Looking to move beyond its discount brokerage roots, Quick & Reilly Group is on the prowl for a mutual fund company and an investment management firm.
During a wide-ranging interview in his downtown Manhattan office, Thomas C. Quick, president of Quick & Reilly, said consumers are increasingly demanding convenience and investment help, forcing the nation's third- largest discount broker to diversify.
"We have to keep up with changes that are taking place," Mr. Quick said. "We don't want to be left behind."
In addition to reaching into the money management business, Quick & Reilly hopes to introduce by yearend a no-transaction-fee mutual fund supermarket, where customers can buy no-load funds from many different providers. Other initiatives include opening 10 more discount brokerage offices this year and offering securities trading via the Internet.
But the expansion effort most dear to Mr. Quick's heart is the search for an investment management and mutual fund firm. Piled behind his desk is a foot-high stack of folders on acquisition candidates.
So far, Quick & Reilly's efforts to diversify have been fruitless. He blames the sky-high prices routinely demanded by targets.
"You make them rich and spend the rest of your life trying to make it pay for shareholders," Mr. Quick grumbled. Still, Mr. Quick has not stopped working to make a deal.
The youthful Mr. Quick said he is looking for a money management company geared to individual accounts that could help wealthy customers manage their assets for a fee.
And for less-wealthy clients who don't want to pick their own stocks, Mr. Quick would like to add a mutual fund company to the Quick & Reilly fold.
The key ingredient for both acquisitions is superior investment performance.
"We're looking for a track record," Mr. Quick said. "The name is irrelevant."
Mr. Quick declined to say how much he was willing to spend, but a sizable acquisition is not expected to come cheap.
Mutual fund companies typically fetch nine or 10 times pretax earnings, while money management firms command multiples of seven or eight, said Peter L. Bain, an investment banker at Berkshire Capital, New York.
One recent acquisition may shed some light on what Quick & Reilly will have to spend. In January, Legg Mason Inc. acquired Bartlett & Co., a Cincinnati-based money manager with $2.2 billion assets under management, for $36.4 million in company stock.
A well-known name or impressive performance history can easily drive prices above the median, Mr. Bain added.
"I'm not surprised the Quick boys and their dad are concerned about the money they'd have to pay," said Perrin H. Long Jr., an independent securities analyst based in Darien, Conn. "But longer-term, it's something they have to do to broaden the products and services they offer."
Revenues from asset management are relatively stable and would keep things afloat when the core brokerage business goes through inevitable down cycles, Mr. Long said.
But brokerage commissions are likely to contribute the "lion's share of profits" for a long time to come, he said. And asset management "won't keep earnings from declining when the broker-dealer goes in the tank," he added.
As for Quick & Reilly's other expansion efforts, Mr. Quick is well aware that in launching a mutual fund supermarket, his company is entering an area already dominated by Charles Schwab & Co.'s OneSource program. But tardiness has its advantages, he said. Quick & Reilly's program would be able to use automated clearing systems that are increasingly being used by fund companies to settle trades, Mr. Quick said.
That promises fewer headaches and lower costs compared to the fund supermarket pioneers.
As for its traditional discount brokerage business, Quick & Reilly plans to open a new office in the lobby of Admiralty Bank, a community bank based in Palm Beach Gardens, Fla. The office will be the broker's second in an Admiralty Bank branch.
Negotiations to duplicate that already-successful partnership with banks in San Diego and outside Dallas fizzled, Mr. Quick said. Although he's not "beating a drum" for bank partners, he said, "I'm willing to talk seriously with banks about it."