Offshore Havens Beckon—Online

By eweek  |  Posted 2001-05-14

When Michael Nelson, an attorney and wealth management adviser in Walnut Creek, Calif., jumped on the Web about a year ago, he was hoping his site,, would attract new business and perhaps even become a vehicle for selling some of his investment materials. But he knew going in that his wealthy clients would be particularly sensitive to privacy and security issues. If e-mail messages containing financial information fell into the wrong hands, for example, they could tell the Internal Revenue Service and others more than his clients wanted them to know about their business dealings.

So Nelson followed the lead of other sites dealing with sensitive financial information by locating Web servers in offshore locations where they are immune from the U.S. governments prying eyes. While others have chosen well-known tropical island tax havens, Nelson selected Monaco, one of only a handful of places that limit what information the IRS can seize. "If you want clients at peace, youll house your records outside the U.S.," he said.

But as Nelsons and a number of other luxury-oriented Web sites have found out, even offshore Web servers and a catchy URL are sometimes not enough to get wealthy customers to execute transactions online. In Nelsons case, the site brought him less than 3 percent of his business last year. The bulk still comes the old-fashioned way, by word of mouth.

The problem with getting new wealthy clients to buy things like financial services online, Nelson said, is one of credibility.

"There are a lot of sites out there giving conflicting information, and its hard to know what to believe. And in my business, you have to have confidence in the person youre handing your money to," Nelson said. Very wealthy people, while they surf the Web, arent crazy about using e-mail for communication. "Its not secure enough," he said.

As a result, many sites, such as, targeting well-off customers are becoming large electronic brochures rather than transaction-focused sites.

Nelsons experience mirrors that of George Gonzalez, president of financial advisory company Asset & Wealth Strategies, of Fort Lauderdale, Fla. Gonzalez, too, started a site hoping to attract new clients and even paid someone to register the site with a large number of search engines. The end result? A lot of hits, but very, very few new clients. These days, Gonzalez uses his site as a big electronic brochure.

And thats a trend thats returning, said Gartner Inc. analyst Geri Spieler, in Stamford, Conn. In its early days, the Web was simply a channel of information, Spieler said. But soon the push was on to make every site a transaction vehicle. Now, though, with the economy changing, the trend is swinging back to brochureware, at least for some businesses such as those targeting the wealthy client, she said.

"Its OK to be a channel of information and not a customer acquisition site today. In this tough economy, you can use a Web site as a customer service tool. This is a way to improve your relationships with customers. Its not a bad thing."

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