Ebank X.com Pays Customers to Invest By Will McClatchy March 10, 2000

One of the best deals in indexing for the small investor could well be x.com's offer to pay investors to place their money in a reputable S&P fund.

X.com actually pays .01% of assets to investors in its Premier S&P 500 Fund. Up to $15,000, that is, for non-banking customers. For banking customers the limit is $50,000. There is, however, no limit on how small the account must be.

How much in savings could this mean? An investor switching $15,000 to x.com from a fund with a typical .2%-fee, if returns are equal, would net $31.50 more from x.com than the other fund. For banking customers with $50,000 the gain could be $105.00. x.com's fund is managed by Barclays, a giant institutional indexing firm with a strong reputation.

Clearly x.com believes it can make up these promotional costs with lower costs due to paperless, internet banking, its primary line of business. In its S&P fund prospectus x.com declares that it:

"... is dedicated to providing easy, low-cost financial services to on-line investors through its continuous emphasis on technology."

And the firm warns all customers:

"You are also required to consent to receive all information about the Fund electronically, both to open an account and during the time you own shares of the Fund."

The firm deals with almost no paper and will have no branches. It relies solely on the Internet for transactions and the telephone for support. It provides basic check writing and has merged with PayPal, an online payment company.

X.com's on-line technology is not perfect, but its telephone support appears to be real. In a test by IndexFunds' staff to establish a personal account recently, x.com's server announced that it could not process the application form. A call to the firm's toll-free number took less than a minute to get through to a cheerful customer support representative. He declared that on occasion the server has hiccups which usually go away in an hour or so. He had not heard of such an error for a few weeks. The glitch did stay for over an hour, but a subsequent attempt to sign on later in the day was successful.