The investment adviser and Web technology provider FundQuest has carved a niche for itself with an investment program that helps banks and other financial services companies move into fee-based businesses.
Banks are increasingly attracted to fee programs such as separate accounts, mutual fund wraps, and fee-based brokerage accounts that cater to the "emerging affluent," people with less than $1 million to invest, and several are turning to private-label providers such as FundQuest to reach this market.
Of the 17 or so companies FundQuest is now in talks with, said Robert Del Col, its president, about a dozen are banks. Though FundQuest deals mostly with retail divisions, he said, in the last six months several banks' trust and wealth management units have sought the Boston company's services. "Until last year, we never had a meeting at a bank that the wealth management people attended," Mr. Del Col said.
All are looking for more sources of fee income, but banks' trust and wealth management divisions are increasingly aware, he said, that portfolio management products for the emerging affluent could also work for some of their clients.
FundQuest has a group of investment products that it can private-label for the brokerage firms, banks, insurance companies, and registered advisory firms with which it works. People can gain access to the products through links from these companies' Web sites or from a private-label site FundQuest can develop.
FundQuest's primary product, which Mr. Del Col calls a "hybrid account," is designed to be flexible enough to let a bank, brokerage, or insurance agency configure it specifically for its clients.
FundQuest can supply either active portfolio management or administrative infrastructure to companies that want to offer its mutual fund wraps, separate account portfolios, fee-based adviser-managed investment programs, or any combination of these.
FundQuest's average separate account client invests $700,000 to $900,000, Mr. Del Col said, and he added that many wire houses refuse to take clients without at least several million dollars of investable assets.
The average fee-based brokerage investor at FundQuest has about $300,000 in an account, and the company's average mutual fund wrap investor has $150,000 to $200,000, Mr. Del Col said. FundQuest charges each client institution 25 to 50 basis points on the assets in that institution's portfolio, depending on size.
After eight years in business, Mr. Del Col said, FundQuest has $3.5 billion of assets through its products. He said the company expects to add $2 billion this year. "We've had calls from several of the top 100 banks," he said.
FundQuest has also developed its own portfolio assessment tool, which Mr. Del Col said gives detailed measurements of accounts' performance. The tool compares each segment in an account's portfolio - international stocks, domestic stocks, and fixed-income securities, for example - with its best-known benchmark. FundQuest then uses the composite of these benchmarks to measure an account's overall performance.
The company is planning to unveil a series of custom products soon, Mr. Del Col said. This week, at one client's request, FundQuest is to launch a wrap program dealing exclusively with exchange-traded funds. It is also designing a stock "basket" similar to those offered by FolioFN and MyMoneyPro.com. The products are being created at the request of specific clients, but versions will be available to any institution that requests them, he said.
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