TimeCapital Securities Corp. is applying the "boutique" concept in financial services to unit investment trusts, and the result is a new player in the market -- an independent unit trust desk.
The independent desk offers brokers and dealers a way to sell a full range of unit trust products -- including customized unit investment trusts -- without paying any overhead. The new TimeCapital division, nicknamed TCUT for TimeCapital Unit Trusts, is the brainchild of Daniel B. McCarthy, former unit trust national sales manager at Bear, Stearns & Co. and managing director at TimeCapital.
"My main thing now is to become an active unit trust desk for regional brokerage houses and dealers," Mr. McCarthy said. "I can reduce the cost to the dealer and increase their profitability by three- or fourfold."
The primary cost savings come from the lack of overhead, he said. A regional dealer would pay the regular sales charge for whatever trust shares were supplied by TCUT, but it saves all the fixed expenses of maintaining a professional desk, from research to phone bills.
On the other side of the equation, Mr. McCarthy and his staff also are independent from the trust sponsors and thus can recommend specific trusts to clients.
"If people want to stay away from the [worst performers] and they ask me, 'Between you and me, which is the best one?' I can do that," he said. "I might be underwriting the trusts, but I'm not on anyone's playroll; I can share my professional opinion."
TimeCapital's new desk is only two weeks old, yet Mr. McCarthy has participated in two new suit trust underwritings, one sponsored by Bear Stearns and the other by Glickenhaus & Co. Smaller underwriters on a typical $15 million account can take pieces ranging from $100,000 to $1 million, he said.
"The unit trust accounts are a lot easier to participate in than the municipal bond accounts," Mr. McCarthy said. "We'll put our stamp of approval on it and show it to local investment advisers."
The TCUT desk also plans to act like a regular trading desk specializing in unit trust shares. Last week, Mr. McCarthy purchased unit trust shares from National Financial Inc., a brokerage arm of Fidelity Investments, and provided trust shares to Vantage Securities, a brokerage house concentrating in New York and New Jersey.
Michael DeMarco, vice president of municipal trusts at Vantage, said TCUT provided much-needed research and expertise with unit trusts and facilitated trades to retail investors that otherwise would not have been done. And as the tax-exempt trust market evolves -- toward increased disclosure of the investments' often confusing features -- specialized services like TCUT's will be even more in demand, he said.
"Today's tax-exempt UIT is becoming more like a hybrid municipal product, and it's starting to be traded as a muni," Mr. DeMarco said. "We're quoting shares not just according to long-term lives, but we're trying to show calls" and other information.
"TCUT's been able to feed me with the right information," he added. "I can take that to my customers and sell the shares. Dan McCarthy is providing a great service that I don't have time to do myself."
In the future, Mr. McCarthy plans to customize unit trust shares to a dealer's needs. Any customer seeking an investment over about $2 million can dictate the "parameters" of the desired trust, he said. "I would then work with the sponsor and 'piggyback' the trust," Mr. McCarthy said. "I have the capability to do that, and that's the trend of the future.
"It's not like buying a suit off the rack," he added. "I'm the country tailor."
The TCUT offices are in Newtown, Conn. Mr. McCarthy expects to serve New England and New York from there.
"Everybody seems to be heading south to cover Florida, Georgia, and Louisiana," he said. "There's a lot of people in upstate New York, Connecticut, and Massachusetts who aren't ignored, but the attention isn't there either."