Wall Street was hit hard by the Sept. 11 attacks, and financial services companies anticipate lost business and the expense of relocating lower Manhattan employees will cut deeply when they announce their 2001 results this month and next. But the stock market rally that followed the post-tragedy resumption of stock trading has given hope to many that the recovery will come sooner rather than later.
Financial services companies could actually make small advertising increases if the stock market continues to percolate, said Francis J. Kelly III, president-chief operating officer of Arnold Worldwide. The agency, part of Havas Advertising, handles a large portion of Fidelity Investments' $150 million account.
The financial services sector is one that is expected to come out of its stupor in 2002. Robert J. Coen, senior VP-director of forecasting at Interpublic Group of Cos.' Universal McCann, said financial services is one of the secondary advertiser categories that will help the industry out of its slump, since the top categories such as automotive will continue dormant until 2003.
NEED TO JUMP IN
In his year-end forecast, Mr. Coen noted that as soon as the economy shows signs of improving, financial companies need to jump in and increase their ad presence or risk losing customers. Those that have cut budgets will be forced to restore them, he said.
Some of the healthier financial advertisers have played the market share game in 2001-upping advertising to take share from competitors who were forced to reduce budgets-and plan to continue in 2002. They are counting on price-cutting media companies and eager agencies to create opportunities that would have been prohibitive at 2000 rates.
For example, H&R Block launched two campaigns in Decem-ber-one to promote its new financial services offerings and another to promote its core tax preparation business (AA, Dec. 31)-while Bank of America broke a large effort keyed to its sponsorship of the Salt Lake City Winter Olympics.
"We feel it's a great opportunity to grab some of the loose molecules out there," said Frank Sottosanti, senior VP-brand executive, brand and communications, Bank of America. The Charlotte, N.C.-based bank increased spending by 59.7% in the first three quarters of 2001 and expects to increase again in 2002, partly to support its Olympic efforts (AA, Dec. 17).
But investment experts say many companies' stocks are now overpriced-based on investors' expectations of a quick recovery-and could fall fast if those investors are disappointed early in 2002. Economists warn that could be a hard blow to the financial services industry, already haunted by lost income, as consumers opt for 0% financing promotions, and by bad credit due to rising unemployment.
"It looks like people are too bullish about the turn of the economy," said Richard Bernstein, Merrill Lynch & Co.'s chief economist. The health of the financial services sector, he warned, will depend on how the economy does and not on investors' expectations.