Financial Sites of the Rich and Famous

For Todd Rulon-Miller, as for so many new-economy millionaires, time isn't money - it's more precious.

The former VP of worldwide sales for Netscape Communications Corp., Rulon-Miller joined the company in 1994 when it had just 50 employees. By the time he left in 1997, he had a fortune in Netscape stock and stock options. Moving on, he established his own Silicon Valley-based company, Apogee Venture Group, which assists startups in finding funding and talent.

Now managing a new business, a family of six, philanthropic efforts, taxes, estate planning and day-to-day bill payment, Rulon-Miller is frustrated by the amount of time it takes him to manage his complex financial needs.

"The biggest problem I have now is time management," he says. "I still need to be competitive to continue to grow my income and asset base. I needed someone to help me become efficient in managing my time."

A growing number of online financial services are only too happy to help. They range from Wall Street giants like Goldman Sachs to online-trading pioneer E-Trade, which originally set out to democratize the world of investing through Internet technology. The rich, after all, are the most coveted of customers for the personal-finance industry. A single client can bring in more revenue than hundreds of customers at discount brokers, and potentially for less cost.

Much of the new wealth sought by the elite financial sites is coming from the Internet industry itself. These days, the word "millionaire" is less likely conjure up a gray-haired businessman than a young entrepreneur at complete ease on the Internet.

Witnessing the success of online trading in general, Wall Street firms are inching to dive into the waters of online services for the wealthy. J.P. Morgan, Merrill Lynch, Morgan Stanley Dean Witter and Goldman Sachs are elbowing one another for a piece of the market. On the other end of the scale, E-Trade and Charles Schwab - historically the champions of the smaller investor - are moving upscale with online and offline services designed for the affluent.

And startups like MyCFO, a money management firm catering to high-net-worth individuals, are hoping to attract the new elite with unbiased advice from professionals who they say understand their needs.

MyCFO was founded by Jim Clark, whose previous startups include Netscape and Healtheon. Clark, whose net worth is estimated at a mere US$2 billion, started the company after having the same frustrations as Rulon-Miller in managing his finances.

Looking at MyCFO's client base, it's clear why this market niche is so attractive to so many. Currently, the startup has just 250 clients, but its advisers are managing a staggering $37 billion in assets, or nearly $150 million in assets for each of its customers.

Rulon-Miller was one of MyCFO's first users last year. He allowed one of the company's financial advisers to take over responsibilities ranging from bill payments to long-term tasks such as philanthropic activities, tax planning and asset management.

Now, Rulon-Miller and his wife can handle their finances online, by phone or in person. They turn to MyCFO several times a day, even for nonfinancial services like finding a baby-sitter. The fees include an annual retainer of at least $25,000, plus additional fees for various services. The company, which has five offices nationwide, is planning to open more in cities such as Atlanta and Boston.

Wealth-management services are nothing new, but finding solutions for the growing ranks of dot-com millionaires has been a challenge for the companies, financial advisers and consulting firms that have done it for centuries. The Internet Economy has created more millionaires in a five-year span than any industry in history.

High-net-worth clients, usually defined as those with more than $1 million in assets for investment, are demanding the same cost efficiencies offered by the Internet that the masses have enjoyed. For the firms offering these services, finding the right combination of online services and trusted, personal advice at a competitive cost is the challenge.

"This market is a rapid adopter of Net services, so it's necessary for them to have lots of utility in tracking their investments online," says William White, practice leader for affluent market consulting for Spectrem Group, a consulting firm for the financial services industry. "Somewhere in the middle, things are going to meet. Affluent investors need the wisdom of an adviser as much as access to online products."

MyCFO has attracted the cream of the crop of affluent customers, thanks in large part to Clark's Rolodex. Unlike Wall Street firms, the company says, it's a third-party adviser independent from any underwriting or trading divisions. It also pledges it won't sell financial products to customers.

It may be tough for many investors to spare pity for a group of folks burdened with managing hundreds of millions in assets, but MyCFO is happy to lend a helping hand. "It's a good burden to have, but if you have it, you want someone to take care of it," says company CEO Art Shaw.

The $45 million that MyCFO raised from the Barksdale Group, Kleiner Perkins Caufield & Byers and private investors has helped it in hiring professionals in the areas of accounting, asset management, estate planning and tax planning. And the company has drawn talent from major financial institutions by offering stock options in Clark's newest venture in lieu of steep commissions.

But with Wall Street marching into the market for online financial services for the rich, MyCFO's greatest challenges lie ahead. The firm has no assets under management - it merely provides advisory services to help manage assets under management elsewhere.

Affluent investors who are customers of J.P. Morgan or Goldman Sachs will be offered competitive services at no additional cost to the existing money management fees. Account aggregation technology enables an adviser from Morgan Stanley, for instance, to view his customers' assets that are housed at Goldman Sachs or Charles Schwab.

Of course, it's not only the wealthiest retail investors who are demanding online access to their financials in combination with personal advice. Particularly during the last six months of a volatile stock market, online brokerages have realized a dire need to attract assets instead of just trade commissions to survive.

E-Trade, in a joint venture with consulting firm Ernst & Young, plans to launch a service called eAdvisor by the end of this year. It will offer a combination of customized online advice and access to professional advisers from Ernst & Young. The company has yet to disclose the pricing and details of the service.

And Charles Schwab, which bought high-net-worth advisory firm U.S. Trust in January, is working on integrating its Internet platform into its advisory trust services. Schwab officials won't discuss the specifics of the forthcoming combined offering for its wealthy clients, saying only that it will launch "in the near term."

"No one has found the right combination of high tech and high touch yet," says Jamie Moldafsky, senior VP of retail marketing for Charles Schwab. "People still feel like they have to patch together their financial relationships."

And MyCFO, which has focused on the wealthiest of the wealthy, plans to move downstream to target individuals with a mere $1 million in assets. For a smaller fee, customers might get more electronic advice and less face time with an adviser.

For now, Shaw isn't worried about the number of competitors headed his way. And Rulon-Miller isn't about to hand over the reins to an old-economy financial institution that might offer an Internet face.

"The group I'm working with [at MyCFO] has no problem with the way I talk and deal and act," says Rulon-Miller. "Maybe it's a cultural thing."

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