DALLAS -- The conventional wisdom says demand for financial advisers has contracted as cost-cutting pressures and issuers' sophistication have grown.

But not everyone sees it that way.

Tom Luce, the new chairman and chief executive officer of First Southwest Co., believes his firm's advice -- which last year accounted for $6.879 million in revenues -- will be more in demand as municipal bond deals become more complex.

"I believe the entire field of public finance is going to grow more complex and expand over the next couple of years," said Mr. Luce, who led a group of investors that earlier this month acquired a majority interest in the closely held firm. "I believe the services of the financial adviser are going to be more critical in the future."

In an interview, Mr. Luce said Texas issuers may turn from plain-vanilla financing techniques to try private-public partnerships and off-balance-sheet debt instruments.

Texas is a conservative state from the standpoint of public policy, he said, and yet "you can have financing techniques that are different, but still conservative."

One result of the experimentation will be greater demand for financial advisrers, he predicted.

Many in the Texas bond industry believe financial advisory work -- the lifeblood of regional firms -- is threatened by the growing on-staff skill of many issuers. Also, the national push to limit professional fees has forced advisers to work harder for less money.

For that reason, some Texas firms have been more aggressive underwriters as volume approaches the $10 billion level this year. While the state's mega-deals are still handled by Wall Street, regional firms are building their capital base and targeting small underwritings.

Many expect First Southwest to do the same. While Mr. Luce is not saying exactly what the firm's plans are yet, statistics show that the state's number are financial adviser ranks lower as an underwriter.

So far this year, the firm has completed 17 deals totaling $21 million, to rank 191st nationally as a senior manager, according to Securities Data Co./Bond Buyer.

"First Southwest has been a competitor that has been judicious in its use of capital," he said. "I don't know that that will change."

A former official of the firm, who spoke on the condition that he not be identified, said that during his tenure in the 1980s the firm never emphasized underwriting.

"Underwriting was evil when compared to being a financial adviser," he said.

Mr. Luce's answer: "In the three weeks I've been here, I haven't heard anyone say that it's evil."

Certainly, the firm's most recent financial statement shows that underwriting profits ranked fifth as a source of revenue. For the fiscal year ended March 31, First Southwest reported that underwriting accounted for $1.093 million, or about 8%, of its $12.2 million in revenues.

That may be changing. Already, the firm has been named a co-manager for an upcoming $250 million lease revenue bond sale by the Texas National Research Laboratory Commission, which is financing the state's $1 billion share of the cost of the Superconducting Super Collider project.

Also, competitors say they are seeing the firm submit bids on other deals. Still, there is little doubt that the new owners will continue to build its financial advisory business.

Just last week, the Texas Bond Review Board chose First Southwest over seven out-of-sale firms to advise the state on its $750 million school bond bank -- a program fought by regionals who say it threatens the financial advisory business.

Mr. Luce sees the assignment as a good opportunity and not as an indication the firm's focus is changing.

"We don't plan any changes," said Mr. Luce, a lawyer and former candidate for the Republican gubernatorial nomination. "We think that First Southwest is an excellent company, with an excellent franchise."

With a few exceptions, First Southwest has done little business outside Texas. Despite that, it is consistently ranked as one of the top financial advisers nationally with more than $2 billion a year in volume.

Executives at competing firms expect the company to market its name and experience across the Southwest and nationally and are watching closely for that do happen.

"I'm glad they're watching, " Mr. Luce said. "But I don't think I'll send them our game plan right now."

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