighted in all its advertising efforts, the company still looks to traditional channels such as television, out-of-home and direct mail to promote its offerings, she says.
‘The Internet for us is still mainly an information medium rather than a branding medium,’ she says.
AGF Management, for its part, uses its Web presence to inform consumers about its products and services and keep current clients up to date with their investments. Traffic on the site has exploded to 400,000 hits this current RRSP season from only 20,000 hits a year ago.
