Millennial Marketing

Compliance tests on Wall Street show the millennial computer bug nearly exterminated. Come Monday, Jan. 3, 2000, the major systems that run the nation's financial markets should function as usual. But the battle to convince clients of this fact is just getting started.In an image war for customers' confidence, firms are using statement stuffers, press releases, preparedness kits and presentations

Compliance tests on Wall Street show the millennial computer bug nearly exterminated. Come Monday, Jan. 3, 2000, the major systems that run the nation's financial markets should function as usual. But the battle to convince clients of this fact is just getting started.

In an image war for customers' confidence, firms are using statement stuffers, press releases, preparedness kits and presentations to soothe client nerves about the move into the new millennium.

"The key thing brokerage firms want to do--and we're assisting in--is prevent any sort of panic," says Margaret Draper, a spokesperson for the Securities Industry Association, sponsor of the industrywide compliance tests. "We're working closely with journalists and the media to educate them about the tests, making sure people know the securities industry takes this seriously, and that we're doing everything possible to be as prepared as possible."

How effective has the campaign to assure the public been? It depends on whom you talk to. Brokers report a gamut of client reactions to Y2K--from abject fear to ambivalence.

A few customers are overreacting months ahead of schedule. A Morgan Stanley Dean Witter broker in the Southwest has seen the panic firsthand. One of his clients recently liquidated his rather large investment portfolio in anticipation of the year 2000 "disaster." The successful professional also cashed out his bank account, sold his house and moved into a rented apartment, the broker says.

"I thought maybe he was just kidding me," the MSDW rep says. "I asked him if he reallywas just transferring to another brokerage firm."

Other brokers say clients are simply asking Y2K questions. "Clients in general are concerned about the brokerage industry being prepared," says Richard Sharrieff, an Everen Securities broker in Waterloo, Iowa. "I have a client who is a computer programmer who is concerned."

Firms and reps say dealing with the computer bug itself is now nearly secondary to addressing client concerns in the waning months of the century. "We think this will be the single greatest issue financial advisers will face in their careers," says Robert Froehlich, vice chairman of the Kemper Funds Group in Chicago. Kemper sponsored a conference call on Y2K issues in March for brokers. About 450 reps participated.

"It's the biggest unknown investors have ever faced," Froehlich says. "It will be the biggest hyped disaster that never happens. No financial adviser can hide under a rock about this."

Feeding Clients' DoubtsClients are regularly subjected to various doomsday scenarios. For example, U.S. News and World Report in March featured the story of a former New York commodities trader holed up in a Virginia farmhouse with his family and a stock of AK-47 rifles. He's preparing for the new millennium by slaughtering his own hogs and grinding his own flour.

The Senate Y2K report, also released in March, contained ominous forecasts about the lack of preparedness by certain government agencies and international entities. However, it had praise for the financial services industry in general.

Even so, high-profile market commentators are waving red flags about Wall Street's readiness. Edward Yardeni, the global investment strategist at Deutsche Bank Securities in New York, raised anxiety by predicting a worldwide recession and stock market crash.

The Federal Reserve, too, may have fed worries when it announced that it anticipates cash hoarding. It has ordered an additional 70 billion in currency to stave off a crisis in the remaining months of 1999.

Firms are aware that clients might panic, and know that their financial advisers are on the frontlines of the propaganda battle. "If financial advisers are not taking this seriously, the money will come out of the market," Froehlich says. "If we don't educate individual investors, they will run to the gates. ... They're going to listen to Ed Yardeni."

Getting the Message OutSome firms are responding by becoming sources of information for clients in all matters related to Y2K preparation--not just financial matters.

American Express Financial Advisors in Minneapolis has created a client preparedness kit called "Year 2000 and You," to go along with its broker presentation of the same title. The kit describes the steps American Express is taking to be ready as well as provides helpful advice for customers.

"We are positioning ourselves as experts on helping people prepare for year 2000," says Lori La Chapelle, year 2000 reporting and awareness leader for American Express Financial Advisors. The firm has a standard letter that advisers can send to clients or prospects talking about Y2K status, and has a quarterly broadcast to its field of independent advisers.

Commonwealth Financial Network, Waltham, Mass., another independent brokerage, has also put together a seminar for its reps to use with existing clients, along with a client guide (see "Y2K Survival Guide," Page 118).

Firm officials believe that preparation is going to pay dividends, not only in retaining existing clients, but also in attracting new ones. "Companies that aren't sending out any message or don't have a message that is good are going to suffer," La Chapelle says. "Those of us who are in a solid position will be able to capitalize."

Commonwealth Financial Network's spokesperson Paul DiCesare agrees: "We're seeing it as a chance for our advisers to reach out to the community. Any time advisers [act as] consumer advocates, it increases their chance to get more clients."

Reps in the trenches are hoping to "flip the script," when talking to clients about Y2K fears. "After I've calmed their nerves about Y2K, I'd like to get them interested in investing in companies that help firms prepare for the new millennium," Sharrieff says. "It hasn't worked yet, but I'll keep trying."

Commonwealth Financial Network in Waltham, Mass., provides these simple steps to help clients get ready for the turn of the century.

Basics * Store enough supplies for about three days. These include water and nonperishable food; a flashlight, a radio and batteries; and food for pets.

Health * Refill prescriptions in December.

* Talk to your doctor about obtaining an extra month's supply of prescription medication.

* Ask your doctor for a copy of medical records.

Finance * Have two weeks of salary available in cash.

* Don't wait until December to remove the extra cash from the bank. Anticipate long lines.

* Ask a financial adviser to help you send off a "Request for Earnings and Benefit Statement" from the Social Security Administration.

* Request a copy of your credit report by calling Equifax at 800/685-1111 or Trans Union at 800/888-4213.

* Keep financial statements, credit card bills, bank statements, mortgage statements, retirement plans, and November and December's canceled checks. Remember to keep frequent flier statements, too.

* If you rely on automatic payment of any bills such as mortgage or car payment, consider paying these bills manually. If there is a problem, it will be up to you to prove you made the payment.

Miscellaneous * Fill all cars with gas. Get an extra gallon or two for each car.

* If you renew your driver's license or vehicle registration during January or February, consider doing it in October, November or December.

* Contact your computer manufacturer or retailer and find out what you must do to ready your computer hardware and software for Y2K. Also, transfer any important files on your computer's hard drive to diskettes.

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