Bank-owned Web brokerages have their work cut out for them in building a customer base and cultivating loyalty among those customers.
Online investing simulators allow individuals to gain experience with the investing platform without risking their capital, but banks have not yet rushed to avail themselves of this technology.
Simvest Solutions, a three-year-old Toronto company, is trying to change that. It is marketing an investment simulation platform called Simvesting for bank broker-dealers to offer to their customers so they can practice at investing before taking their money online.
Simvesting lets users put imaginary money into investments and track the results without losing real money.
The platform can be reached through a participating bank or broker's home page, and can be configured with a broker-dealer's own product line. Simvest also provides trained personnel to assist investors in the simulation.
The company says that by letting investors practice with fantasy money, institutions that use the platform can build relationships with and collect key demographic information about potential investors within and outside the bank's customer base.
Potential investors can also learn about such products as stocks, mutual funds, hedge funds, and exchange-traded funds, as well as margin investing, the company said.
Simvest has partnerships with TD Waterhouse, Ameritrade, and Merrill Lynch Direct, and it says it is working on agreements with Wells Fargo & Co., Bank One Corp., and Wachovia Corp.
Chris Chandler, president and chief executive officer of Simvest, said that with the evolution of online investing, teaching investors what they need to know before they go into the market is crucial.
Such a teaching platform can help banks reach and retain investment clients, he said.
Simvest says its average user spends 40 minutes and view 200 Web pages a month working on the simulation. "For any bank, that is a tremendous amount of time to have to be in front of the customer," Mr. Chandler said.
But Jamie Punishill, an analyst with Forrester Research, said customers who use a platform like Simvesting are not building loyalty as much as they are playing a "stock game" similar to the ones offered on the Web by Yahoo and CBS Marketwatch.
The "game" reaches two kinds of people, he said - experienced investors who don't believe they have anything left to learn, and first-time investors who can't learn it all in 30 days. "For new investors, the only way for them to learn the twists and turns of the market is to keep up with it for a year. But lets be honest: Who is going to play this for a year?"
Mr. Chandler said Simvesting may have the look and feel of a game, but it is different, because the mock transactions are made in real time, without the 5- or 10-minute delays used in most investing games. Simvest's platform takes into account elements such as commissions and confirmations, reconciliation of positions if a stock splits, and dividends declared, he said.
Mr. Punishill said he doubts Simvest will create measurable loyalty for a bank. "Testing ideas with play money is good, but I don't think that many people will take advantage of it. If you are curious about new ideas, odds are good you will test the ideas with real money. People without that savvy are going to use advisers."
Sixty percent of Simvesting users surveyed by the company said they felt more prepared to open an account online after going through the simulation, and 80% of the users who are not yet investing online said they felt more knowledgeable after participating in the simulation.
"The key here is we are capturing the curious investor," Mr. Chandler said. "These investors go to the investment site but are not ready to open an account. The simulation motivates investors to learn and then put their learning into practice under real-market conditions without the risk."