Even the throes of the fund scandal cannot keep some firms from bragging about themselves.
After first pledging to restore its reputation in full-page placements in The New York Times and The Wall Street Journal, a mere 11 days after the first charges were filed against it, Putnam Investments is now touting the heritage it's built since 1937. American Century, which has not been implicated, boasts about the "integrity, honesty, hard work, patience" and "strong values" of President and CEO Bill Lyons, in its ads. But Janus has laid low and made no mention whatsoever of the scandal that has engulfed it.
Advertising, and sometimes a lack thereof, has been a telling indicator as to how some investment companies weathered last year's mutual fund scandals.
As a whole, advertising spending by investment companies fell 13% last year to $260.2 million, according to Competitrack, (see chart, page 13). This is the third consecutive year in which spending in the universe of some 200 investment firms monitored by Competitrack has fallen. In 2001, the first year in which Competitrack began tallying these figures, the group's total advertising outlay was $428.6 million.
Fidelity Investments held the top spot in advertising spending both last year and in 2002, though the Boston fund giant cut its ad budget 16%, to $67.8 million. T. Rowe Price Group of Baltimore retained its second-place ranking last year with spending of $35.1 million, up 11%, and American Express Co.'s American Express Financial Advisors jumped two spots to No. 3 with $19.4 million, a 7% rise.
Television advertising among the universe of investment firms Competitrack monitors fell 31% last year, to $79.4 million. But total print ad spending was down only 2%, to $18.1 million, with newspaper advertising rising 4% and trade publication advertising rising 6%.
And though Putnam did an aggressive campaign in an effort to "come clean" with investors, some industry analysts say silence is the best weapon for most companies under fire.
"Unless the court orders you to run an ad campaign, you are better off laying low," said Elizabeth Rowe, an analyst with Find/SVP, New York. "I don't know how many individual investors have actually followed these investigations. But once you launch an ad campaign to address these charges, you suddenly are raising their level of awareness."
Dan Sondhelm, a partner at SunStar, a financial marketing firm in Alexandria, Va., agreed. A high-visibility campaign in response to criminal or civil investigations could backfire if more evidence is uncovered later.
But Putnam says it is treading carefully. The company spent $1.4 million on advertising in the fourth quarter of 2003, after spending only $64,000 in the first three quarters in an effort to combat the charges.
Meanwhile, Janus spent only $30,000 on advertising in the fourth quarter, after spending $838,000 in the first quarter, $586,000 in the second, and $625,000 in the third. The company's total ad outlay for the year was down 77%, to $2.1 million
Investor assets have been leaking from both Janus and Putnam. According to Financial Research Corp. data through Jan. 31, Janus has had $12.1 billion and Putnam $23.9 billion in net outflows since Sept. 1. Gordon Forrester, a managing director for Putnam Investments, said the firm decided to quickly create a print ad campaign after the civil charges were filed in an effort to reassure investors.
"Our advertising program in the fourth quarter of 2003 was information-based, rather than image- or product-based," Forrester said. "We focused on reassuring investors that Putnam's new management team was putting in place some of the most rigorous governance, oversight, trading and compliance standards in the mutual fund industry and that Putnam would provide full monetary restitution for all improper-trading losses to our fund shareholders."
Putnam spent more in the fourth quarter, but its overall advertising, along with most of the investment industry, declined last year. According to Competitrack, the firm spent $1.4 million on advertising in 2003, down 61%.
Janus CEO Mark Whitson said Janus is building a small budget for advertising spending this year and will be very selective about when and where it will spend money. For its part, Putnam has no current plans to run any TV ads anytime soon.
As for the rest of the industry, some analysts predict that advertising spending among investment firms will increase this year. "I think there is a hangover effect impacting the brokers and the investment companies," said Find/SVP's Rowe.
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