CLARIFICATION: This article, originally published at 3:08 p.m. on Tuesday, Mar. 6, has been updated to make clear that the new E.F. Hutton America is a different legal entity than the E.F. Hutton of the 1980s.
When E.F. Hutton talks, television ads promised in the early 1980s, people listen. That was, of course, the Wall Street brokerage's heyday, when it had an army of employees in brick-and-mortar offices marketing stocks to investors. Fax machines were high-tech, and many U.S. homes didn't yet have touch-tone land lines.
Now, 30 years later, the grandson of founder Edward F. Hutton, Stanley Hutton Rumbough, and a new management team are bringing it back to life for a generation accustomed to using handheld devices for everything from grocery shopping to watching TV.
The move affords the news media an almost irresistible opportunity to ask whether customers will still listen when E.F. Hutton speaks, a question the company plans to take advantage of, later this year, with an E.F. Hutton smartphone.
In the meantime, executives have moved the firm's headquarters from New York to Springfield, Ohio, where they are differentiating themselves from rivals such as E*Trade (ETFC) , Fidelity (FIS) , Charles Schwab (SCHW) , and TD Ameritrade (AMTD) by paying brokers a salary instead of a commission and giving users access to an online stock- and option-trading platform for a flat monthly fee instead of charging by the transaction.
"The E.F. Hutton brand is known by investors nationwide and even worldwide," CEO Chris Daniels said in a phone interview. "We are essentially continuing the legacy of Edward F. Hutton, and we see that as very important because that legacy is all about service to investors and doing what's right for our clients and our customers."
E.F. Hutton, which assesses a monthly fee of $29.95 for stock trades and $49.95 for option trades through platform partner Tradier Brokerage, a FINRA-registered broker-dealer, is re-introducing itself at a time when competition in electronic trading is heating up. The environment is not unlike what the previous company grappled with in the late 1970s after the Securities and Exchange Commission began allowing brokers to set their own fees.
The charges had previously been established by the New York Stock Exchange, and deregulation meant a drastic reduction in prices.
The change, on May 1, 1975, was later referred to in Wall Street parlance as May Day, referencing both its timing and the distress it it inflicted on some firms. E.F. Hutton survived, however, and even thrived.
But just a decade later, the firm -- which was the fifth-largest brokerage in the country -- pleaded guilty to 2,000 counts of wire and mail fraud, according to contemporary news accounts in the New York Times and other media.
The government fined the company $2 million for shuffling money between hundreds of banks and accounts in order to access more cash than it had actually on deposit, according to the Times. In a chain of events later made routine by the 2008 financial crisis, public ire prompted Congress to summon the CEO to Washington for hearings.
"Although we fully expect to reestablish our good name and to emerge from this experience the better for having undergone it, it has been a trauma that none of us will ever forget," then-CEO Robert Fomon told the House Judiciary Committee's subcommittee on crime in June 1985.
Less than two years later, Fomon was out, and in 1987, after the Black Monday stock-market crash, the firm was sold to American Express's (AXP) investment banking unit, Shearson.
Citigroup (C) acquired the firm in about 2000 and kept it until the financial crisis forced the bank to begin selling assets. Rumbough and the current management team purchased the brand in 2012, and the Hutton family holds a substantial ownership stake.
Daniels noted that the current company, formally known as E.F. Hutton North America Inc., is a different legal entity than the 1980s company and said it has no link to the predecessor's scandal.
Last month, the new company's subsidiary, E.F. Hutton Mobile, introduced a mobile phone service with plans that include unlimited talk, text and trades for $69 per month. It's compatible with Apple's (AAPL) iPhone or Android devices.
The smartphone will follow in April, allowing "customers to buy stocks, conduct banking, make payments, track expenses, save for retirement, do taxes, connect with a realtor, use a mobile wallet, and consult with a banker or a financial adviser," in addition to offering standard functions, the company said.
"Our mobile platform is a significant innovation and brings together a lot of functions that investors look for and really puts the power of E.F. Hutton in the palm of their hand," Daniels said.
Next up, the company will work on products designed to help future retirees cover living costs. Many have struggled to adapt to the replacement of corporate pensions -- which guaranteed a payout to former employees -- with 401(k) plans that match worker contributions at varying levels but otherwise leave them to fend for themselves.
"We are hoping to help people with their retirement needs and to develop new and innovative ways for people to attain retirement security," Daniels said. "It's a complex problem. It's the kind of thing that a firm like E.F. Hutton, that is good at coming up with innovative, financial solutions, can participate in to develop alternatives for people."