Five years after rolling out OneSource, Charles Schwab & Co. has a lofty goal for the mutual fund mart's well-known brand name: to emerge as the Good Housekeeping seal of approval for one-stop fund shopping networks.
"There are lots of no-load supermarkets and they're all a blur," said David S. Pottruck, the newly minted co-chief executive officer of the San Francisco-based Schwab. "Our effort is to try to distinguish what we provide as the best."
That means offering "the best funds, the best information and research, and the greatest degree of brand awareness," he said.
Mr. Pottruck has his work cut out for him.
OneSource was the first program to offer retail investors a choice of mutual funds from a range of families, with no transaction fees. But it has been widely imitated. Everyone from brokerages to banks has copied Schwab's formula for one-stop mutual fund shopping.
Fidelity Investments, for example, has its own no-load, no-transaction- fee mart, dubbed FundsNetwork, which, like OneSource, offers investors access to some 800 funds. Fleet Financial Group, meanwhile, stands to gain its own sizable supermarket when it completes its acquisition of Quick & Reilly Group early next year.
And banks ranging from Citicorp in New York to BankAmerica Corp. in San Francisco are all experimenting with their own takes on the fund market concept.
"The product itself will largely become a commodity," acknowledges Tom Seip, a Schwab executive credited with launching OneSource in 1992. Mr. Seip in September was named president of the firm's mutual funds and international businesses. Shortly thereafter, Mr. Pottruck was named the firm's No. 2 executive.
Both Mr. Seip and Mr. Pottruck maintain that OneSource has what it takes to stay ahead of the pack.
For one thing, Schwab plans to double or triple the number of funds available via OneSource by the second half of 1998, Mr. Seip said. OneSource, which entered the market in 1992 with approximately 75 funds drawn from six fund companies, now offers retail investors 800 funds from over 100 families. It holds customer assets of $55.5 billion.
Mr. Seip said OneSource's future lies not in the mart itself but in the services Schwab can provide around it. To that end, giving investors access to information and asset allocation tools 24 hours a day, seven days a week, has become increasingly important, he said.
At Schwab, customers can now access OneSource over the phone, on-line, or by visiting one of a large network of branch offices. With roughly 270 branches, Schwab has more physical presence than Fidelity Investments and Quick & Reilly combined, its executives point out.
Mr. Seip also said the addition of products like Schwab's Asset Allocation Toolkit will make OneSource stand out from the competition. Unveiled in October, the tool kit enables investors to go on-line and map their specific fund holdings against historical portfolios.
Also this fall, Schwab began enabling users of its OneSource Web site to link to fund companies' sites to view fund manager commentary.
And for customers who want to speak with a broker before buying mutual funds, Mr. Seip said he could envision a time when Schwab offers more investment advice to OneSource users, for a fee.
According to Mr. Pottruck, another factor distinguishing OneSource from the crowd is its adherence to its fund pricing rules. Schwab mandates that fund companies offer the same share class and same price on fund shares sold through the mart as those sold directly to the public.
"Every fund that's in OneSource is the same quality, the same expense ratio that the company offers to the public," Mr. Pottruck said.
Observers, however, point out that most fund supermarkets can make that claim. One exception would include some fund marts that sell shares managed by Neuberger & Berman, New York.
Neuberger offers 11 of its funds at prices several basis points cheaper through OneSource than through Fidelity's FundsNetwork or other sources, noted Geoffrey H. Bobroff, an East Greenwich, R.I.-based consultant.
A Fidelity spokesman said that his company has the same pricing policy as Schwab, but made an exception for Neuberger & Berman long ago.
Elsewhere, Charles Schwab has developed some offshoots of the OneSource program. Two banks-Charlotte, N.C.-based First Union Corp., and Cleveland- based KeyCorp-are now distributing the product to their customers.
The company has also begun to help market new funds from companies that sell their portfolios through OneSource. This fall, it began marketing two new managed index funds from NationsBank Corp. to the large number of independent financial planners that clear through the firm.
"Most people have seen the benefit of doing it, to get that kind of access," said Jeffrey Lyons, a senior vice president in charge of marketing for OneSource at Schwab.
The deal with NationsBank was the first of its kind with a bank.
