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Munigo.com Looks to Make Munis User Friendly

MAR 7, 2012 4:12pm ET
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A new website that targets mom-and-pop investors of municipal bonds and promises to streamline their investing experience on the Web is set to launch this week.

After three years in development, Munigo LLC will conduct a beta launch of Munigo.com on Thursday, according to founder and chief executive officer Bhu Srinivasan. All investors can access the free site, but only those in New York, California, and Texas can open an account, fund it, and complete transactions, he said. Beta launches will be added in additional states on a rolling basis.

Munigo.com is an interactive, online distribution platform where investors can search federally tax-exempt bonds by CUSIP number, state, coupon, maturity, and rating, as well as purchase them from an inventory of thousands of offerings.

Srinivasan feels the site will fill a need on the Web, especially given the recent migration of investors from wire houses to online brokerage accounts.

“Fixed income is the last asset class that hasn’t been Web-ified,” he said, adding that municipals are often “unapproachable for retail investors” because of their complexities.

“For a person who doesn’t understand fixed income, there is a huge learning curve,” Srinivasan said. “I didn’t just want an education or data product, I wanted to make it easier to find bonds and make bonds more approachable.”

Munigo.com is the retail division of iTB Securities LLC. It will be Srinivasan’s second online venture geared exclusively toward retail investors and individual municipal bonds.

Three years ago, the self-proclaimed internet entrepreneur purchased the website municipalbonds.com, a CUSIP-searchable platform that also offers real-time updates and trades from the Municipal Securities Rulemaking Board, average bond yields by state, price history, and education and research.

He bought the website after discovering that many online brokerage sites catered to stocks or funds, with little focus on municipal bonds — and even then, the interface was complicated, confusing, or expensive for self-directed investors. For instance, Zionsdirect.com is one fee-based site that offers an inventory of 30,000 bonds, including municipals, but charges a $10.95 commission for online transactions.

Srinivasan’s desire to launch an even simpler, more user-friendly and cost-effective approach than municipalbonds.com led to the birth of munigo.com.

He hopes the new site will complement municipalbonds.com, and facilitate a smoother entry point for new municipal bond investors or those transitioning from a traditional broker-dealer to their first web-based experience.

The home page conveys its message: “Our Mission Is to Make Bond Investing Simple.”

He expects the growing retail usage of municipalbonds.com to channel new users to munigo.com. “We get a lot of traffic on municipalbonds.com,” said Srinivasan, who once owned a network of video game websites, among other online business ventures.

He also owns bondfunds.com where investors can view, and later replicate, holdings of any municipal bond fund to build and manage their own portfolios at munigo.com.

“We are going to use those websites to promote education and transparency,” he said. Munigo.com, however, will be the flagship product of all three.

During the initial launch, Srinivasan said investors will have access to only federally tax-exempt, non-callable, A-rated or better, general obligation bonds — eliminating callable and AMT paper.

“We want it to be as retail-friendly as possible,” he said. He is targeting baby boomers, some of whom may have never bought a bond before, but need the safety of tax-free bonds.

Even though it is user friendly, he expects some initial hand holding. Live telephone brokers are available to field inquiries and facilitate phone transactions until investors get their feet wet.

“This is nest-egg money. They are not going to buy bonds online as flippantly as they would a plane ticket or a pair of shoes,” Srinivasan said.

He said munigo.com will stand out for its cost-effectiveness, simplicity, and new innovations, such as a patent-pending technology that will help customize investors’ bond searches to their location.

“If you are in Princeton, N.J.,” Srinivasan said, “beyond showing you New Jersey bonds, it would show you bonds available within a mile of your location.”

Cost efficiencies, such as non-commissioned brokers and no marketing or advertising costs, allow Srinivasan to pass savings onto investors. Bonds are sold on a net-yield basis, and the site has no membership or per-transaction fees.

Only investors who transfer purchases to non-partner brokerages are subject to a $25 fee per transfer.

Munigo LLC previously partnered with Lebenthal & Co. to build and launch munigo.com as its online brokerage division, but that relationship ended in 2011 due to contrasting visions between the partners for the future of the venture.

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