CNN MONEY MORNING: Correcting Brokerage Firm Research Problems, CNNfn

December 24, 2002

ALLAN CHERNOFF, CNNfn ANCHOR, CNN MONEY MORNING: Joining us this morning is Tim Alward, he is CEO of independent research firm, Ford Investor Services. He's joins us from San Diego and he's going to tell us a little bit about the implications of the big Wall Street settlement deal.

Good morning to you.

TIM ALWARD, CEO, FORD INVESTOR SERVICES: Allan, good morning, and Happy Holidays.

CHERNOFF: You, too. Now, Tim, first of all, what does the deal that was struck on Wall Street between the regulators and the major investment houses mean for an independent firm like yours?

ALWARD: Well, we were happy with the settlement as it was announced on Friday. We think it will go a long way in correcting some of the problems with the brokerage firm research. I mean, obviously, you have to split the investment banking from the research. You have to quit using IPOs as an incentive to do things.

And we did think it was a good idea to provide independent research to the brokerage firm clients. And hopefully, I'll demonstrate why in a minute. But there was a fourth part that we thought was the most important, and that's that the analysts have to disclose their buy and sell recommendations, so they can be evaluated and performance can be calculated on them.

As independent research firms, we live and die by the performance of our research. That's what shows it has value, that's why institutional investors buy it. And putting Wall Street research on the same footing should go a long way to correct some of those problems. So we were quite happy with the settlement.

CHERNOFF: Tim, are you expecting a bonanza of business here since the investment houses will essentially have to subsidize firms like yours?

ALWARD: Well, I don't know about a bonanza of business but we think that we do have some valuable research we can provide. And hopefully we can get it into the hands of the clients. We did put together a group of six independent research firms. We picked firms that had very good track records, had very good longevity in the industry, and had good coverage of companies.

And we named it "Best Independent Research" because they do have some of the best track records. And our goal is to try to provide independent research to the brokerage firm clients based on performance under the settlement agreement.

CHERNOFF: And has there anything been in place just yet, in terms of the major investment houses contracting to help subsidize a firm like yours? I mean, after all, the settlement does call for them to spend about half a billion dollars on independent research.

ALWARD: That's correct. What we know now is they will appoint an independent consultant as a monitor. And, you know, I assume that what we'll have to do is go through a whole process of submitting our research, submitting the backgrounds of the firms. And then they'll decide who will get into that research pool and how it will be distributed to the brokerage firms.

CHERNOFF: Do you guys have, generally speaking, a better track record than the major investment houses?

ALWARD: It's kind of interesting, two years ago, a firm by the name of InvestStars, that's not related to research, not related to Wall Street, started ranking the performance of research firms, both independent and Wall Street. And it was a real eye-opener. We never really got to see our performance directly measured against Wall Street.

And if you go on to their Web site, Investstars.com, you can see - if you look at the last one and two years of the top 10 performing research firms - six of them have been independent, and six of them are members of the Best Independent Research firm, the group we created. So there is some very good research put out by the independent firms. And it should be a very good tool for the brokerage firm clients.

CHERNOFF: So, bottom line, you're expecting this settlement really is going to be helping the individual investor?

ALWARD: We hope so, yes.

CHERNOFF: Tim Alward, thank you very much for joining us this morning.

ALWARD: Thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 888-CNNFN-01 OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT WWW.FDCH.COM

Back to Articles & Interviews

800-842-0207 | info@fordequity.com Copyright © 2002, Ford Equity Research, Inc.