An explosion of online and self-service investment options, plus savvy new advertising from hot mutual funds, is sending major brokerage houses scurrying to refurbish their images.
"We're moving toward a whole new marketing focus where advertising is used to pull in business, rather than brokers and wholesalers pushing stock brokerage sales," said Daniel Darst, exec VP of consultancy Optima Group.
The major investment houses aren't revealing their marketing budgets, but observers expect ad spending to increase 10% to 20% as several update their advertising.
What they're alarmed about is the rapid growth of discount and do-it-yourself investment companies, a trend that has turned no-fee operations like Charles Schwab & Co. and Fidelity Investments into powerhouses catering to aging baby boomers.
Not only are these consumers flocking to these channels in droves, lured by the greater independence they offer compared to traditional brokers, but the discounters also are using lower-cost automated and online delivery systems.
"We're making things extremely convenient for busy people who want to self-manage their portfolios, without a hassle," said Tom Taggart, Schwab's director of corporate communications.
No. 1 full-service brokerage Merrill Lynch & Co. will undergo an ad repositioning in the next several months via longtime agency Bozell, New York. The campaign is expected to be global.
Next month, PaineWebber is expected to break a new version of its print and TV campaign from Saatchi & Saatchi Advertising that uses emotional themes to emphasize the importance of intelligent investment counseling.
Dean Witter Reynolds will produce a new campaign this spring and Smith Barney this month started print ads touting its role as the first brokerage company to offer online account access via Intuit's Quicken and Microsoft Corp.'s Money software. Leo Burnett USA, Chicago, is the Dean Witter agency and McCann-Erickson Worldwide, New York, handles Smith Barney.
Once viewed as a lower-end investment option, Schwab has gained stature in recent years among a wide array of investors, particularly through its OneSource family of 400 no-load funds.
Approximately 60% of Schwab's customer calls are now handled through a series of constantly evolving automated systems. They include Schwab's TeleBroker keypad system; its StreetSmart software; and e.Schwab, a PC-only investment service introduced last month. The latter supposedly is surging with Schwab's technology-savvy customer, whose average age is 47 (vs. 60-something for traditional brokerage houses). Schwab's active accounts increased 13% to 3.4 million last year, with total assets up 48% to $181.7 billion.
CRS, San Francisco, handles Schwab and uses national print and broadcast and cable TV.
Despite Schwab's growth, traditional brokerages believe success lies in hammering home the virtues of full-service brokerage over self-serve options.
"We see more people coming back to us after trying do-it-yourself options," said Jay Mandelbaum, Smith Barney's exec VP-retail marketing and client services. "Despite all the information that's out there, at the end of the day consumers want an expert."
Merrill Lynch believes consumers will eventually become overwhelmed by the explosion of online and self-serve discount investment options.