Feeling the Flow

Schwab leading the way on bringing in new assets.

Net asset flow figures among the nation’s top firms indicate that Charles Schwab is leading in the race to add new assets.

Schwab gathered $48 billion in net new assets in 2002, besting Smith Barney ($35 billion), Merrill Lynch ($18 billion), UBS PaineWebber ($13.4 billion) and Morgan Stanley ($1 billion in lost assets).

The success coincides with an aggressive advertising campaign and to a new accounts program known as Fresh Start.

The ad campaign capitalized on the research scandals plaguing wirehouses by suggesting (disingenuously, it turns out) that branch managers and brokers conspired with the research side of their firms to knowingly sell stocks poised to tank. The ad, launched a year ago, famously featured a branch manager exhorting his charges to "put some lipstick on this pig." In October 2002, Schwab launched another series of print and television ads featuring investors who had transferred their money to Schwab from other brokerage houses.

Then there is Fresh Start. Launched at the beginning of this year, the program offered investors a portfolio analysis and rebalancing for a flat fee of $95. The catch: To partake investors are required to transfer at least $25,000 to a new or existing account.

During the first quarter of 2003, Schwab captured $14 billion in new assets. Around $1.4 billion, or 10 percent, of those new assets were attributed to the Fresh Start offering. As of last week that number had reached $2.2 billion says Morrison Shafroth, a Schwab spokesperson. David Pottruck, Schwab president and co-CEO, called Fresh Start "one of our most successful campaigns ever."

Paul Bates, adjunct professor of marketing at the University of Toronto and former CEO of Schwab Canada, believes the firm is finding success by capitalizing on existing client relationships. "Schwab clients have a high level of trust in the firm. By offering advice they’re trying to deepen that relationship," says Bates.

Merrill’s Total Merrill campaign, also launched in January, has also been highly visible. However, it has yet to translate into a boost in assets for the firm. Merrill had an outflow of $4 billion in U.S. business in the first quarter.

"Merrill has a different challenge," says Bates. "They really have to get new business. I think this is an important campaign for them."

Dan Sondhelm, a financial marketing consultant with SunStar in Alexandria, Va., has noticed a shift in how firms advertise.

"These programs are focused on the big picture," says Sondhelm. "It’s more about providing a comprehensive planning package."

Bates agrees. "What the firms are saying is that they want to bring judgment as the key to the relationship."

Other firms who have not mounted ad campaigns are still bringing in assets. Smith Barney reported net flows of $5 billion in the first quarter. UBS reported $2.7 billion. Morgan Stanley experienced an outflow of $.5 billion in its first fiscal quarter.

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