Stockbrokers are doing a lot of hand-holding

October 01, 2008|By Eileen Ambrose | Eileen Ambrose,eileen.ambrose@baltsun.com

Stockbroker Bruce Alderman's client returned home from a trip just in time to watch the stock market shed the most points ever in a single day and to hear that his bank, Wachovia, was being acquired by Citigroup.

Yesterday morning, the client rang up his broker, telling the receptionist that the call was "urgent."

"I want to make sure I'm OK," the man told Alderman, president of Chapin Davis brokerage in North Baltimore.

Alderman looked up the man's account, telling him his portfolio was down about 1 percent after the market plunge. Not bad, Alderman said, given that the Dow Jones industrial average fell 7 percent Monday, or 778 points.

After more assurances that his money and bank accounts were safe, the man thanked Alderman "for calming me down a little bit."

This has been a trying time even for the most steadfast buy-and-hold investor. Brokers everywhere are doing more hand-holding than usual. Investors have seen the failure or fire sale of big-name investment firms and the stability of money market mutual funds shaken.

Washington Mutual recently became the largest U.S. bank failure ever. And Monday, Congress couldn't muster the votes for a $700 billion emergency bailout of Wall Street, sending stocks over a cliff, though markets staged a rally yesterday.

It's the kind of climate in which long-time brokers start making comparisons to the Black Monday of 1987, the 1973-1974 bear market and, yes, the crash of 1929.

Investors are clearly concerned. Whether it's worries about their retirement accounts, mutual fund investments or the safety of their savings, many more customers are calling their investment advisers for guidance or just some reassurance.

At Chapin Davis, the event that triggered the most calls from clients occurred two weeks ago, when the nation's oldest money-market mutual fund announced that investors would lose some of their principal, something that's not supposed to happen. Investors across the country pulled billions from money market funds, fearing they could face similar losses. More than 200 calls came in to Chapin Davis the day after that announcement.

"They were more concerned about that recently because that was safe money," Alderman said. Clients told him, "You have been telling me to move to cash because things are rough out there. And now it's in cash. How safe is that?"

The firm moved one-third of clients' money out of money market funds that don't invest in government-backed debt and into funds that hold only Treasury securities. Clients want a safe, liquid place for their cash, he said, and they are far less concerned these days with how much they earn on that money.

This week, Chapin Davis has fielded fewer calls from nervous investors. When the House couldn't agree on a bailout package, Alderman heard from a few clients who watched the deal fall apart on CNBC.

"They wanted to commiserate," he said. "It's almost like, 'I can't believe what they just did to us.' "

A few calls came from those itching to jump back into the market now that prices are lower. Alderman advises them to get in gradually: Invest one-third now, another third after the election and the rest at the end of the year.

Broker Alexander P. Brown III said he received one panic call as the market plummeted Monday. The client wanted to sell.

"I told her that I feel she had good companies and I didn't think this was the right time to sell," he said. "But if she felt that concerned about the risk factor, my philosophy is just sell down to sleeping level, which is sell enough securities so you can sleep at night." The woman didn't sell.

As the stock market rebounded yesterday, one client called Brown to check up on his account and verify that the brokerage was fully insured in case of failure. The Dow closed up 485 points at 10,850.66, a 4.68 percent gain from the disastrous Monday.

Allan Mead, 73, has been a broker for nearly 50 years. He said this week's stock plunge is not nearly as shocking as the crash of 1987 when the market dropped more than 20 percent in a day.

Still, Mead has been calling clients lately to reassure them.

"I try to tell them this in time will be behind us and not to panic," said Mead, whose office is decorated with pictures of his alma mater, Washington and Lee University. "Most cases the call is pretty unnecessary. I just want them to know I'm not deserting them."

Sometimes clients can't be consoled."This is the hard part for me," said broker Jeff Plesser, remembering a phone call from an upset client a couple of weeks ago.

"You have to do a lot of hand-holding," he said. "It's rough. You don't leave this job when you leave this office. You take it home with you."

A broker's job can be stressful, Plesser said, but less so than his part-time job as a nurse in labor and delivery, with life-and-death situations.

Many of the Chapin Davis brokers have lived through many ups and downs in the market. But for 25-year-old Chris Matthai, who celebrates his first anniversary as a broker today, this turmoil is brand new.

His computer screen is filled with dozens of ticker symbols that light up green when the stock rises and red when it drops. After Congress failed to pass the bailout, the screen was virtually all red.

"I was speechless, shaking my head," he said.

Still, Matthai sees a silver lining. He's trying to build his client base beyond family members and friends of relatives.

"Right now, a lot of people are probably upset with their current brokers. It's a great time to prospect," he said.

But even those who have worked through wild markets say this situation is more serious.

"This is the worst I have ever seen," said Brown, 71. "I'm sure it's the closest thing we have seen in my lifetime to something near 1929 or the 1930s."

"They will come to some resolution on this," Brown said, expecting lawmakers to eventually approve a bailout package. And when that happens, uncertainty will leave the market and investors will regain confidence, he said.

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