Funds Turn to Advertising to Promote Credibility

June 11, 2004, 1:00 a.m. EDT 1 Min Read

Mutual fund providers are stepping out from the shadow of widespread scandals and investing heavily in advertising campaigns designed to restore investor confidence, The Wall Street Journal reports.
Mutual fund advertising expenditures in the first quarter rose 21% to $1.6 billion from the previous one-year period, according to New York-based TNS Media Intelligence/CMR. The sharp spike in advertising follows a modest increase last year in which financial advertising grew 10% to $2.6 billion. However, in 2002, it decreased $2.2% to $5.7 billion, following another 4.3% decline to $5.82 billion in 2001.

Putnam Investments and Janus Capital, both of which were tainted by mutual fund scandals, have led the charge in investor cheerleading through hard-charging advertising campaigns aimed at rebuilding investor confidence and instilling trust in financial services providers.
Dreyfus, which has managed to steer clear of the scandals, took the direct route of incorporating the words "Experience. Integrity. Trust" into some of its print advertisements. Some analysts and marketing experts concur that the mutual fund providers are on the right track by emphasizing credibility rather than pitching product.
Advertising gurus also predict that some financial service providers may have to fine tune their messages if the Federal Reserve Bank follows through on two anticipated quarter-point rate hikes of the Fed-funds rate, which currently stands at 1%.