Applied Technology, a venture capital firm, has invested about $850,000 in a software company that plans to help banks and others distribute investment products over the Internet.
Applied Technology now co-owns MarketKnowledge Inc., a recently formed software company based in Austin, Tex. Applied Technology will commit additional funding of up to $2 million at a later date for marketing and related expenses.
Marc Ferguson, president of MarketKnowledge, billed the service being developed by his company as "the first fully digital distributor of retail investment products."
"This is the next generation of distribution," Mr. Ferguson said.
MarketKnowledge was formed last year to develop a prototype of its service, which officials said will be tested with an undisclosed bank later this year.
Applied Technology, a Lexington, Mass.-based firm, invests primarily in software developers.
Mr. Ferguson said the service will let brokers and banks download graphically presented product information from mutual fund providers over the Internet.
The software component, which will reside on retailers' desktops, will integrate with back-office systems for execution of orders and transmission of customer information.
Felice Larmer, a senior vice president of KeyCorp who viewed a demonstration of the software, said she is intrigued by it.
"If they can deliver what they say they are going to create, then it's going to be a very exciting product," she said.
However, KeyCorp has no immediate plans to install the software.
MarketKnowledge executives said the company plans to collect fees from mutual fund companies by constructing Web sites on the Internet, which eventually will help deliver products and information to brokers on-line.
The service converts "everything that was done on traditional media" to electronic form, Mr. Ferguson said.
David Boucher, who is managing general partner with Applied Technology, said the market for such services is largely untapped.
The MarketKnowledge software, called LifeScript, "is really going to make a big difference in the way financial instruments are sold, particularly by banks and independent brokers."
He said the MarketKnowledge service will not compete directly with any existing offering from on-line providers of investment product services, such as Galt Technologies Inc., which was recently purchased by Intuit Inc.
Mr. Boucher said Galt's service, called Networth, is designed to provide "a lot of good information about a tremendously broad variety of funds" directly to consumers.
The proposed service differs because it is a point of sale tool designed for brokers. They can use Galt in conjunction with MarketKnowledge's service, he said.
In the long run, on-line distribution might ultimately replace the "human wholesaler," Mr. Ferguson said.
Other banks that saw early demonstrations of the prototype software include Great Western Financial Corp., Northridge, Calif., and BankAmerica Texas.
"Banks are grappling with ways to get beyond the transaction orientation of brokers," said Kenneth Kehrer, a Princeton, N.J.-based mutual fund consultant. "Banks are saying, let's look at the next investment step you are going to take."
