The Old Mutual FundsNet Web site has stopped accepting new business and is to be closed down by the end of June, the company said today. The shutting down process is only scheduled to start in May in order to make it painless for the small group of high-value investors using the system.
FundsNet was launched in November 2000 and modelled on American sites which at the time showed strong growth. It promised to offer the lowest possible fees in the unit trust business because of its savings when compared to paper-based systems. It also had plans to go international with the system.
But the company only managed to attract about as many customers as it had unit trusts. It offered 180 unit trusts at the time of the site`s launch and Old Mutual says the online facility attracted only 205 clients, "far below expectations".
"It is clear that in the investment market the vast majority of clients continue to prefer dealing with intermediaries," says Old Mutual executive GM Mike Harper.
Even though the 200-odd clients were worth a combined R54 million in investment (an average of R263 000), Old Mutual says the volumes of trade did not make the site sustainable. It was to be funded through rebates from the management companies whose unit trusts were sold through the site.
Old Mutual says it will reimburse the current users the membership fees they paid and move them to an alternative platform at its expense.
The company has not yet determined what the exercise has cost it. Old Mutual says the infrastructure used for the system was that of its existing unit trust business and won`t become obsolete. It also does not expect job losses, saying the small number of staff employed by FundsNet will be absorbed by other businesses.
Reimbursing current users will put it little more than R115 000 out of pocket.
Old Mutual says growing market share means it needs to be bold with new initiatives, but that there is no guarantee of getting it right every time.
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