By CATEY HILL
You weren't the only one who went on vacation this summer. August, traditionally a slow time of year for the financial markets, sent plenty of money managers and financial advisers to the beach -- just in time for the markets to go haywire.
Since the markets crashed last Thursday, big brokerages and small advisory firms alike have been scrambling to respond to a crush of phone calls and worried investors. Similar to what they did when the markets crashed in 2008, they sent reassuring emails en masse to clients or hosted web casts; some extended their hours or added more staff to answer the phones. But this most recent market crisis has posed an added wrinkle for advisers and the clients trying to reach them: It's smack in the middle of prime vacation season, the traditionally-sleepy August when most money managers figure it's safe to head for the beach. "Their main priority may be spending time with their family, rather than taking your call," says Jack Waymire, founder of Investor Watchdog, a website which monitors the financial industry. "There's a view that when Labor Day comes, then it's back to business."
Most firms declined to say how much of their staff was away -- and many may not even know. Traditionally, August is a safe time to skip town. Trading volume is light in August, down about 5% from July and lower than any other month with the exception of February (which is a short month), according to data on New York Stock Exchange trading volume over the past two decades. Not this time, and financial firms like BNP Paribas have been calling employees back from the beach and the mountains, according to reports in the Wall Street Journal. Of course, brokers and money managers aren't alone in taking off. French president Nicolas Sarkozy only yesterday returned from his vacation in the French Riviera to deal with the threat of a downgrade to France's credit rating, and recently calls have started to bring the United States Congress from its traditional summer break.
But as in any time of market crisis, this is when investors most want to be able to reach their brokers or advisers -- and are least forgiving when they can't. After the crash of 2008, about 40% of brokerage customers said they either switched brokerage firms or planned to, according to a survey conducted by SmartMoney and research firm Synovate. In 1987 and after the tech bubble, investors directed their brokers to stop trading, and firms saw commission revenue fall. For clients, these are the times when their advisers can really prove they're worth their 1% to 2% annual fees or fixed annual price, says Velda Eugenias, founder of Eugenias Advisory Group in Huntsville, Ala.
And yet, some firms are sticking by their old playbooks. When SmartMoney.com called some of the biggest brokerages on Monday, we sat on hold for as long as four minutes -- and on a day when the market lost 500 points, minutes really matter. But firms like Charles Schwab and Ameriprise said they didn't need to add staff to handle customer calls in the last several days. A spokesman for Charles Schwab said the firm already "has sufficient staff for situations just like this," and Ameriprise said that its advisers were putting in longer hours to deal with the volume. Online trading sites Scottrade and OptionsXPress posted relatively little information about breaking news events -- including current market moves and the debt downgrade late Friday. Scottrade says it doesn't provide advice like this because it caters to the do-it-yourself investor. OptionsXPress couldn't be reached for comment.
Not all firms have been so blase. At INGDirect, everyone from executives on down is trained to work the phones, and, starting Friday, the firm has pulled in 80 staffers to do just that. Online brokerage TradeKing kept its phone lines open on both Saturday and Sunday, even though the markets were closed. Some advisers at smaller firms say they spent all of last weekend reaching out to clients. Katherine Liola, an adviser at Ameriprise Financial in Vienna, Va., says she sent an email to all her clients last week, then followed up with a phone call to nearly half of them, with more calls planned for this week.
To be fair, firms say they have plenty of staff already, and that everyone -- from customer service reps on the phone to advisers to senior-level executives -- is working longer hours. Also, in the age of BlackBerry, being on vacation doesn't necessarily mean being out of touch. "It's easier to reach people these days," says Eugenias. And adding brand-new staff may not be the quick-fix it would at first appear, says Richard Kahler, founder of Kahler Financial Group in Rapid City, S. Dak.: There is a fairly long training process for the folks who answer the phones, whether they're doling out advice or just routing calls to the right place. And clients should be able to get the advice of the person they hired, not a fill-in, says Eugenias. "You've hired that adviser, not someone else, to help you."