Spurred by the recent market volatility, bank brokerage executives have snapped into action with plans aimed at keeping investors in the fold.
In recent weeks, bank brokerages have stepped up their communications with brokers and customers alike. Letters, faxes, and E-mail messages are flying, and brokers are working down client lists.
Joel Calvo, president of PNC Brokerage Services, said he's been prodding his brokers not to "let cobwebs grow" on their phones. "If a customer's portfolio is down $20,000, they're going to want to talk to someone," he said.
Bankers say they have become more attuned to investors' behavior since the 1994 bond market crash. At the time, many banks were fresh to the brokerage business. They were left reeling when droves of investors pulled $43.4 billion out of bond mutual funds, the bread-and-butter investment product of banks.
"What we've tried to do is reinforce that volatility is inevitable, and that customers should keep with their (investment) plan," said C. Bayne Northern, a senior vice president at Crestar Securities, Richmond, Va.
A bank brokerage expert said that's a sound approach.
"What you want to do is reassure your client base - and reassure them before they take any action that might be detrimental to their investment goals," said Joy P. Montgomery, president of Money Marketing Initiatives, Morristown, N.J.
She added that "a delayed reaction could cause customer panic or even internal-broker confusion or panic," because many bank brokers have not been through a bear market.
Even before the stock and bond markets took a big tumble on March 8, some banks were preparing for a dip.
PNC had a special edition of its Investor Insights newsletter in the mail a few days before the markets nose-dived, Mr. Calvo noted.
The letter said, among other things, that "investors tend to regret departing from their original investment objectives," and it predicted the stock market will reach 10,000 by decade's end. PNC's bottom line: brokerage customers should "develop a long-term strategy ... then stick with it."
But for the most part, banks dusted off contingency plans as soon as they saw the way the markets were headed on March 8.
At Wachovia Corp.'s brokerage, the 171-point drop in the Dow Jones industrial average prompted a closed-door meeting of six senior executives. They put more people on the phones and assigned additional salespeople to the discount brokerage desk, where volume was up for the day.
"It was a wake-up call for us," said Anne J. Doss, a senior vice president at Wachovia Investments.
Had the plunge continued, the Winston-Salem, N.C. banking company was ready go on the offensive. Ms. Doss said form letters, prepared in advance, would have been updated and sent out to customers had the stock market dropped 200 points in five consecutive days, or fallen more than 10% in one day.
At Banc One Corp., brokers and trust officers received E-mail memorandums saying that "despite the market shift" the company believes "equities are still the best means for growth."
Customers seemed to buy the argument. In the days following the markets' fall, sales of company's proprietary stock funds soared. (See related story on page 15.)
