Robbie Stephens Sees Online Synergy With Fleet Brokers

While some traditional brokers fret over how to approach online trading, BancBoston Robertson Stephens is salivating over the prospect of linking up with Fleet Financial's (FLT) online brokerages.

Robbie Stephens sees a perfect fit between its tech focus and Fleet's two online brokers, Quick & Reilly and Suretrade, both of which have tech-stock-hungry traders, like all online brokers. The firm already distributes research and underwriting through E*Trade (EGRP), the No. 3 online broker by share of online trades. But Robbie Stephens is looking for more. And by working under the same corporate umbrella with two online brokers, Robbie Stephens figures it will have all the ingredients for an actual Internet investment bank. It also plans to work with Quick & Reilly's traditional discount brokerage customers.

The link between Robbie Stephens and the two Fleet units will come courtesy of Fleet's pending acquisition of BankBoston (BKB), which was announced Sunday.

"The direct benefit of the merger with respect to us is we can build a relationship with Quick & Reilly, the third-largest discount brokerage firm," says Michael McCaffery, president and chief executive of Robertson Stephens. "For certain parts of our product line, we think it's essential to offer that kind of distribution for our clients."

Quick & Reilly, which has two self-named Internet channels, and Suretrade combined made up 3.4% of online trades in the fourth quarter, according to Credit Suisse First Boston. Together, the two were ranked No. 8 by online trades. (Quick & Reilly also has a substantial number of traditional brokerage accounts.) Piper Jaffray, which treats Quick & Reilly and Suretrade as two separate brokers, ranked Suretrade the No. 9 broker by online trades, while Quick & Reilly didn't make the top 10.

Robertson Stephens had already been evaluating strategies for increasing its Internet access before the merger and had talked with other brokers. Its potential to set up an Internet investment bank comes as other firms already are doing so. The idea behind firms such as W.R. Hambrecht & Co. and the E*Trade-backed E*Offering is to issue stock without all the overhead, cutting fees. However, strict Internet investment banks may find they have a tough time without post-offering support, such as research and making a market in the stock. But Robbie Stephens could offer these services.

"It's obviously an opportunity," says analyst Scott Appleby at ABN Amro, which hasn't participated in underwriting for Fleet or BankBoston. "You have Quick & Reilly customers who are supposed to number a million or so and you add another quarter of a million for Suretrade and then you have what E*Offering is suggesting."

The firm also may have an easier time convincing its troops of the benefits of working with online brokers because it's an institutional investment bank, distributing underwriting largely to institutional customers. It has only a small, high-net-worth private client group. By comparison, firms such as Merrill Lynch (MER) have thousands of brokers who feel online trading would cannibalize their business. Even Discover Brokerage Direct, a unit of Morgan Stanley Dean Witter (MWD) and the No. 9 online broker, faces conflict with Dean Witter's retail brokerage force and doesn't promote the fact that its research comes from Morgan Stanley.

Fleet and Robbie Stephens agree that the merger has the advantage of minimal territorial conflict. "What we've got here is a nice fit with each of these entities having niches that are compatible but not overlapping," says Charles Salmans, a Fleet spokesman.

McCaffery envisions creating different research products for different customer groups within the units, from the Quick & Reilly customers who prefer dealing with brokers at one end and the online traders at the other. Suretrade's clients, who tend to be young, active traders, carry a particularly strong interest in the types of deals and research Robbie Stephens offers.

Already, Fleet and Quick & Reilly are integrating their online banking and brokerage services, letting customers bank and invest online in the same place and linking their online brokerage and bank accounts. Added to that would be a distinct research and IPO offering from Robbie Stephens. Suretrade's tech-focused customers could particularly benefit from the investment bank's presence in the technology field.

But the integration of Fleet and Quick & Reilly services may be delayed beyond the original summer target date. Salmans says the company will also explore linking up BankBoston services.

There is one confusing aspect of the merger. Last Thursday, Fleet announced it was looking to spin off or find a partner for Suretrade. Fleet has kept Suretrade at arm's length while it pursues integrating online banking services with Quick & Reilly's online brokerage services. Yet the new possibility of offering Robbie Stephens' research and underwriting through Suretrade, clearly still at the exploration stage, speaks to closer ties between it and its banking parents. But the BankBoston acquisition doesn't change plans to spin off or find partners for Suretrade, according to Salmans.

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