Stiff sales fight puts storefront strategy in play
Three green Fidelity flags hang limp over the entrance. It's after 5 p.m. and this brassy storefront office that opened in June is nearly empty. An occasional commuter whisks in to make a quick transaction or grab a brochure before scurrying off to catch a ride home.Skip to next paragraph
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But appearances may be deceptive. By Fidelity's count, an average of 300 to 500 people use the center daily. From January through April 15 (the IRA season), it expects clientele to top 1,000 a day.
Fidelity Management and Research is one of several mutual funds that are, in a sense, going public. Traditionally, the mutual fund business has been conducted by mail or by phone. Now, partly in response to more walk-in customers and a desire to reach a bigger share of the general public, some funds are opening street-level storefront offices.
To customers, these offices mean longer hours, easier access, and a wider range of services, as well as a face-to-face opportunity to see who's handling their money.
For the once-cloistered mutual funds, it's a new marketing avenue for products. Promoters say it also offers a way to stem the exodus of money-market fund shareholders, who went back to the banks and their insured money market deposit acounts, and educate them to the investment possibilities of other funds. And it may give mutual funds another weapon as deregulation opens the door to competition from banks, brokerages, and insurance companies.
The utility of this concept became apparent between 1979 and 1982 as vast numbers of new investors were attracted first by money market funds and then by IRAs. ''People kept showing up at our (sixth-floor office) door; we had no way to accommodate them,'' says Dennis E. Nelson, vice-president of Fidelity Marketing Corporation. ''They were standing in the hall. And they were showing up in spite of the fact that we had never encouraged them to visit.''
As yields in money funds dropped, another need for face-to-face encounters arose: to introduce the neophyte money fund investor to other funds.
''There was the stock market rise. And meanwhile the money market yield had gone down,'' says Richard J. Vesely, vice-president of marketing at Delaware Management Company. ''Many investors asked, 'What do I do now?' They began asking about other funds.
''Now, people are getting educated about the equity concept,'' he says. ''We have to explain what money funds and equity funds are. That becomes time-consuming. The staff spends more time with inquiring investors. That's why the storefront concept is helpful.''
Just the same, the jury is still out on it.
''It's too new to know if it will generate enough business to offset the higher cost,'' says Steven Norwitz, spokesman for T. Rowe Price Associates, which has ''no plans as of now'' for a walk-in center. ''They can be a substantial increase in the cost of operation. The advantage of a mutual fund is that it operates on a low margin. (These centers) are starting to fall into a bank operation with a lot of brick-and-mortar costs,'' Mr. Norwitz says.