Mutual funds pour millions of dollars into cable television advertising


September 11, 1994|By New York Times News Service

When you watch cable television news programs, you are probably used to being pitched fast-food hamburgers, cars, beer and other consumer staples. But mutual funds?

Within the past few years, the fund industry has indeed taken its pitch to television, but its reaction to the medium has been mixed.

The big companies are in the game, and "a lot of the smaller complexes are testing the waters now," said John A. Jelilian, vice president of Competitrack, a firm in New York that tracks advertising spending by funds, brokerage firms and other financial services companies.

On the other hand, television spending by fund companies has dropped to $9.5 million in the first half of 1994, from $13.6 million in the first half of 1993, according to Competitrack.

A cutback in television spending by just one of the big fund companies could account for that decline, Mr. Jelilian said, and, in fact, Fidelity Investments, the largest fund group, said it had reduced spending this year.

Total fund advertising in the first half of this year, meanwhile, grew to $113 million, an 8 percent increase over the first six months of last year, with fund companies spending $59 million on magazine advertising and $45 million on newspaper ads.

For those who have turned to television advertising, what is the appeal?

"We believe that this is a visually oriented generation," said Roger T. Servison, president of Fidelity Brokerage Services Inc., a unit of Fidelity Investments.

He estimated that television accounted for less than 20 percent of Fidelity's total advertising budget of $70 million to $80 million a year, depending on market conditions.

Mr. Servison said Fidelity has recently cut back on TV advertising because of a slowdown in business after the first quarter.

Most fund television advertising is on cable channels, primarily CNN, CNBC and CNN Headline News, "largely because the audience is highly targeted and because of the comparatively low cost of running a spot," Mr. Jelilian of Competitrack said.

The cable ads accounted for $8.24 million in spending in the first half of 1994, compared with $1.16 million spent on network television ads.

Most fund advertising on television is generic, addressing broad topics like the confusing nature of fund investing.

Alliance Capital Management, for example, has several entertaining commercials on this topic. In one, an executive walking onto a train is asked by a colleague whether he has made progress with his retirement planning.

When the executive says no, his colleague tells him that "I just plunked a bundle into the Husney-Farrell Emerging Developing Global Balanced Biotechnology Fund." Another friend adds, "You know, I'm in the Vasco da Gama Municipal Short-Term Convertible Inverted World Income Fund."

Then a stranger in the seat behind them leans forward and says, "I'm sorry, I couldn't help but overhearing, but I highly recommend the Southwest Pacific Tectonic Drift Emerging Continent Contrarian Uncomfortable Investor Equity Value Fund." And the executive's two friends then also agree that he "should be in that."

A simpler way to invest, the commercial concludes, is to call Alliance.

Fidelity has taken another approach, with a 30-minute paid television program that began airing nationally in late July on several cable stations and independent and network affiliates.

The program asks "ordinary people, rather than paid spokespersons" to talk about their financial goals. It walks viewers through the various steps that are necessary to set up a sensible financial plan, weaving in commentary from Fidelity's fund managers.

Although the program does not give a hard-sell for Fidelity funds, it flashes a toll-free telephone number for a free investment planning kit, which does offer Fidelity funds.

Mutual fund companies are mostly limited to generic statements in television advertisements because information about performance and other fund features require extensive warnings and disclaimers that cannot be adequately squeezed into a 30-second spot. Where they are necessary in a television ad, they are usually flashed in small print across the screen, most often at the end of the spot.

But tough new rules from the National Association of Securities Dealers aim to make advertisements less misleading. For example, a fund company that advertises a fund as "No. 1" must tell investors the number of funds with which it is being compared.

"Our chief concern" in television ads, said Clark Hooper, vice president of advertising and investment companies regulation for the NASD, "is that the viewer is getting two separate and complicated messages."

Admittedly, she said, it is difficult and expensive to get the required disclosures across. B With the difficulties presented by advertising on television, some fund companies are taking a conservative approach. T. Rowe Price Associates Inc. in Baltimore, for instance, has done some preliminary testing, but "whether we will spend significant dollars on it is still a question mark," said Edward Bernard, vice president of retail marketing at Price.

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