Infocus Securities

www.infocus.com.au

Executive Summary

Infocus Securities is a financial services company specialising in wealth preservation and retirement planning, corporate and personal superannuation, debt reduction and insurance planning.  The company is based in Maroochydore, QLD and employs 34 full time staff in four locations, Maroochydore, Gympie, Mackay and Sydney.

In 1998, the management team lead by Managing Director, Darren Steinhardt implemented an e-commerce strategy which would include development of a website, Virtual Private Network (VPN), electronic marketing and a facility for clients to view their investments online in a password protected account.

In recognising the increasing reliance on the Internet for supporting business operations, Infocus Securities has installed several e-security measures.  Data traffic to and from the VPN is controlled by a firewall application.  Other security initiatives include installation of anti-virus software, daily data back-ups and the provision of physical security for the server.  An external security expert was also engaged to assess system security and ensure adequate protection against data loss, system failure or unauthorised access.

Infocus Securities initially aimed to improve market share through the use of e-commerce.  This goal and several other benefits have since been accomplished.  In 2001, the company achieved an operating benefit from e-commerce of $149,111, more than recouping the establishment cost of $137,555, in one year.  The website has been particularly successful in generating additional revenue with the company recording $250,000 of sales as a result of clients having discovered the business through its website.  Cost savings have also been significant, totalling $270,900 in 2001.  The most significant reductions have been recorded in correspondence, marketing and administrative functions.

A particularly successful initiative has been the development of enhanced after-sales service.  By allowing customers to access their financials position online, they are better equipped to make decisions regarding new developments.  The online facility provides them with the ability to act on these developments, which in turn generates additional business opportunities for Infocus Securities.

The Business

Infocus Securities is a financial services company specialising in wealth preservation and retirement planning, corporate and personal superannuation, debt reduction and insurance planning.  The company currently holds over $300 million in funds under management with medium size Australian clients forming its target customer base.

Infocus Securities was established in 1993 in Maroochydore, QLD.  The company has expanded, and in addition to its Maroochydore office, they now have offices in Gympie, Mackay and Sydney. Infocus Securities employs 34 full time staff.

Getting Started

Three years ago, the management team lead by Managing Director, Darren Steinhardt, initiated the e-commerce strategy which included the implementation of a website, intranet, electronic newsletter, and a facility for clients to view their own investment accounts online. 

Consistent with Infocus Securities' plans for regional expansion in Queensland, the initial aim of the e-commerce strategy was to increase market presence.  The management team recognised that e-commerce provides a differentiator for the business in the increasingly competitive financial planning market.  It was envisaged that a website would draw new clients and online functions would be developed to enhance service delivery to existing clients.

The management team investigated the type of online capabilities that may meet the goals of the business by consulting with two local web developers and talking to peers in the industry.   The website was developed by two internal programmers and is now maintained by the same people.  Client information on the website is updated daily using information provided by fund managers, banks and research houses.

E-Security

The company recognised that increasing reliance on web-based processes must be supported by an adequate security system.  To this effect, Infocus Securities installed firewall technology to control data traffic coming in and out of the Internet.  The company also encourages use of hard-to-guess passwords for client and staff access to the extranet.  These must be changed every 90 days.

Wide-spread use of email communication and Internet applications exposes the business to the risk of virus transmission.  This issue was managed with the installation of anti-virus software on all terminals with automatic patches downloaded on a daily basis.  To minimise the effect of data loss on company productivity, automatic data back-ups are conducted on a daily basis with tapes stored offsite.

While access to Broadband Internet is via an Asymmetric Digital Subscriber Line (ADSL) connection, an Integrated Services Digital Network (ISDN) connection is kept for back-up purposes.  This acts to minimise the affect of Internet downtime on the execution of web-based business transactions and overall firm operations.

Current E-commerce Strategy

The website has proven to be effective in informing prospective clients about the Infocus Securities business and the products and services offered.  The interface is interactive such that visitors can register interest in investment and educational seminars online and also have the opportunity to calculate home loan repayments and self-assess their financial position.

The company has set up a VPN such that employees can access the internal website for client data, company information and training details.  The network allows staff to access an online directory detailing staff, suppliers, clients and prospective clients.  

In line with the company's goal of enhancing customer service, a post sales facility has been established whereby clients are provided with their own online accounts.  Using a login password, clients can monitor their investment interests and loan repayments.  Infocus Securities has also encouraged the use of electronic communication with clients including the distribution of an electronic newsletter detailing developments in financial markets and outlining new products and services.

The e-commerce strategy has also included streamlining of administrative functions.  Broadband Internet service allows staff to access real time share prices and manage the banking and trading of stocks online.  Payments to suppliers are now online as are communications with various regulatory bodies such as Australian Securities and Investment Ccommission (ASIC) and the Australian Taxation Office (ATO).

Revenue and Costs

* Note: Capital Expenditure has been amortised over a four-year period

Financial Analysis

Infocus Securities has achieved an operating benefit from e-commerce of $149,111 in 2001.  The business has more than recouped initial costs spent in establishing the e-commerce system of $137,555 in one year.  Clients have been particularly receptive of the website, generating $250,000 in internet-related sales.  This is revenue that the business has received from clients that have come to Infocus Securities after visiting the website or registering online for investment and educational seminars.

Considerable cost savings have been achieved from the implementation of e-commerce, totalling $270,900 in 2001.  The most significant cost saving has come from reducing staff time spent in conducting administrative functions such as manual preparation and lodgement of forms with regulatory bodies, fund managers and correspondence with Government agencies ($150,000).  The use of online banking and payroll has reduced bank fees by $1,000 and payroll by $1,500.

Communication expenses have been substantially reduced by the increased use of email over phone and fax.  Stationery costs of $1,000 have been saved while staff time spent in general correspondence with clients and associates has been reduced by $30,000.  The replacement of hardcopy brochures and newsletters with website content and electronic mail-outs have significantly decreased production and printing expenses.  Savings in photocopying costs have amounted to $2,400 while printing costs have been reduced by $2,000 per month for the newsletter and $8,000 per quarter for the glossy brochures.  In addition, the business has saved an estimated $2,000 per month on expenses otherwise spent in marketing initiatives to promote new products and increase brand awareness.

Initial costs in setting up the e-commerce system totalled $137,555 over three years.  A major portion of this expense was dedicated to investment in a new server ($30,000) and small business server software ($30,000) to support development of the virtual private network.  The integration of databases into the VPN resulted in three months work by a dedicated programmer and 2 months of work by a contractor, totalling $25,000.  In building the website, time spent by two internal programmers amounted to $20,000 while the management team dedicated $10,000 of time in researching the various website and online business processes available.  Costs associated with e-security include installation of a firewall blackbox ($9,000) and ten licence fees for anti-virus software ($1,055).

Ongoing costs totalled $221,789 in 2001.  The major ongoing expenses are attributed to the employment of two internal programmers to set up and maintain the website ($115,000).  As online security has been an issue for clients, the business commissioned an external security expert to conduct regular reviews of the online technology, amounting to fees of $10,000 and also $2,500 was paid for authentication services.  Client information available in online accounts is updated with data feeds from research houses.  Licence fees paid to these institutions were $5,000 per quarter, totalling $20,000 in 2001. 

Fees paid for rental of the ASDL line to the Internet Service Provider amounts to $16,800, and $900 is paid in to enable use of the electronic payment system.  In addition, $34,389 is allocated to the amortisation of capital expenditure over four years.

Non-financial Benefits

Many of the business goals set out by the management team in establishing the e-commerce system have been achieved.  In particular, customer service has been enhanced by the development of the online after-sales service initiatives.  Customers are now empowered to access their investment portfolios online and monitor changes in financial position.  Customers equipped with greater knowledge of their finances can make a better assessment regarding the products that best suit them and to contact investment advisors for further information.  This contributes to increased income for the company.

The virtual private network is effective in enabling employees to access the knowledge required to make effective business decisions.  For example, access to real time share information enables staff to more accurately advise clients as to trading decisions.  The technology set up at the firm also provides a selling point for business development purposes.

A key success factor to the successful implementation of e-commerce has been in keeping all staff and clients informed about the technology changes and responding to any feedback provided.  Staff and client input was particularly important during the design phase of the online system as the relevant changes could be made to develop a system that suited everyone's needs.

Challenges

When conducting preliminary research, Infocus Securities found it difficult to obtain information about the website options and online processes available for the business.  Following implementation, the company encountered some cultural barriers with certain staff and clients less responsive to the new technology.  This problem was managed by making extensive training available to all staff and repositioning staff unwilling to use the new technology.   In addition, Infocus Securities encountered several problems with the ISDN provider in terms of inconsistent and unreliable connectivity.  As a result, the company upgraded to an ADSL service.

Future

Following the success of the initial online system, Infocus Securities has implemented additional technology enabling clients to enter personal details such as credit card numbers, passport details, will information into a 'personal vault'.  This vault also contains a customised balance sheet containing the client's own financial details such as insurance and superannuation contributions.  As a result, clients are supplied with a complete picture of their financial position and can monitor any relevant developments.  This provides clients with the opportunity to rectify any financial problems, which in turn increases business volume for the company.  In addition, strict security measures are critical in ensuring the success of this initiative.

Darren's advice for businesses considering implementing e-commerce is to ensure that planning and research is thorough before development begins.