Randomly Noted

Donald Marron has his fingers back in a business he knows very well – broker-dealers. Overnight, the former head of PaineWebber (when it was a publicly traded company) agreed to buy several broker-dealers from ING, the Dutch bank that has been forced to go through a restructuring to get itself back on its feet. Weaker firms have had to shed the steady fee-based brokerage business (Citi sold a big chunk of Smith Barney to Morgan Stanley, AIG at one point put its broker-dealer operations up for sale and UBS has hinted its PaineWebber unit is not core).

Enter folks like Marron who know an undervalued asset when they see it and who understands the wisdom and economics of fee-based businesses. A lot of money was lost by individuals when the markets tanked last year – a lot of retirement money. But people will still need advice and products to help them make ends meet. Perhaps now more than ever.  Smart move by Marron and his firm, Lightyear Capital.

It may have been an acquisition that made sense on paper. But the purchase of PaineWebber by UBS never really worked the way the Swiss bank had hoped. The bank, with a big private banking business in Europe, was looking for a springboard into the U.S. market. PaineWebber had a good brand and a strong foothold in the U.S. brokerage business. But the two never seemed to be a good fit – maybe it was the different cultures, the inability of UBS to move quickly and mis-steps like thinking the UBS name carried more clout in the U.S. marketplace than did PaineWebber, which it ultimately dropped.

Today, as has been rumored for the past month or so, UBS hired Bob McCann, the former head of Merrill’s brokerage, to run the UBS wealth management business in the U.S. The move likely signals a commitment to the U.S. market by the Swiss bank  – hard to imagine McCann would come to run a business up for sale. And you can’t blame people thinking it was given comments from UBS’ top brass recently that seemed to indicate it didn’t believe the U.S. wealth management business was core to its operations. Of course, it’s easy to see why they thought that – the top brass was very preoccupied with settling a nasty little tax evasion case with the U.S. government.

Which is all the more reason why UBS should bring back the PaineWebber name. McCann said earlier today that wasn’t under consideration. But that strong brand name can be built upon and it doesn’t evoke images of Swiss bankers hiding money in the basement to help others avoid paying taxes. So, bring it back so we and all the financial advisers can say “Thank you, UBS” (a play on the old “Thank you, Painewebber” ads of yesteryear.)

Newswires reporters Brett Philbin and Annie Gasparro had a nice article last week that looked at the storied past of the old Painwebber and how it lost ground to rivals like Merrill Lynch or Morgan Stanley/Smith Barney. See that piece below.

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Welcome to the big leagues, Ameriprise Financial.

Already one of the largest financial advisory firms in the U.S., Ameriprise today became one of the largest asset-managers as well with the acquisition of Columbia Management’s long-term fund business from Bank of America. (It didn’t buy the money-market funds business).

Ameriprise is picking up an asset management busiess that appears to be on the mend. Net outflows from Columbia’s equity business are slowing and there have been net inflows on the fixed-income side. (See flow charts below)

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James Gorman and Sallie Krawcheck have a couple of things in common. Both are heading up two of the largest retail brokerage operations in the country, now that Krawcheck was named today as head of the wealth management division of Bank of America. And the two businesses are pretty close in size – Gorman’s Morgan Stanley Smith Barney has about 18,000 financial advisers and about $1.3 trillion in client assets.  Krawcheck’s WM business (a huge chunk of which is the old Merrill Lynch) has 15,000 financial advisers (again the old Merrill) and  $1.16 trillion in client assets.

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Putnam Investments is looking to regain some of its past might by cutting some of its fund fees to attract new business. But the real news to me in the company’s press release announcing the management fee reductions is that it is adding a performance fee structure – an idea that should become the industry standard.

Typically the way a mutual fund and its managers get paid is based on a flat fee that is a percentage of total assets under management. Not much incentive there except to get people to sell more of your funds.

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The chairman of the Federal Reserve hosts a town hall meeting. Some in Congress want the ability to analyze interest rate decisions after the fact. More than just central bank scholars are raising questions about regional Fed bank governance in place for nearly 100 years.

All these seemingly disparate events raise one central question: how much democracy is good for the U.S. Federal Reserve?

Fed Chairman Ben Bernanke took a remarkable democratic step over the weekend, sitting down in middle America with reasonably just plain folks, taking their questions and getting out his message.

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As evidenced by profits Wall Street banks and trading forms have been logging, the professional investor has clearly returned to the markets. Now, we are seeing more evidence that individuals are as well.

T. Rowe Price reported second quarter earnings today and as part of that announcement, it said it has seen net inflows of $4.1 billion into its mutual funds in the quarter. About $1.9 billion of the inflows went into U.S. stock and blended asset funds. Bond and money market funds saw $1.3 billion of new money coming in. About $900 million came in to international stock funds.

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If we were talking about Billy Bob’s Securities Inc. or some boiler-room operation, this would be mildly interesting and not too shocking. But it is Ameriprise Financial, a nationwide financial planning/services company that employs in the area of 12,000 advisers. It’s big. And so is the story.

The Securities and Exchange Commission today charged (in an enforcement action) that Ameriprise received millions of dollars of payments from two non-exchange traded real estate investment trust companies after demanding the cash in order to continue selling shares of the REITs. What makes this particularly shocking is that senior management – all the way up to the CEO and CFO – sat through presentations during which these kickbacks were discussed, the SEC said in its complaint. And they did nothing. Ameriprise, by the way, was owned at the time by American Express.

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Buried on page 71 of the 88 page Regulatory Reform proposal announced yesterday by the Obama administration is a suggestion that Wall Street brokers should be held to the same standard as independent financial advisers. To the layman, this probably doesn’t sound like that big of a deal. But to Wall Street, it is seismic and could force the traditional brokerage business to change even more dramatically than it has in the past decade.  The current model may be dead.

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The latest leak on the Obama administration’s financial regulatory revamp plan, which will be officially revealed Wednesday, calls for the creation of a Consumer Financial Protection Agency.

The Wall Street Journal’s Damian Paletta, who just reported this, writes the agency “will be charged with protecting consumers in credit, savings, and payment markets.”

The group will have the power to “reform” the U.S. mortgage market and the authority to levy fines, Paletta reported.

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