An A.G. Edwards rep sat down at his desk last November to a huge pile of mail. The usual assortment of bills, junk mail and account statements awaited him, but so did something else: a sponge. Specifically, a sponge emblazoned with the name of a fund family that the rep didn't sell. The rep didn't want to give the fund's name (and wasn't sure he remembered it anyway). But he did remember the slogan: “Clean Up With (Name of Fund).” He chucked it aside, next to the countless keychains, candles, stuffed animals and assorted trinkets that he receives in the mail on a daily basis.
As almost any rep knows, wholesalers and fund families love to send them tchotchkes branded with their company name. Whether it's golf balls, a pen or just a sack of marbles, funds are doing whatever they can — within the NASD rules — to get their names out there. (According to NASD Rule 3060, advisors cannot accept gifts from wholesalers with a net value of more than $100.)
Oh, and don't call them tchotchkes, or knickknacks, either. They are “promotional products,” thank you very much, says Karen Renk, executive director of the Incentive Marketing Association. And they're use by corporations is hitting near-record levels: In its yearly study, the Professional Products Association (PPAI) says distributor sales hit $16.34 billion in 2003, the second-highest total ever, trailing only 2000's $17.85 billion. The financial industry — PPAI defines the industry as “banks, stockbrokers, S&Ls and credit unions” — was the second-biggest customer, trailing only the education industry.
“It's amazing the amount of crap I get on a daily basis,” says one Morgan Stanley rep. “I usually take them home and see if anyone wants any of it. No one ever does. But it keeps piling up.” (PPAI ranks the most prevalent promotional products as wearables, writing instruments, desktop items, calendars and glassware.)
An attendee of the Schwab IMPACT Conference, held in Philadelphia in November, says the section of the conference reserved for fund families was “littered” with the trinkets. (For this reason, Merrill Lynch doesn't allow fund families to bring the stuff to its annual conference.) “It looked like it had snowed junk,” she says. Most reps say that most conferences they go to — and their desks — are the same way. Many advisors simply grab a mutual fund sponsored tote bag, collect stuff and drop it all on their kids. (Hi, kids, got you this on my trip to Philadelphia! Isn't Dad great!?)
The question remains: Are all these knickknacks effective at building name recognition? Are they worth the cost? Renk says that on the whole, the promotion industry is thriving, but that it's “too early to tell” if individual fund families are having more success than others. (And you thought it was about performance and customer service.)
But fund families argue that what really matters is the name recognition. Which brings us back to that A.G. Edwards' rep's sponge. What happened to it? Well, it ended up in his office's kitchen. After it was used twice, the fund's logo had been completely rinsed away.