At Your Service

While Bear Stearns boasts 69 years on Wall Street and 25 years in the clearing business, the firm also offers advisors sophisticated trading technology, performance reporting, prime brokerage to 850 hedge funds, and customized portfolio systems, as well as custody services. But to address clients’ ever-changing needs, and position itself more strategically in the market, Bear Stearns has refocused its business around capital markets, wealth management, and global clearing. According to Bear Stearns’ latest quarterly report, released in August, the firm has $29.6 billion in capital and, as of May, total assets of $185.6 billion. The global clearing business represents a “significant portion” of Bear Stearns’ profitability, Suber says. Net revenues for Global Clearing Services in August were $186.6 million, a 2.8% decline from $192 million last year. Net revenues for the Wealth Management division, meanwhile, which includes private client and asset management services, hit $124 million, a 3.1% decline from the $128 million reached last year. Suber says Bear’s private client business boasts 400 brokers in the U.S. and abroad.

Tyers says being able to tap Bear Stearns’ wealth management resources is crucial in helping advisors compete for wealth management business. For example, he says, a number of high-end advisors are coming to Bear Stearns for help with short-term cash management. “There is a tremendous amount of money in cash, and it’s being parked for various reasons,” he says. “We’re able to leverage off of Bear Stearns’ treasury department business, which manages more than $20 billion of Bear’s own capital, and take that expertise and make it available to an investment advisor’s client or prospect who just sold a business and has $20 million,” Tyers notes. But the client “needs to keep $10 million available until he pays his taxes next year. We’re able to go to our treasury department and ask them what solutions they recommend in terms of cash management needs to help this advisor make a proposal to land that piece of business.”

Another draw for advisors is Bear’s experience in derivatives and structured products, Tyers says. That’s what convinced Jeremy Radcliffe, a partner with Salient Advisors in Houston, to custody his $300 million in clients assets with Bear. His clients are high-net-worth individuals and families with assets ranging from $10 million to $50 million, and many of them have concentrated single stock positions. “Bear has been helpful [in] working with us on ways to get liquidity and diversification for those types of clients, mostly through derivative transactions” like synthetic collars, Radcliffe says. “Bear can help us get the right transaction in place and get good pricing on it.”

Competing With Goldman Sachs

Tyers says Bear also has a nine-person restricted stock desk, and can assist advisors’ lending needs by providing large credits to their clients. Other successes have been Bear Stearns’ private-labeled client Web sites, as well as its performance measurement and reporting solutions. The firm also services a significant number of advisors “that use separate account managers, and we provide them with the technology and reporting infrastructure to handle that business,” he says. The new separate accounts consulting product will combine the due diligence, technology, and reporting services of the top three providers, Tyers says.

Custody and clearing also help Salient go head to head with its biggest competitor, Goldman Sachs’ private client group. “With Bear, we can provide the same kind of services and do anything we want to on the derivatives side, and we are not constrained by proprietary product offerings like a lot of [brokerage] firms,” says Radcliffe. He is also fond of Bear’s specialized product offerings like low-leverage, arbitrage-based hedge funds.

Bear provides clearing services for about 380 B/Ds, Suber says, serving firms that fall under four categories: money management, institutional, full-service retail, and active/quantitative trading. Because the needs of independent B/Ds who are money managers are converging with those of RIAs, Suber says, Bear Stearns can offer both “seamless integration from the moment they decide what they want to buy or sell, to how they report to the end client.” Tyers adds that by targeting the top 10% of advisors, Bear will be able to “provide a higher level of service” to these firms. In offering many sophisticated products to a few, Bear hopes to stand out.