Bond broker’s Web site proves to be its best expansion policy
By Purva Patel
Posted January 6, 2003
Buying bonds isn’t necessarily the most exciting purchase a person will make. “Buying bonds is like watching your car rust,” said James Klotz, president of Boca Raton-based FMSbonds, Inc. Inc.
But, he added, as stock markets sputter and interest rates drop, “now people are anxious to watch their cars rust.”
FMSbonds, Inc., a local municipal bond dealer, has discovered that tax-free bonds have become an attractive addition to investor portfolios. Low interest rates and burgeoning investor demand for municipal bonds, which are free from federal taxes and usually from state and local taxes, are helping boost sales. States, cities and counties issue the bonds to raise money for such things as building schools, roads and sewer systems.
Klotz and his business partner, Paul Feinsilver,decided to capitalize on heightened interest in bonds in 2000 by using the Internet to sell the staid securities. Though FMSbonds, Inc. was founded in 1978 to give investors money management advice, the 2-year-old site has expanded the company’s reach as customers from Los Angeles to New York order bonds from the company’s site.
The site has worked as an inexpensive marketing tool. Before going online, the company would spend hundreds on newspaper ads that resulted in about 30 leads on potential buyers. Now the company receives up to about 2,000 inquiries a month, Klotz said.
In the site’s first full year of operation, FMSbonds, Inc. sold $40 million worth of bonds online, and this year they’re on track to sell more than $100 million via the Web. As dealers, the company makes money off the 1 to 1.5 percent markup between its purchase and selling price.
The company has received an estimated 22,000 inquiries a month since launching the interactive Web site in March 2000, and overall sales have jumped to a steady $318 million worth of bonds for each of the past six months, Klotz said. But he says he has to remind customers that bonds or bond funds should only constitute part of a diversified portfolio.
The firm has trading rooms in North Miami Beach, administrative operations in Boca Raton and sales offices in both.
Bernard Lewis, 90, has been investing with the firm for more than 20 years. The Sunny Isles retiree’s investments have funded his grandchildren’s college education and are sending one to Florence to study psychology for six months. “I’ve done business with a lot of brokers, and they are the most honest bunch of fellas I’ve met,” Lewis said. Internet administrator Michelle Parker calls him after he makes a purchase online to confirm that he wants to buy a particular bond and understands what he’s buying. If he decides the buy was a mistake, the firm returns his money — something Lewis values because each online purchase must be a minimum of $15,000 in face value, or the amount paid to holders at maturity.
The company sells bonds only from its own inventory, so customers don’t have to wait for brokers to order them.
Klotz also posts commentary and analyses on the site. Investors can also surf the company’s site and see its inventory without registering or paying a fee. “Even if you don’t buy, there’s so much you can learn,” he said. Purva Patel can be reached at email@example.com or 954-356-4667.
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