Stocks Can Swing, Brokers Still Pitch

As the market continues its historic gyrations, investment firms are juggling advertising pitches and scrambling to meet customer service pledges that are being sorely tested by Wall Street’s blistering pace.

One big investment house has changed its pitches overnight, and Wall Street advertising executives are holding daily meetings to fine-tune ads aimed at reassuring investors going along for the market’s white-knuckle ride.

Prudential Insurance Co. of America rushed a full-page advertisement into the New York Times on Tuesday to crow about its bond expertise. Then the company crafted a brand-new ad for Wednesday that urges investors to keep a long-term focus.

Charles Schwab doubled the number of staffers answering telephones--and then contacted AT&T; to talk about adding more lines for the inevitable day when Tuesday’s record-shattering volume is bested.

Fidelity Investments on Tuesday added to its Web site an unpublished question-and-answer interview with longtime money manager Peter Lynch along with a perspective piece that briefed investors on Monday’s market free fall.

But the rapid market swings early in the week failed to derail expensive consumer advertising campaigns from mutual funds, brokerage firms and banks that are vigorously competing for consumers’ hearts and pocketbooks.

And market observers said that Tuesday’s unprecedented trading will render it difficult for full-service brokerages to make marketing hay with advertising that thrashes lower-cost competitors whose online trading systems slowed down.

That’s because no one received flawless service during a week when Wall Street set several new records--including Tuesday’s 1.2 billion trades, which generated millions of additional telephone calls and e-mail from anxious investors.

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Advertisers were hard-pressed to hone advertising messages that would remain on target in a wildly swinging market.

By Tuesday, investment firms that regularly pitch price, service levels and specific products--say, bonds instead of stocks--were sticking with ads that urged consumers to hold to their long-term goals despite immediate pain or gain.

The week’s frantic trading pace should bring higher profits to investment firms since more trading means more fees. But investment firms could face a backlash from consumers who weren’t able to execute trades in a timely fashion or who paid substantial sums for investment advice from firms that were blindsided by the week’s unprecedented activity, experts said.

At the same time, though, investment companies can’t afford to simply yank their advertising and wait for the market storm to pass.

“The last thing you’d want to do is disappear,” said Carol A. Scott, a UCLA marketing professor. “That would be a foolhardy strategy. What you’re trying to do with your advertising is help avoid a panic among small, individual investors as well as tell people you’re still here, you’re still as solid as a rock.”

The turbulent market might even offer an opportunity, advertising experts said. Confused investors are looking for advice and might be inclined to pay closer attention to advertising pitches.

“When the newsstand where you buy the newspaper is sold out and everyone on the train is reading the business section, you know customers are looking for help in reassessing their own portfolios,” said Michael Hines, marketing vice president for Prudential Insurance Co. of America.

“So you really want to talk to them . . . because people will view the stock market differently because of this past week’s events.”

Prudential’s Tuesday advertisement was aimed at shaken investors in search of non-equity options. Hines spent Tuesday shepherding the creation of a second ad that was sent electronically to newspapers around the country by midday on Tuesday.

“The ad is very topical,” Hines said. “We worked hard to get it in the papers. And at a time like this, it’s an education ad. It’s not the time for hype or a sales job.”

Executives at John Hancock Funds met after Monday’s market free fall but didn’t change the firm’s 2-year-old image advertising campaign, which features the tag line: “Insurance for the Unexpected. Investment for the Opportunities.”

“It’s not really market-specific, so it didn’t need changing,” John Hancock spokeswoman Sue Bishop said.

John Hancock did rush a bullish forecast from its chief investment officer onto the company’s Web site on Monday night so East Coast investors could read it before drifting off to sleep or skim it on Tuesday as the market started to surge. The company, with $30 billion in funds under management, also drafted a letter to its customers that underscores the long-term nature of equity investing.

Fidelity Investments, which unveiled its first-ever corporate campaign during the World Series, is juggling its catalog of existing ads, airing those that highlight service and long-term relationships with customers.

Merrill Lynch weighed in Wednesday morning with a full-page newspaper ad arguing that the bull market has yet to run its course. Like Prudential, Merrill Lynch urged consumers against abandoning their long-term strategies.

But discount houses such as Kennedy, Cabot & Co. and Quick & Reilly, which aggressively advertise their relatively low trading charges, said they have no plans to change their thrust.

Both Kennedy Cabot and Quick & Reilly typically advertise more heavily in the fourth quarter to attract investors who are readying their portfolios for the year-end.

“That isn’t going to change if the market is going up or down,” said Kennedy Cabot broker Phil Brumer.

“We had a quick, informal meeting on Monday where we essentially validated our ad program,” said Quick & Reilly spokesman Charles Salmans. “This is one of the heaviest seasons of our year for advertising, and our decision was to leave all of those ads in place.”

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Brokerages acknowledged that some customers weren’t able to make trades or get information in a timely manner.

“There was an avalanche [Tuesday] morning--everything was pent-up demand, and it hit everyone, even us. We were slower than normal,” said Christos Cotsakos, chief executive for E-Trade, a Palo Alto-based online trading service. “People made trades and then were calling back trying to get confirmation,” Cotsakos says. “The channels were jammed everywhere in the industry.”

“Yes, there were people who didn’t get their phone call answered, and electronic trading was slower,” said Schwab spokeswoman Tracey Gordon. “But if a full-service broker tells you every customer got through to a live broker, they’re lying. . . . While we had to apologize to some customers who couldn’t get through, everyone knows this was an extraordinary day.”

Schwab typically registers 450,000 “customer interactions,” but on Tuesday the total soared to 1.5 million. Live calls more than tripled to 260,000, menu-driven phone calls more than doubled to 500,000, and activity on the company’s Web site was twice the normal 5 million to 7 million hits.

E-Trade reported that a third of its customers made a record 50,000 electronic trades on Tuesday.

“All orders were placed and executed in a timely and appropriate manner,” spokeswoman Kim Shepherd said. “And customers displayed an insatiable appetite for more information.”

Observers said it is difficult for full-service brokerages to knock low-cost competitors whose online trading systems slowed during Tuesday’s barrage.

That’s because familiar names like Fidelity T. Rowe Price and American Express now offer online trading and firms like Dean Witter are paying millions of dollars to buy online services such as those offered by San Francisco-based Lombard Institutional Brokerage.

Cambridge, Mass.-based Forrester Research reports that the estimated 1.5 million online accounts now in existence will soar to about 10 million by the year 2000--a clear indication that many well-heeled consumers are sold on electronic trading.

And, in a twist, Schwab on Wednesday ran newspaper ads boasting of how fast electronic trades move compared with phone trades.

Even with delays, Wall Street firms said information flowed more freely than in October 1987, when consumers overwhelmed telephone lines and crowded into regional offices as they clamored for information.

Sophisticated menu-driven phone systems offer consumers easier access to updated account information and, although electronic trading was slow on Tuesday, record numbers of customers accessed investment firm Web sites for market updates.

“The technology has advanced to the point where we can handle these huge spikes in consumer volume better than before,” Salmans said.

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It’s uncertain how long investors will take to digest the market’s dramatic moves. But observers said that one potential casualty could be ads that use 10-year charts to chronicle a given company’s investment successes.

And even if the market turmoil quickly subsides, the overarching message in consumer-oriented investment advertising will continue to hit hard at the need for investors to ignore immediate pain or gain and focus on longer-term investment goals.

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Times staff writer Debora Vrana contributed to this report.

Bull Market Advertising Roundup

This week’s drama on Wall Street isn’t expected to slow advertising spending by investment firms, brokers and other institutions that are courting individual investors. Expenditures of print and broadcast advertising exploded last year, thanks to a bull market that whetted investor interest. Consumer investment advertising spending, in billions:

Investment Companies

1996: $359.9

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Full-Service Brokers

1996: $170.3

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Discount Brokers

1996: $163.7

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Banks*

1996: $163.7

* Bank figures include ads for mutual funds and other non-FIDC-insured investment products.

Source: Competitrack Advertising Tracking Service