Officials of the securities industry, battered by losses in 1984, predicted Thursday that, in 1985, the industry will return to the basics of selling securities to individual investors. But they confessed that they face an uphill fight in holding on to their share of the market, and an industry-sponsored study suggested that brokerages do not understand exactly what their retail customers want.
At a meeting sponsored by the Securities Industry Assn., George Ball, chief executive of Prudential-Bache Securities Inc., said brokerages have allowed their skills in selling equities to "atrophy" in their eagerness to offer such new products as tax shelters, certificates of deposits and shares of money market mutual funds.
He said their inattention may have hastened the withdrawal of retail investors from the stock market. Revenue from the sale of securities to individuals dropped 60% between 1980 and 1984, he said, at a time when brokerages have also faced declining fees from institutional securities sales, rising costs and the looming threat that banks may soon be freed to act as investment bankers.
The U.S. Treasury Department's pending proposal to cut the value of tax shelters poses another threat, he said, since 35% of brokerages' retail sales are motivated by a desire to reduce taxes.
However, demographic changes may give a boost to the retail securities industry, Ball added. The number of Americans in the age group 45 to 54--in the "accumulation phase" of their careers--will grow 53% between now and 1990, he said. Also, the number of persons making more than $50,000 a year will grow more than 40% in the same period to more than 13 million.
Ball said the industry also must change if it wishes to capture the market in financial planning services, in which banks and diversified financial-service companies are its competitors. He said a Prudential-Bache public opinion survey found that the public put relatively little faith in the word of stockbrokers.
Also released at the trade group's conference were the results of a study suggesting that neither securities firms nor their competitors in banking and the insurance businesses understand precisely what individual investors want from the company that sells them stocks.
The study, conducted by the accounting firm of Arthur Andersen & Co., found that senior managers of securities firms and their competitors believe a variety of products and services are key in customers' choice of a stock dealer.
Officials of neither group thought customers placed high priority on the "image and reputation" of the dealer. But retail customers surveyed by the consultant ranked image and reputation high and variety of products and service low on their lists.