ISD/Shaw Inc. and Ernst & Young Co. are teaming up in what both companies described Tuesday as a strategic alliance.

Under the agreement, ISD/Shaw will remain an independent consulting firm controlled by its founder, Karen Shaw Petrou.

The two companies will refer clients to each other. Ernst & Young will steer customers seeking strategic advice regarding banking regulations and legislation to ISD/Shaw. Ms. Petrou's firm will hand off clients seeking more than her five-person staff can deliver, such as advice on mergers and acquisitions, risk management, and fair-lending compliance.

Ernst & Young also will pay the Washington-based firm a licensing fee so employees can access ISD/Shaw's on-line analysis of developments on Capitol Hill and in the bank and thrift regulatory agencies.

"This is a very unusual example of a good faith working relationship that captures the strengths of two companies without a specific exchange of equity or fee-splitting or any other kind of arrangement," Ms. Petrou said in an interview.

Ms. Petrou approached Ernst & Young about working together because she said she was tired of turning work down.

"I kept saying 'Sorry, can't do it,' because in a small company focused primarily on strategic legislative and regulatory issues, we didn't have the capability," Ms. Shaw said. "This is why I went to Ernst & Young - it's against my grain to turn away business."

Forrest L. Ward, Ernst & Young's national director of financial services industries, said his firm's clients include 10 of the 25 largest bank holding companies that need advice on "leading-edge" financial services and products.

"That's where Karen's expertise and her vision...is so critical to our clients," Mr. Ward said. "We don't have anyone in our firm who can bring the same vision and breadth of experience."

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