How to Save a Buck

Up to a Georgia schoolhouse one day last week drove a salesman named John Stacy Cotter. "Most people want to save," he told Teacher Elizabeth Burke, "but most people don't save. I can show you how." Salesman Cotter had no promises of big returns to offer: if Teacher Burke would pay $16.70 a month for twenty years--a total of $4,008--she would get back $5,000. Teacher Burke would earn only 1.91% interest on her money, far less than on a Government bond. Moreover, if Teacher Burke quit the plan before ten 'years, she could not even get out as much as she had paid in. It didn't sound like much of a deal, but within an hour Teacher Burke had not only bought it, but authorized Cotter to take the money out of her bank account each month by simply presenting a sight draft.

By promising so little, Salesman Cotter manages to make around $20,000 a year in commissions. His employer, Minneapolis' Investors Diversified Services, Inc., has sold so many such savings plans that its total assets last week were above the $1 billion mark. Most big-city dwellers have never heard of I.D.S. But in farm areas and small towns all over the U.S. and Canada, some 2,000 salesmen, who make $8 to $20 per year on every $1,000 plan sold, sign up contracts for $5,000,000 in savings each week. The big appeal lies in the fact that I.D.S. makes people save. Contract signers cannot get out "even" until they have been in the plan several years, and once they have stayed that long, they have more to gain by staying all the way. Boasts I.D.S.'s Dallas Manager Clyde J. Moore: "We could sell the plan without any yield. All we need to say is here is a plan for money accumulation that will work."

A Good III Wind. The plan does work. Since 1894, when the company started on $2,600 capital, it has never failed to pay off an investor. It has not only weathered wars, depressions and bank runs, but some ill winds which blew it good. In 1943, when SEC brought suit to compel I.D.S. to follow a policy of "full dis-- osure," stressing objections as well as advantages to its savings plans, I.D.S. discovered that underselling actually boosted its business. After hearing all the disadvantages (low interest, losses on early cash-ins, etc.), cautious investors felt that candid I.D.S. was a company they could trust.

Moreover, once a sale is made, word-of-mouth advertising helps make others. Almost every buyer of a plan gladly signs a card introducing the I.D.S. man to another friend or neighbor (doctors and professional men are the best customers, closely followed by farmers). If anybody fails to meet his second payment, I.D.S. refunds the first one and cancels the deal. I.D.S. feels "that man will just be trouble for us."

But if I.D.S. paid off the savers, it had trouble making money for its own stockholders. They have gone twelve years without a dividend, and the company's stock was selling as low as $3 a share in 1949, just before Financier Robert R. Young's Alleghany Corp. bought 93.6% of the voting stock (TIME, May 9, 1949). Young now controls I.D.S.'s $1 billion by the $1,968,000 he put up for the stock at $17 a share. He kept I.D.S.'s President Earl E. Crabb, 69, and its star salesman, Vice President Grady Clark, 50. But he made his own right-hand man, able Lawyer Robert W. Purcell, chairman of I.D.S.'s executive committee, and set him bird-dogging I.D.S.'s investments.

The results have justified Young's belief that Alleghany got a bargain. The stock now has a market value of $6,000,000. And though I.D.S. still hasn't paid a dividend, it earned $35 a share in profits in 1950-51. When it finishes paying off high interest plans (5% and 6%) sold in the '305, it may start paying dividends. "We're in this strictly as an investment," said Bob Purcell, "and we're in it to stay. We figured that the investment business of the country was moving from Wall Street to Main Street, and this looked like an ideal way of moving with it."

Old Folks at Home. Through I.D.S., Main Street now owns a sizable share of the U.S. wealth. I.D.S. is one of the nation's biggest buyers & sellers of securities and real estate. Its main stock in trade is the "face-amount certificates," which are given to the participants in its various savings plans after payments ranging from six to 20 years. Once the certificates are cashed, I.D.S. gets back about one-third of the money, on average, to reinvest in more certificates or one of three mutual funds it operates. Through these--Investors Mutual, Investors Selective Fund Investors Stock Fund--it owns $386 944 -ooo worth of U.S. securities, second only to Massachusetts Investors Trust (TIME April 9, 1951) in the mutual-fund field.

I.D.S. has three other subsidiaries which invest mainly in real estate, and make I.D.S. the sixth biggest U.S. mortgage owner. I.D.S. has financed huge multimillion-dollar shopping centers at Wilmington, Chicago and Los Angeles. Last week, in a hunt for profitable new fields of real-estate investment, it spent $45,000 for advertising in a nationwide survey to determine i) where elderly, retired couples plan to live, and 2) what kind of housing they prefer (i.e., small homes, apartment kitchenettes, or what) When the returns are in, I.D.S. hopes to reach a lucrative new market that no big investor has yet bothered about.

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