CSFBdirect: Parent’s Clout an Edge with Advisers

Credit Suisse First Boston, the latest entrant in the crowded field of serving independent fee-based advisers, is betting that advisers want the products and back-office support of a major investment bank.

CSFBdirect Institutional — part of CSFBdirect Inc., Credit Suisse’s Jersey City online brokerage arm — rolled out a slate of services last week, including custody, clearing, trade execution, research, and investment products.

“The marketplace that advisers are in is an area where CSFB has no market share,” said Richard V. Cancro, who runs the institutional division along with Jeffrey A. Roush.

“It’s a way to get assets in the firm,” Mr. Cancro said.

Before designing a platform, he said, CSFBdirect spent several weeks in advisers’ offices — watching and videotaping how they work, finding out which transactions they perform most often, and talking to them about what kind of technology they need.

CSFBdirect Institutional is marketing the service to advisers with $25 million to $1 billion of assets under management. Mr. Cancro said that the company is willing to work with advisers with smaller portfolios if they seem likely to grow.

He declined to discuss how much CSFBdirect Institutional would charge advisers but said that its prices are competitive. He added that it will compete on the basis of products and services rather than price.

CSFBdirect would also not say how many fee-based advisers it is working with nor what its goals are. But Mr. Cancro did say that the institutional division is a key business for CSFBdirect and one it is committed to building.

“We’re not in the business to have a single-digit percentage of the marketplace,” he said. “The plans are to build this business very quickly and aggressively.”

The move comes as many online brokers are smarting from lower-than-expected trading volume. On Thursday, CSFBdirect announced a fourth-quarter loss of $6.7 million, compared with a $2 million loss the year earlier.

CSFBdirect, the former DLJdirect, is going to face tough competition: Charles Schwab & Co. in San Francisco controls roughly 70% of the registered investment adviser market, and Fidelity Investments of Boston is second, with about 18%, according to the Boston consulting firm Cerulli Associates Inc.

CSFBdirect will also compete with other new players, such as Raymond James Financial, a regional broker-dealer in Tampa that opened an institutional division last month.

And companies are steadily adding to their services. On Thursday, TD Waterhouse — which is third-ranked, with a 4% market share — said it would offer trust services to advisers.

Mr. Cancro said that CSFBdirect also plans to offer trust services but would not say when.

The investment adviser market is growing by just a few hundred year, according to Cerulli. But Mr. Cancro and Mr. Roush said a lot of opportunity remains, given the advisers’ volume of assets under management — about $1 trillion — and the dissatisfaction of many with their back-office providers.

Several advisers who work with Schwab, for instance, are worried that its purchase of U.S. Trust Corp. would eventually put Schwab in direct competition with them.

“CSFB represents a truly institutional player,” Mr. Roush said.

Mr. Cancro and Mr. Roush said that CSFBdirect has other advantages: Its adviser clients have access to research and products from its investment bank parent, such as initial public offerings, private equities, alternative investments, and hedge funds.

Mr. Roush said that products such as IPOs would be distributed throughout Credit Suisse First Boston so that advisers would get a crack at them.

Another advantage, Mr. Cancro said, is CSFBdirect’s technology group, iNautix Technologies, which supplies a fully automated paperless service platform.

A financial adviser expressed doubts, however, about CSFBdirect’s ability to thrive.

Harold R. Evensky, chairman of the financial planning firm Evensky Brown & Katz in Coral Gables, Fla., said, “It’s going to be awfully hard for someone to come in and capture a big share of the market unless they’re doing something extraordinarily different.”

Pricing is “at a commodity level already,” Mr. Evensky said; everyone boasts advanced technology; and the services provided are essentially the same.

Alternative investments, which CSFBdirect touted as a differentiating factor, are readily available to advisers, Mr. Evensky said. “I’m inundated with offers,” he said.