Financial Advertising Through Market Cycles

While financial innovations appeared over the course of centuries, the advertising of financial services was almost unheard of before the 19th century and rather primitive before the 20th century. Particularly in America during the 1920s, financial services advertising, like advertising for other products and services, blossomed. There were a greater number and diversity of firms and products to market and potential customers to reach. In the 100 years since then, financial advertising has had to adapt to changing market conditions and it has done so quickly when required.

Early History

Even over two centuries ago, just as soon as newspapers and magazines became more prevalent and widely read, individuals looking to raise or invest money put advertisements in print in order to find a willing counterparty. Early banks also used similar advertisements in papers to announce something like the opening of a new branch.

Still, prior to the 19th century, advertising for financial products was not common. Most bankers and brokers worked with a small set of clients who they came to know personally. Business was sourced face-to-face or through referrals. The pool of potential clients for a financial firm or product was so small in a still primitive and developing economy like that of 18th century America that advertising to find new clients was ineffective. Also, securities issuances and financial firms were themselves few, so their demand for newspaper advertising space could only be so large. What ads did exist were very simple. Early financial advertisements rarely amounted to more than a simple notice, of a dividend for example. The launch of new firms was announced in print ads but usually in a bland and terse manner.

After 1800, growing international and domestic long-distance trade and the development of new firms like additional banks or trust companies increased the proliferation of financial advertising in the United States. There was also a growing number of investors and savers in the country. This meant mass marketing could bear more fruit than before. During the U.S. Civil War and the boom in railway construction in America, bond securities were marketed by the financier Jay Cooke in newspapers. Publicity was becoming increasingly important in finance. Though who could harness it well stood to benefit.

1920s Boom

In the 1920s, financial advertising became, like advertising for other products, much more creative. Now, ads for financial products featured large images and creative text and could take up an entire page in a newspaper or magazine. They were increasingly prepared by dedicated advertising agencies and even when they were created internally within a financial firm, companies now had internal marketing or publicity departments dedicated to this work.

From Richard F. Durham’s *Financial Advertising in 1929*

These more sophisticated advertisements had more diverse messages. They variously highlighted some combination of the strengths of a firm, the location of its branches, the experience or friendliness of its staff and officers, the diversity of its services and their quality, the number of its customers, or its financial resources. Increasing the diversity of the ads, expanding product lines, like unsecured consumer loans, meant there were more potential products to market and customers to reach. Even common and simple products like safe deposit boxes and Christmas savings clubs were the subject of well thought out full-page ads in newspapers and magazines.

Already in this era, as consumer finance took off, a growing proportion of financial services advertisements were targeted to women. One print ad for the First National Bank of Detroit highlighted “a special department for women, with a women’s commercial teller in attendance … evidence of the growing importance of women in business”; this was in an advertisement from 1929.

Besides banks, other financial firms were running ads in print. Trust company ads stressed experience and honesty. Like banks, they also introduced new products, like insurance for key company executives. There was also growing differentiation by firm and product. Trust companies offered insurance and investment products that would be so different from one another that these ads were often more informational by necessity. By comparison to modern financial advertisements, those of the 1920s, like that for the Birmingham Trust & Savings Company below could be very informative if wordy by modern standards. It walks through how the trust company’s customers could enhance the income generated by their estates by way of a detailed example.

Investment banks and issuers of securities were also jumping into the financial advertising boom. Investment banks were unique in that they advertised to both buyers and issuers of securities, two very different categories of client. Driving this marketing was the fact that entirely new industries, from oil and electrification to aviation, were raising capital during the 1920s. Also, regions of the country, like the South, were still industrializing. This was all increasing the need for new investment capital.

There were far more issuers of securities in the 1920s than at any prior time in American finance. A decade or two earlier, the American financial markets were largely oriented around railway or government issues. Now, new industries in America like consumer durables and electrical generation, together with foreign appetite for American capital, meant there were more securities to be placed than ever before. A January 1929 ad for brokerage firm Hornblower & Weeks marketed such eclectic securities as Finnish government-guaranteed mortgage bonds to securities issued by a relatively small furniture store chain, Reliable Stores Corporation. That ad was more of a menu of available securities; others detailed the merits of individual investments, like the security or payment structure of a single bond, in order to find buyers.

1980s

Advertising during boom years like the 1920s has a certain orientation that may not seem right after a market crash. Decades later, on Black Monday, October 18, 1987, U.S. stocks saw their greatest single-day loss in history; the comparison to 1929 was often made. Due to heavier than usual trading volumes, many were unable to exit investment positions even if they tried, creating frustration between clients and brokers. Financial sentiment worsened and the press atmosphere turned negative towards the stock market and finance generally. Within days, firms adjusted their advertising to reflect the changed environment.

A study of over five hundred ads placed in the Wall Street Journal before and after the crash exhibit the shift. In the weeks after the crash, financial advertising did not decrease but it was re-oriented towards alternative investments, or at least alternatives to listed stocks which lost so much value during the crash. Ads directed towards common stock investing fell by two thirds while those pertaining to other investments rose 41%. There were also more ads that sought to frame recent events and shape public opinion without advocating for a particular product or kind of product.

2008

In 2008, the U.S. economy was straining from the downturn in real estate that began in 2007 and the subsequent 2008 financial panic. Consumer confidence contracted sharply. A similar study to that mentioned previously was conducted with respect to ads placed in business and finance magazines from 2005 through 2008. While it may be easier, though limiting, to review print ads alone in this sort of research, even in 2008, U.S. financial firms were still more likely to advertise in magazines than television or the internet.

The study showed that financial advertising became more informational and less ‘emotional’ as the economy worsened. This was true of all major types of financial firms, from banks to investment firms to insurance companies. Another study of over seven hundred print ads from 2005 and 2010 also showed a decline in advertising that relied on emotional appeals, especially positive emotional appeals. It was not an era of good feelings; the proportion of consumer finance ads using a positive emotional appeal fell from 40.5% in 2005 to 24.6% in 2010. Also, financial firms’ ads came to focus more on the financial value of the products or services offered rather than important but non-monetary aspects like service quality.

Lesson

Finance moves fast and so does the marketing of financial products. When financial conditions change, old messaging no longer fits the moment. New imagery and marketing copy will be needed. Nevertheless, all this speaks to the sophistication of modern financial product marketing compared to that employed in earlier periods. The form of simple notices that one would have found in newspapers in 1800 could have been crafted by anyone and would have changed little from year to year. In those days, when financial products were offered on a very personal basis, the need for sophisticated advertising was little. Today, when products are sold to a mass market with less face-to-face solicitation, quality and timely marketing in all sorts of media is made more crucial.

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