News

Custodians target Bear advisers

Attention, registered investment advisers who keep assets at Bear Stearns: The big custodians are out to bag you.

With the New York-based investment bank set to be acquired by JPMorgan Chase & Co., its four large custody rivals — Schwab Institutional, Fidelity Institutional Wealth Services, TD Ameritrade Institutional and Pershing Advisor Solutions — are engaged in an all-out blitz to grab The Bear Stearns Cos. Inc.’s 100 RIA custody clients, who collectively manage $45 billion in assets.

“We don’t take any pleasure in what’s going on over there, but when something like this happens there’s something of an all-out assault,” said J. Thomas Bradley, president of TD Ameritrade Institutional of Jersey City, N.J. “The names [of the RIAs] are available on lists. Everybody just swoops in.”

Schwab has experienced a “huge uptick” in assets flowing from Bear Stearns since February, and expected more assets to follow, said Bernard Clark, senior vice president of sales and relationship management at Schwab Institutional.

“Right now, in our immediate pipeline, we’re talking to 20 advisers with $10 billion of assets [with whom] we expect to close [custody deals] very soon,” he said.

John Tyers, senior managing director and co-head of broker-dealer and investment adviser services at Bear Stearns, acknowledged that the company has lost custodial assets, but said the storm is passing.

Early in March, “we were under incredible strain, and our clients began to take action and move some assets to our competition,” he said. “Now we’re back on the offensive, taking advantage of the great [JPMorgan] brand name and resources we offer our clients.”

JPMorgan of New York on March 14 announced that it would acquire Bear Stearns and immediately began to back the company financially.

Yet the news of Bear’s distress unsettled clients, and competitors were ready to capitalize on adviser uncertainty about the effect of the ownership change.

To the Bear clients who also have used Schwab, the San Francisco-based custodian is promoting itself as a known entity, Mr. Clark said. To those who use Bear Stearns exclusively, Schwab is positioning itself as the industry’s unquestioned leader, he added.

“Advisers don’t know where they fit in the [JPMorgan] plan, so this consolidation of assets [to Schwab] is happening rapidly,” Mr. Clark said.

One adviser who was referred to InvestmentNews by Bear Stearns said he has no intention of moving assets away from the company.

“I’ve been a client of theirs for four years, and we’ve had the same superb service right through the crisis,” said Christopher S. Moore, principal with CSM Capital Corp. of New York, which manages $180 million. “I have no problem [with Bear Stearns]. My clients have no problem with [JPMorgan’s takeover] at all.”

The backing of JPMorgan Chase was enough to keep Steinberg Global Asset Management Ltd.from moving assets.

“We had the paperwork all set up and were ready to go to Schwab,” said Richard Steinberg, president of the Boca Raton, Fla., firm, which manages $500 million. “We held on after the JPMorgan announcement. With them as the backstop, we felt we could remove the crisis label from the conversation.”

Indeed, some financial advisers are looking to switch to Bear Stearns, Mr. Tyers said.

For example, the company is having advanced discussions with a family office that has New York-based Citigroup Inc. as its asset custodian, he said.

Yet it remains to be seen whether most financial advisers will see JPMorgan Chase as a favorable brand name for asset custody, said Robert Ellis, a New York-based analyst for Celent Communications LLC of Boston.

“It’s not that JPMorgan’s brand name is so great,” he said. “It’s a dubious honor, but it’s definitely preferable to Citigroup or Bear Stearns. It’s the beating those banks have taken in the press.”

Fidelity and Pershing also are viewing the unsettled times as a selling opportunity.

“At this point, we remain actively engaged in discussions with many advisers and broker-dealers that are currently working with Bear Stearns,” said Steve Austin, spokes-man for Fidelity of Boston.

Pershing said that it is having particular success at winning Bear Stearn’s clients, because it has a similar Wall Street feel to it, according to Mark Tibergien, chief executive of Pershing Advisor Solutions LLC of Jersey City, N.J.

“[Bear Stearns clients that are seeking a new custodian] have put us in a good position because they have a [similar] business-to-business image,” he said.

Mr. Bradley disagrees.

“Mark would run into Bear [Stearns] clients more than we would run into them, so logically, you’d think [Pershing has the edge], but we haven’t seen that,” he said. “We’re doing very well with the RIAs shaking out of there. We’ll hopefully get our fair share or more.”