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FundsHub sets wheel turning for would-be supermarkets

For the sake of clarity, it is worth describing what FundsHub is not. FundsHub does not offer a direct-to-retail or IFA-based online fund supermarket carrying the FundsHub brand. Strictly speaking, then, we do not compete with Fidelity&#39s FundsNetwork, CoFunds or Egg.

FundsHub is an independent provider of an outsourced fund supermarket solution. In short, we target banks, building societies, savings product providers and financial services groups such as big IFAs which want to build a robust, technologically superior fund supermarket as quickly and cost-effectively as possible.

To take advantage of fast-to-market fund supermarket technology, our customers need a strong brand, significant branch network and a big customer base, with enough robust customer data to be able to identify the relevant target groups who would want to use this kind of online investment proposition.

As a fund supermarket enabler, we are responsible for the development of the fund supermarket – from the internet-based customer, through the fund trading capability to the treasury and settlement functions – and the maintenance and development of that fund supermarket over time.

But the FundsHub brand is invisible. All the FundsHub fund supermarkets will carry is the brand of the distributor, our customer.

FundsHub is essentially the combination of two distinct and powerful propositions – Investia&#39s fund trading technology and Chase Manhattan Bank&#39s global custody, fund operations and wholesale banking capability.

FundsHub provides the technology and operational linkage between the fund companies whose products make up the supermarket and the distributors which sell the funds to their customer base.

Distributors retain full ownership of their clients, managing the collection of daily orders and subsequent cash from their clients.

For example, our first UK customer, Bradford & Bingley Group, will be operating a FundsHub-based fund supermarket platform as part of an overall online wealth management offering which will carry the Charcol Online brand. This fund supermarket will offer retail investors the choice of over 250 investment products from at least 16 different fund companies.

As the fund supermarket sector matures, the market will see the development of three distinct fund supermarket models. The first is the direct-to-retail fund supermarket such as that as operated by Egg. The second is the IFA platform, or the retail/IFA hybrid, of which FundsNetwork and the proposed CoFunds are good examples. The third, which is unlikely to stand the test of time, is the order router. These are not fund supermarkets in the true sense but web “front-ends” which still rely on traditional ordering and processing methods, presenting little or no administrative and cost savings to fund companies or investors.

Currently, there are no traditional banks or building societies offering online fund supermarkets. The existing players in the sector are fund houses (Fidelity, CoFunds), online providers (Egg) and new entrants (Virgin). This is all set to change.

In fact, the traditional banks and building societies may well be the eventual victors in the fund supermarket war and the wider e-finance sector, purely because customers take reassurance from those brand names.

FundsHub&#39s business model is closely tied to this concept. Established names and embedded distributors in financial services will be able to use their current brand strength and branch networks to increase their share of the existing customer base through well-planned e-finance strategies.

For most of these organisations, there is a long way to go before they are in a position to capitalise on these strengths. But, gradually, more banks and building societies are moving towards an intermediary model in which they turn themselves into marketplaces for third-party products.

Today&#39s financial services consumers, who are having to be more responsible for their financial futures, are no longer prepared to accept tied, poorly-performing investment products. Fund supermarkets, as part of wider online offerings featuring share dealing, mortgages and e-banking capabilities, will help the traditional players meet this consumer need.

As such, the technology and solutions providers are the arms dealers in the fund supermarket war. Our customers recognise their own strengths, which are their brands, their physical networks, their customer bases and their marketing excellence.

For the most part, technological prowess is not one of those strengths. It is our role to help them overcome this.

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