ING Direct, the branchless bank of Dutch insurer ING Group, has expanded into the investment business by offering six mutual funds, according to Tom Deck, president of ING Direct Securities in Wilmington, Del.
"The product is easy to understand, so it fits into what we offer the ING Direct customer," Mr. Deck said. "We are not in the advice business, and mutual funds are a do-it-yourself product. So it's a good fit for our 300,000 customers."
Mr. Deck said that last May a survey of the bank's customers found that 63% had an interest in buying mutual funds from it.
The six ING-manufactured portfolios were added last month to ING Direct's product menu, which includes savings accounts, revolving loans, certificates of deposit, home equity loans, and mortgages.
"We're offering six funds, each with a specific audience in mind," Mr. Deck said. "Our customers know what they want. They know what their needs are, and while it would be too limiting to have just one fund, it would be too confusing if we had too many. Six is about right."
The six portfolios are the Index Plus Large Cap, Index Plus Mid Cap, Index Plus Small Cap, Bond, International, and Technology funds.
Though ING Direct is moving in the right direction by offering mutual funds, it should not expect a sales bonanza, according to Geoffrey Bobroff, president of Bobroff Consulting Inc. in East Greenwich, R.I.
"I applaud them for doing this, but they are going to have to stay the course for five to 10 years, when the 20- to 30-year-old of today, the heaviest users of the Internet, begin to buy these products," Mr. Bobroff said. "Right now the Internet is more of a communication and education tool than an investment tool. There isn't a large population looking for mutual funds online."
Mr. Bobroff also said it would not be easy for ING to persuade even its own customers to buy mutual funds online.
"The problem is, most of these people already have a financial services relationship somewhere else," he said. "People haven't reached the point where they use just one vendor for all their products, and mutual funds are a readily available product."
The average ING customer, unlike the E-Trade or TD Waterhouse customer, might not be as willing to move into the equity market, Mr. Bobroff added.
"People who use the E-Trade platform generally gravitate to that platform for equity exposure," Mr. Bobroff said. "I'm not so sure that's the case for ING's customers."
But Kenneth Kehrer, president of the Kenneth Kehrer Associates consulting firm in Princeton, N.J., said at least some ING customers would buy mutual funds.
"If you split ING customers into two groups, one is with ING because they are a traditional saver; the other because they are a savvy customer that found the best CD rate," Mr. Kehrer said. "The traditional saver will probably consider buying a mutual fund with ING because they're comfortable with ING; they've already purchased a product from ING."
However, the savvy customer would probably go elsewhere. "They want to see funds from different sources," Mr. Kehrer said. ING Direct has "limited offerings."
Mr. Bobroff also said the lack of choice would hurt ING Direct.
"The customer is experienced, and in terms of selection, it would be foolish to think that the product will sell just because it has an ING label on it," he said. "They want choice."
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