SAN FRANCISCO -- Officials at Callan Associates Inc. are reshaping their web strategy to offer services similar to those of InvestorForce Inc. and eFrontiers.com Inc.
The formation of e-consultants is "sending waves in our industry and it's forcing us to react, so we don't become dinosaurs," said Gregory Allen, Callan's executive vice president and director of operations.
The first component will be an e-mailed money manager news service at no cost for clients only.
The firm is seriously considering an online version of its money manager database, containing information on between 1,600 and 1,700 managers.Money managers would be allowed to update their information via the web.
The firm is considering sending what Callan considers RFPs via e-mail, where managers can update data in the Callan database more easily, said Eric Colson, senior vice president and head of global manager research at Callan.
Currently, these data are gathered annually on a standard RFP, Mr. Allen said. Acquiring the data via a web browser is not viable now, but could be in the future, he added.
Meanwhile, Callan's hometown, San Francisco, has been hit with higher rents and increases in starting salaries for "old economy" businesses such as Callan.
"It's putting cost pressure on us we would not normally have," Mr. Allen said.
Mr. Allen expects in the next 30 to 60 days clients will be able to select from a list of about 500 money management firms on which they'll receive e-mailed daily news items, updates and commentary.
This service to clients is a logical extension of what Callan has had in place for the past few years to keep its money manager research up to date for members of its nationwide consulting team, Mr. Allen said.
Right now, Callan has what may be considered by many in the money management industry a first-generation website -- basically an electronic marketing brochure.
Mr. Allen said the traffic on the site is minimal, although clients have access to Callan's research papers and market commentary through a password-protected area.
Callan already provides access to its money manager database and delivers reports on money managers to about 35 midsize consulting firms, so those firms are able to build reports online for clients.
It's this use of Callan's back-office money manager data that executives are pondering whether to make available publicly.
According to Mr. Allen, it's a matter of how readily and freely available information on money managers becomes.
But if InvestorForce or eFrontiers does manage to change the way searches are done, Callan is ready to respond, Mr. Allen said.
While Mr. Allen believes Callan is capable of allowing plan sponsor clients to search for money managers online, he doesn't believe it's a strategy that will make Callan wealthy. And he believes that the revenue model has yet to be discovered by any firm, especially since it's costly to gather and maintain such a comprehensive money manager database.
So far, Callan executives are sure they can't charge their clients twice for information on managers, but they're not sure whether they could charge other plan sponsors or money managers for use of their information.
"Giving it away seems to be the standard now, but we are not interested in that from a revenue perspective," Mr. Allen said.
Callan has looked into creating a site for institutional investors to use some of Callan's manager data to conduct searches, said Mr. Colson. "There is an enormous amount of interest and discussions on a model that will work on the Internet," he said.
But, Mr. Allen said, that type of model is not an option for Callan at this point, mainly from a revenue standpoint.
The most an InvestorForce or eFrontiers could ever generate in money manager search revenue, it seems, would be between $25 million and $30 million annually if they conducted all of the searches in the United States, he said.
"All of us are saying, `You guys go ahead and spend all your venture capital, and if you find something that works here, we can then go ahead and replicate it'," he said.
Mr. Allen predicts consolidation in the e-consulting business will result in the formation of two portals and then a scramble for content providers, which would include Callan. "Each big firm is doing fine without merging with a startup," he said.
James Morrissey, president and chief executive officer of InvestorForce, Wayne, Pa., isn't advocating mergers, but is supporting technology his company views as helping plan sponsors, money managers and consultants to do business. "This is an industry that has operated the same for 25 years. A change in behavior is not going to happen overnight," he said.
The revenue model is one that will prove itself over time, he said.
Brian Fitzgibbon, executive vice president, eFrontiers, believes the market is bigger than Callan thinks for money manager searches. "Turnover of managers is between $1 trillion and $1.5 trillion each year," Mr. Fitzgibbon said.
