CHICAGO -- In the Internet era, mutual fund investors have a problem that's as hard to handle as high-tech volatility. It's information overload -- hundreds of Web sites with thousands of pages of research material to wade through.
''There is so much information out there, and it is often messy and conflicting,'' said frustrated investor Wendy Wolfson, 40, of Somerville, Mass.
But the overabundance of information creates an opportunity for financial research firms, among them, Morningstar Inc., which has started offering online advice tailored for individual investors.
Personalized advice is growing as a way to reach investors at a time when $7.3 trillion is invested in mutual funds. And more than 20 million U.S. households will get their financial advice online by 2005, according to Forrester Research Inc.
''People want more than investment tools -- they want to be told where to put their money,'' said analyst Jaime Punishill, who follows online financial services for Forrester.
''Being Web-savvy doesn't make you investing-savvy.''
Morningstar, for years a major source of mutual fund information, itself wasn't too Web-savvy until others began moving onto its turf.
The Chicago-based firm revolutionized the mutual fund industry in the 1980s with its detailed reports on funds and its much-copied five-star rating system. But by the spring of 1999, with ''a Web site but not much else'' electronically, top managers called an urgent meeting amid the realization that ''we could become irrelevant if we didn't fully embrace the Internet,'' founder and chairman Joe Mansueto recalls.
Little more than a year later, aided by a $91 million investment from Web financier Softbank, Morningstar has expanded internationally, launched new products and transferred its brand-name clout to the Internet world.
''It's not that going dot-com is an excellent adventure with high stock valuations,'' said Tim Armour, Morningstar's president and chief operating officer. ''What we do can be done cheaper, faster, better on the Web.''
After its belated start, Morningstar.com moved seriously into online advice this year. Offered since February, Morningstar's ClearFuture provides advice, much of it free, to companies and employees on managing their 401(k) plans. Starting later this year, it will also offer full-fledged financial advice beyond retirement plans.
For a company long known as the Consumer Reports of mutual funds, offering personalized investing advice was a dramatic change.
''Before this, we were only providing research-investment data, tools and analysis. We stopped short of giving investment advice even though our most frequently asked question was, 'What should I do with my money?''' Mansueto said.
Like its competitors, Morningstar has come to the painful realization that most consumers won't pay for information in the free-for-all Internet era. But many will pay something for personal advice.
Punishill said the company has proven nimble after its slow-footed earlier response to change.
''In many respects they're way ahead of everybody else and are being aggressive about this electronic stuff,'' the analyst said.
A long-time Morningstar rival in mutual fund analysis, Lipper Inc., has opted not to take its data straight to investors in the Internet era, selling its information to other sites. Its Web business is doubling every nine months, according to spokesman Gary Kreissman.
''The proliferation of sites is good for us because our goal is to provide information to third-party sites, not to disseminate from our own site,'' he said. ''Lipper has always come at (investing) more from the standpoint of institutions and leading financial media than the individual.''
That leaves Morningstar.com vying with such sites as The Street, quicken.com and SmartMoney.com for individual investors' clicks. Lipper and Standard & Poor's remain competitors in the institutional field.
The financial advice market doesn't apply just to individuals, of course. While the retail side is the most visible, advice to brokers comprises about half its business.
Morningstar has tried hard to be known as a source of individual stock analysis, too. But just as McDonald's is eternally linked to hamburgers, its core reputation remains that of a mutual-fund authority for individual investors.
Mansueto, the low-key chairman who presides over Morningstar's transition to a global Internet company from a small cubicle, first ran the firm out of a one-bedroom apartment in 1984. He was rated by The Wall Street Journal as one of the 10 most influential people to have presided over the major investing trends of the 1990s, along with such high-powered names as Charles Schwab, Mark Mobius and John Bogle.
So how does the mutual fund guru view today's market and the alternate leaps and dives of high-tech stocks?
Mansueto feels uncomfortable with the still sky-high valuations of technology stocks and said investors ''seem to have to periodically learn first-hand what risk really means.'' He sees outstanding values in more traditional businesses like banks, insurance, food and newspapers.
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