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Home > Library > Stable Times > Volume 3, Issue 2  The quarterly publication of the Stable Value Investment Association Second Quarter 1999 • Volume 3 Issue 2 Stable Value and the InternetBy Judy Markland, President, Landmark Strategies In recent strategic planning sessions that Landmark has structured for investment clients, the biggest future challenges inevitably seem to be posed by the Internet. Savvy institutional investors can see significant shifts in their customer communication and purchasing patterns. Since this type of change will affect the stable value industry as well, it's useful to review some basic theory about the effect of the web on business as a whole and the current picture of stable value on the web. Internet Strategy: A Reduced Form Overview The major new factors presented by e-commerce are hardly news, but few businesses have yet to face their full impact. Fast-paced electronic transactions allow provider-customer interactivity - which in turn changes the dynamics of pricing and purchasing. Already there are web auctions for many products, and web experts believe fixed prices will soon become a thing of the past for most goods and services. Custom-tailoring at the retail level will also become prevalent. Why not order a CD with just the tracks you want to hear - or get Lands' End to tailor those pants to your exact dimensions?  Moreover, the Internet makes it amazingly cheap to reach a world-wide customer base. A tiny firm can reach a large market without the expense of retail shops or salespeople, and the perception of a firm's quality is no longer dependent on its size. This means more entrants and thus more competition in many markets.  The ease of reaching customers gives the customer more information and greater access to products and services. For the first time providers literally come to the customer, who now can shop when and where he wants. This freedom is a form of empowerment, one which has shifted much of the shopping dynamic to the customer's direct control. As Fortune said recently, "The hunted has now become the hunter". Knowledge is power. The web consumer will have the knowledge to find the best product value - the lowest cost for the value desired. With more information available, providers will find it easier to differentiate their products. Low retail distribution costs and the need to make sense out of all the information available on the net will change the role of intermediaries. Today's product wholesalers will likely evolve into tomorrow's information providers. Stable Value Customer Communication Understanding customers will be critical in the customer dominated world of e-commerce. The picture below on the left shows the traditional stable value customer 'food chain' from the investment contract issuer down to the participant level. Note that almost all communication travels down this chain, with only those who actually serve as administrators generally having any interaction with the final investor. The picture on the right, however, shows Landmark's view of the coming Internet communication pattern - with much more information sought by participants directly from providers at all levels.  
Stable Value on the Web With this bottom-up communication pattern in mind, we set out to discover what a participant would find by searching for "stable value" on the Internet. The search was undertaken in December 1998 using Altavista and turned up over 1000 references. We analyzed the first two hundred, of which 68 percent were investment-related. This graph shows what types of firms were represented. Not surprisingly, the dominant category is asset managers. Both the Stable Value Investment Association and the Profit Sharing Council had numerous citations and are listed under Associations. Media citations were primarily in institutional publications like Pensions & Investments or DC Plan Investing.  We then decided to conduct a second search to see what a participant might find if he or she accessed SVIA provider member websites to look for stable value. This second search was done in January 1999. At that time there were 75 provider sites up and running. Given the institutional focus of the industry, we had expected to find more institutional web pages than retail. In fact, there were 53 retail locations and 51 institutional ones. However, the words "stable value" only appeared on 9 of the retail locations, compared to 18 of the institutional ones. Overall, the words "stable value" appeared on fewer than 1/3 of the sites, although many did have references to GIC, synthetic or investment contract.  On the assumption that individuals would be most likely to look for stable value on major mutual fund sites, we reviewed several of the largest . The table below summarizes the results for six firms, excluding those that also provide a wrap service. The phrase 'stable value' was found on only two of the sites, and one of the two referenced a money market fund. Even institutional investors won't find stable value on these firms' main web sites.  Even when the industry does succeed in reaching out to individual investors and participants, the survey uncovered a tendency to emphasize stable value's safety and not its returns. Typically the asset class is grouped with money market funds and rarely used as a substitute for bond funds. And we often describe stable value using a vocabulary that we carry over from institutional markets. Pages designed to channel visitors between retail and institutional sections of the site use buttons labeled "participant" on one hand and "'sponsor", "institutional investor" or "group customer" on the other. Are these meaningful to individual investors, even 401(k) ones? Moreover, web definitions of stable value products (including GICs and synthetics) may not provide as much education to individuals as the industry would like. While there are excellent ones, the following also appear:  If individuals use the Internet as a basic resource for their investment education, the SV industry must see that they have access to appropriate web material. This will take an overall industry effort - a critical and vitally important effort. I've vowed to add participant-level information to my site, and I challenge other SVIA members to do the same. A copy of the complete web survey and is available from Landmark Strategies by calling 781-860-7319 or sending an email to survey@lmstrategies.com.
Read Next: Where on the World Wide Web is Stable Value?
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