Edward Jones Growth Plan on Track - December 2008

Edward Jones continues an aggressive expansion plan here and nationwide.

"We base our expansion on total liquid investable assets," said Jim Koinis, the area's regional leader and a financial adviser in Punta Gorda. "The industry knows how many dollars are available and what percentage of that business we have, and we know how well we can expand in an area.



"In the beginning, I knocked on doors all day long," "It sounds so old-fashioned, but you realize why you are doing it. You really want to get to know people before you can give them any kind of advice." (financial adviser with Edward Jones, C.J. Bannister). Cold calling remains the primary way she and other Edward Jones advisers build their offices.

St. Louis-based Edward Jones operates 9,200 offices in the United States, plus nearly 600 in Canada and 230 in the United Kingdom. Its 11,000 advisers work with more than 7 million clients. Today ranks first in number of offices, third in brokers and 30th in capital.

New financial advisers go through a detailed training process. Continuing education is important -- "We never stop going to school," according to Koinis.

"Our investment philosophy is buy quality, hold for the long term, and diversify," Koinis said.

Favored are a mix of municipal, government and corporate bonds, mutual funds, common stocks and tax-advantaged securities.

Its model stock portfolio includes financial services, health care, technology, consumer staples, consumer cyclicals, capital goods and energy.

SmartMoney magazine this year named Edward Jones the No. 2 full-service brokerage firm, behind Raymond James.

Adviser Profiles at Edward

Some advisers join Edward Jones right out of college, but many had previous careers.

Koinis

Koinis was a teacher, school administrator and restaurant owner before moving to Punta Gorda and opening his office in 2000.

John Tucker

For John Tucker, Edward Jones is a family affair.

He has been a financial adviser with the firm in Bradenton for 20 years. His wife, Diane, has her own Edward Jones office, also in Bradenton. His sister and her husband, and one of their children, operate offices in Kentucky and Tennessee.

Tucker,presently 62, owned a drug store with his wife in Blackfoot, Idaho, before deciding to make a change. He had a master's of business administration degree, and after checking out a recently opened Edward Jones office in his town, he felt it would work for him and relocated to Bradenton.

"When you first start out, you go door to door, introducing yourself to people and telling them you plan to open an office," Tucker said. "From there you visit with those people you met, and over time some of them become clients, and some don't become clients. You get referrals, and that's how you grow the business."

After 20 years, Tucker does not have to cold call any more, but he still networks at Chamber of Commerce meetings, social functions and the like.

His day is a mixture of talking to clients on the telephone, visiting with them here in the office, or going to see clients if they can't come to see him.

Source
http://www.heraldtribune.com/article/20081215/ARTICLE/812150302/2055/NEWS?Title=Edward_Jones__growth_plans_on_track

Edward Jones - Still Recruiting and Expanding December 2008

Posted Dec 23, 2008 on
http://www.workopolis.com/EN/job/9796927

Financial Advisor, EDWARD JONESPosted Dec 23, 2008
Full Time
London, ON, CANADA; Sudbury, ON, CANADA; Vaughan, ON, CANADA; Windsor, ON, CANADA

Relevant Work Experience: All
Job Category:Financial Advisor
Industry:Banking; Insurance; Project Management
Company Url: http://www.careers.edwardjones.com

Financial Advisor *





Individuals from a variety of occupational backgrounds including sales people, I.T. professionals, and corporate managers have found new success at Edward Jones. By becoming an Edward Jones Financial Advisor, you can run your business, determine your compensation, and redefine your future.



We take a personal approach to business that starts with a face-to-face meeting between a Financial Advisor and an individual investor. As we continue to grow in Canada, the United States, and the United Kingdom, we are looking for individuals who are self-managers, sales-oriented and highly driven.



What leads to success as a Financial Advisor?

Edward Jones believes in doing business the old fashioned way, face to face. When starting out, our Financial Advisors spend most of their time in the communities they serve, making face-to-face contacts in neighbourhoods and with businesses, introducing themselves and Edward Jones. They spend time getting to know their clients, their investment needs and their objectives. Then they recommend the appropriate investments and services on an individual and personal basis. A strong sales and/or management background compliments the Edward Jones business model. We frequently find that individuals with a solid sales or management history thrive as Financial Advisors because they understand the commitment and relationship building skills that are crucial to establishing long-term clients.



As an Edward Jones Financial Advisor you will:

- Work autonomously from your own neighbourhood office while being supported by an international financial services leader

- Build your business by identifying and cultivating prospective clients

- Help clients to determine financial and investment needs, and utilize sales skills to effectively recommend suitable financial products

- Become knowledgeable in an array of financial products to suit a variety of objectives and risk levels

- Enjoy early financial support. We know that building a business takes time. For this reason, you'll have a compensation package during your first eighteen months including training pay that takes into account your experience and geographic location. You'll also have opportunities to earn new account bonuses and milestone bonuses based on your production while you build your client base.





Secure your future:

- Earn commissions, bonuses, and incentive travel based on your production

- Receive world-class financial and business development training

- Apply a proven business model

- Earn a full-time branch office assistant who manages client service and marketing activities

- Participate in profit sharing

- Have the opportunity to become a partner in the firm

- Work for one of the best companies to work for in Canada***



This is a unique and exciting opportunity for the right type of person. The financial gains can be great - but it takes a dedicated individual to capitalize on the potential. Visit the Edward Jones career site now to apply online and read success stories of current Financial Advisors Edward Jones - Achieve Well-earned Success

www.careers.edwardjones.com

*In Quebec, our advisors are known as Investment Advisors.

**Edward Jones received the highest numerical score among full service brokerage firms in the proprietary J.D. Power and Associates 2006-2008 Canadian Full Service Investor Satisfaction StudiesSM. 2008 study based on 6,240 total responses measuring 16 brokerage firms and measures opinions of investors who used full-service investment institutions. Proprietary study results are based on experiences and perceptions of consumers surveyed May 2008. Your experiences may vary. Visit jdpower.com.

***For the sixth consecutive year, the financial-services firm Edward Jones was named one of the best companies to work for in Canada by the Globe and Mail's Report On Business magazine and in La Presse in the annual listing of the "50 Best Employers in Canada." This year the firm ranked No. 5.

Edward Jones is an equal opportunity, committed to developing an inclusive culture. We believe that diverse ideas, opinions and perspectives are good for building business.

Investment Banking - Financing Problem

The problem with the investment banks is that they've generally financed themselves for the good times, not the bad times. This means an excessive dependence on short-term funding and high leverage. This generated high ROEs in good times, supporting large payouts for employees and shareholders alike. But when times turned bad, compounded by poor risk management and mind-bogglingly stupid investment decisions, such a capital structure has come back to haunt many a firm.

Nouriel says solve the problem by joining investment banks and commercial banks, and using core deposits as a vehicle for extending the duration of the investment bank's liability structure.

Roger Ehrenberg says no.

According to him, Goldman Sachs and Morgan Stanley should materially alter their financing strategy, lengthening duration by issuing different tranches of preferred stock, subordinated debt and term debt, de-levering in order to weather the storm and accept lower ROEs in the process.

This means that these firms, their culture and their employees won't be destroyed. To maintain continuity and survival in bad times, firms must forego some of the liquidity-driven option value, and put in a more conservative, less leveraged, more flexible capital structure in place.

http://seekingalpha.com/article/95633-investment-banking-2-0-think-small

Investment Banking 2.0 - Pattern to emerge after the Present Crisis

Investment Banking 2.0 will be the re-emergence of the boutique, the focused, nimble, high-touch firm that was the bedrock of capital formation in the early years of the stock market boom.

The mega-firms, universal banks being created at the urging of the Treasury are not sustainable. They'll live just long enough for investment banking losses to be absorbed by the commercial bank's larger capital base, after which the best talent will flee for greener pastures.


http://seekingalpha.com/article/95633-investment-banking-2-0-think-small

Goldman Sachs Quantitative Group - 2008

Goldman Sachs's flagship Global Alpha fund recorded the biggest loss of almost any hedge fund in 2007. It started the year with $10 billion, made an estimated loss of 39%. The fund lost money after recording a 7.7% drop in the last full week of July 2007. It made a 6% loss in 2006 and a 40% gain in 2005.

Goldman Sachs Asset Management cut 20 members of its quantitative team as a result of a restructuring in March 2008.

http://www.opalesque.com/AMB2008/45022GAIM_Monaco_day_3_Goldman.html

If you take the risk, you get expected return only

If you take the risk, you get expected return

Every security market investor, trader and intermediary should know this statement.

Don't jump in your seats if somebody says I have taken the risk and I made the money.

There were many who took the same risk and were in dumps. This is the man who became successful and exhorts everybody else to take the risk.

Unless you can manage the possible loss (loss will never be expected in a risky venture only profit is expected) don't take the risk.

The mighty investment banks like Merrill Lynch and Bear Stearns have lost their independent status.

Lehman filed for bankruptcy. Many hedge funds are folding up. Let people understand risk taking properly.

Emerging Markets - Investment Banking - Growth Opportunities

The growing opportunity for investment banks in emerging markets

The growth opportunity ofr investment banks is in emerging markets.

Investment banks should look to emerging markets for the strongest growth opportunities in the next few years, recent McKinsey research shows.

Current trends include a relatively benign economic environment, a new breed of globally minded corporate players, and increased competition to develop strong local markets in the emerging world. Emerging Europe, Emerging Asia, Latin America (notably Brazil), and the Middle East are all areas expected to benefit.


Revenues from investment banking in emerging markets should grow in absolute terms even in a worst case. Under all scenarios, they should represent a bigger share of global revenues by 2010.

http://www.mckinseyquarterly.com/Financial_Services/Banking/The_growing_opportunity_for_investment_banks_in_emerging_markets_2183_abstract

Hallmarks of Success for Financial Services

Hallmarks of Success for Financial Services by 2010

Deloitte Report

The worldwide market for financial services is evolving rapidly, and is likely to look very different by the year 2010. Deloitte study identifies major market drivers and operational challenges that financial institutions will likely face over the next four years and pin-points the strategies and practices recommended to create the ‘Hallmarks of Success’. The key drivers and challenges include:


Market Drivers

New asset classes: Changing the center of gravity
Ageing population: Turning silver into gold
Payments: P&L pain or pride
Emerging Markets: Opportunities, but no guarantees
Operating Challenges
Offshoring: Releasing the value
Internal control: A springboard to improved operating performance
The struggle for growth: Process and service innovation provide the keys to sustained performance and enhanced customer relationships
Mindset matters: Tax, accounting and financial reporting


Operating Challenges

Offshoring: Releasing the value
Internal control: A springboard to improved operating performance
The struggle for growth: Process and service innovation provide the keys to sustained performance and enhanced customer relationships
Mindset matters: Tax, accounting and financial reporting


To learn more download the full study below from Deloitte site.

http://www.deloitte.com/dtt/cda/doc/content/UK_DDR_Hallmarks%20of%20success.pdf

Strategies for building sustainable profits in wealth management

A Deloitte Report

Reconnecting for profit
Strategies for building sustainable profits in wealth management

The global private banking and wealth management market has enjoyed significant growth over recent years, riding a wave of high asset prices. With after-tax returns on equity averaging over 25 per cent in several major European markets, the sector remains the darling of a financial services industry in search of some good news amidst recent market turmoil. Despite the profitable performance, we ask in this report if wealth managers have used the growth period wisely. Have they sufficiently adapted their business models so that they can face the next five years confident of further growth?

"Reconnecting for Profit" summarises the results of a major qualitative study based on almost 50 in-depth discussions with private clients and leading wealth management executives. The report argues that forces are aligning that could test the resilience of wealth managers’ business models. In particular, our research suggests that as wealth managers have pushed forward with their growth strategies, a significant portion of the client base is disconnected from, and lacks trust in, wealth management institutions. The report highlights strategies for wealth managers to reconnect for profit and practical steps to aid transformation.



Download the report(2008) of Deloitte from

http://www.deloitte.com/dtt/cda/doc/content/UK_FS_Reconnectingforprofit.pdf

Bear Stearns - Collapse from Sub Prime Crisis 2007-08

At Bear, trading and handling money for clients has always been the main game. The firm made a steady profit as Wall Street's back office. For a long time that was enough. Particularly under the leadership of the legendary Alan "Ace" Greenberg, Bear's disciplined trading culture made it the "Sparta of Wall Street," in the words of Bernstein analyst Brad Hintz.

Bear grew jealous of the hugely profitable hedge funds run by the likes of Goldman Sachs When Bear decided to get into this riskier action, it did so by channeling other people's money into the funds, and only a little of its own. Due to this, instead of being highly risk-conscious and attentive to detail, the funds missed warning signs in the subprime mortgage market, and top management seemed disengaged.


The hedge funds' troubles started in April 2007, worsened in May, and by mid-June had become a full-blown crisis. Bear's injection of $1.6 billion couldn't save them. By mid-July both were next to worthless. Less than three weeks later, the stock was way down and Bear was selling more than $2 billion in debt, both to shore up its balance sheet and to demonstrate that its assets were still valued.

A former Bear executive summed up the irony: "The culture of being conservative and not betting the house's money -- all that got undermined."

Hedge Fund Story

The first fund, the Bear Stearns High-Grade Structured Credit Fund was started in 2004 and had done well, posting 41 months of positive returns of about 1 percent to 1.5 percent a month.

In August 2006, the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund — the second fund that eventually had huge losses — was started with $600 million in investments, mostly from wealthy individual clients of Bear Stearns, and at least $6 billion in money borrowed from banks and brokerage firms. Bear Stearns and a handful of its top executives invested a mere $40 million in both funds.

The timing could not have been worse.

The Bear Stearns funds, like so many others, had invested in collateralized debt obligations, or CDOs, which invest in bonds backed by hundreds of loans and other financial instruments. Wall Street sells CDOs in slices to investors. Some of those pieces have low yields but they are easily traded and carry less risk; others are more susceptible to defaults and trade infrequently, which makes them difficult to value.


As the sub prime problems surface, at first, the Bear Stearns hedge funds appeared to weather the storm. But in March, the older fund registered its first loss.
By April, the older fund was down by 5 percent for the year, and the newer fund had fallen 10 percent.

Managers tried to protect the fund by hedging potential losses in lower-rated securities they held, but did not do so for higher-rated bonds, which also fell in value.



There was a sharp restatement in April of the second fund. The firm revalued some securities and told investors that the fund was down 23 percent, not 10 percent as it had said earlier.

Shocked investors began contacting Bear Stearns, demanding to pull their money out.

In May, however, more significant problems began to emerge. The Swiss investment bank UBS shut its hedge fund arm, Dillon Read Capital Management, after bad subprime bets led to a $124 million loss.

In May, Bear Stearns froze all redemption requests. This month, at least three Wall Street firms — JPMorgan Chase, Citigroup and Merrill Lynch — began demanding more cash as collateral for the loans they had made.

Fighting to save the funds, Bear Stearns sold $3.6 billion in high-grade securities. Meanwhile, its adviser, Blackstone, scrambled to line up a deal in which Bear Stearns would put up $1.5 billion in new loans and a consortium of banks led by Citigroup and Barclays would put in $500 million.

In return, the lenders would have their exposure to the funds reduced but could not make further margin calls for 12 months.

Some lenders, including Merrill Lynch and Deutsche Bank, balked and moved to sell assets. At one point Wednesday, nearly $2 billion in securities were listed for sale, although some banks, including JPMorgan, eventually canceled scheduled auctions.

By the end of the day, out of the $850 million in securities that Merrill had put up for sale, only a small portion actually sold.

In the wake of the weak auctions, several other lenders, including JPMorgan, Citigroup, Goldman Sachs and Bank of America, reached deals with Bear Stearns. At least some of the deals involved the lenders selling the securities back to Bear Stearns for cash, although the prices were not disclosed.








Ralph R. Cioffi As the market for subprime mortgages was crumbling, the 51-year-old manager of two Bear Stearns (BSC) hedge funds, Ralph R. Cioffi, offered nothing but reassurances to investors. "We're going to make money on this," he promised his wealthy patrons in February 2007. "We don't believe what the markets are saying."

Serious doubts are expressed now on the funds' supposedly strong performance before their July 2007 bankruptcies. More than 60% of their net worth was tied up in exotic securities whose reported value was estimated by Cioffi's own team—something the funds' auditor, Deloitte & Touche, warned investors of in its 2006 report, released in May, 2007.

The Bear funds carried the imprimatur of one of the Street's oldest and most storied firms. The funds marketed themselves with the implicit backing of Bear Stearns and played up the fact that they were run by its experts in mortgage-backed securities. Now investors are left with a troubling question: If they can't count on big, well-established firms to operate hedge funds properly, whom can they count on?

The quick collapse of the inelegantly named Bear Stearns High-Grade Structured Credit Strategies fund and High-Grade Structured Credit Strategies Enhanced Leverage fund conjures memories of Long-Term Capital Management, the multibillion-dollar fund that blew up in 1998. In both cases, the damage helped ignite a worldwide credit crunch that prompted intervention by central bankers.

At the height in 2006, Cioffi was a central character in the booming mortgage CDO market, holding nearly $30 billion worth of securities. "Everybody wanted to do business with him because he was The Buyer," says a portfolio manager who was not authorized by his firm to speak for attribution. Cioffi's easygoing manner made him popular with investors, the bankers who lent his funds money, and the charities he supported.

The funds' voracious buying of lightly traded bonds drove down their yields, meaning Cioffi's team had to buy more and more of them to boost returns. That meant more borrowing. Banks such as Merrill Lynch (MER), Goldman Sachs (GS), Bank of America (BAC), and JPMorgan Chase (JPM) lent the funds at least $14 billion all told. Cioffi also used a type of short-term debt to borrow billions more; in some cases he managed to buy $60 worth of securities for every $1 of investors' money. But he made a critical trade-off: For lower interest rates, he gave lenders the right to demand immediate repayment.

For a while the strategy worked, and the fund became a hit. Cioffi started dabbling in fashionable hedge fund manager accoutrements, weighing a partnership stake in a Gulfstream jet and even getting into the movie business. In 2006, he was executive producer of the indie film Just Like My Son, starring Rosie Perez.

The final blow for the Enhanced fund (one of the hedge funds) came when Barclays told Bear it wanted out, according to the bankruptcy filings. The timing of the redemption notice isn't clear. Barclays declined to comment on the relationship, except to say its losses were minimal.



End game

In March 2008, Bear Stearns, the nation’s fifth largest investment banking firm,
was battered by what its officials described as a sudden liquidity squeeze related to
its large exposure to devalued mortgage-backed securities.

On March 14, the Federal Reserve System announced that it would provide Bear Stearns with an unprecedented short-term loan.

On March 16, a major commercial bank, JP Morgan Chase, agreed to buy Bear Stearns in an exchange of stock shares for about 1.5% of its share price of a year earlier, a price that translated to $2/share. To help facilitate the deal, the Federal Reserve agreed to provide special financing in connection with the transaction for up to $30 billion of Bear Stearns’s less liquid assets.

Bear Stearns and JP Morgan renegotiated the terms of the deal: JP Morgan will purchase 95 million newly issued shares of Bear’s common stock at $10/share in a stock exchange. In response to the changed deal conditions, the Fed altered the terms of its financial involvement: it got JP Morgan to agree to absorb the first $1 billion in losses if the collateral provided by Bear for a loan proves to be worth less than Bear Stearn’s original claims. Instead of its original agreement to absorb up $30 billion, the Fed will now be responsible for up to $29 billion.


References

http://money.cnn.com/2007/08/20/magazines/fortune/bear_stearns.fortune/index.htm

http://www.businessweek.com/bwdaily/dnflash/content/oct2007/db20071011_175964.htm

$3.2 Billion Move by Bear Stearns to Rescue Fund, 23 June 2007,New York Times,
http://www.nytimes.com/2007/06/23/business/23bond.html

Report to US Congress - Bear Stearns: Crisis and “Rescue” for a Major Provider
of Mortgage-Related Products. Download from
http://assets.opencrs.com/rpts/RL34420_20080326.pdf

Deutsche Bank - Management of Sub Prime Fallout

July 2008

Deutsche bank announced $3.6 billion of fresh writedowns on 31st July 2008, taking its bill from the financial crisis beyond $11 billion and putting among the top ten global casualities of the turmoil.






The Economic Times, Mumbai, 1st August 2008

Goldman Sachs - Lucky to Survive the Sub Prime Crisis

Goldman Sachs had its problems with hedgefunds. But as a corporate it survived the subprime crisis without reporting any overloss so far.

Its trades on short side helped it to make profits.

Merrill Lynch - Management of Sub Prime Fallout

July 2008

Merrill agreed to sell $30.66 billion of collateralized debt obligations for $6.7 billion. The buyer is an affiliate of Lone Star Funds, a Dallas based investment manager.

Merrill will provide financing for about 75% of the purchase price. The financing is secured only by the assets being sold, meaning Merrill would absorb any losses over the CDOs beyond $1.68 billion.

This article will be developed gradually.

Goldman Sachs - Environmental Responsibility

Sonal Shah, a vice president at Goldman Sachs informed in 2006:

In 2005, Goldman Sachs implemented a strategic plan to improve the company’s environmental responsibility while keeping an eye on the bottom line.


The plan consists of four steps:
analyzing the direct impact of their operations on the environment;
investing in alternative energy;
researching environmental responsibility; and
discussing environmentally responsible investment banking operations with their clients.

Building an Energy Efficient Company

Goldman Sachs hopes to reduce its emissions by 12 percent by 2007. A project that will have a significant effect on this goal is the construction of their new world headquarters in New York, which Shah calls a ‘green building’ because it uses only energy efficient materials.

“A big obstacle with this is trying to convince our suppliers to find all these products,” said Shah, adding that the supply is low because the demand is relatively low. “If we can create a market for it, it makes it cheaper for others in the future.”

In addition to focusing on its own operations, Goldman Sachs promised to invest $1 billion in alternative energy. To date, they have spent $1.5 billion on energy sources, such as geothermal, biofuel and solar energy.

“We feel the economic factors of these types of energy make it a viable investment,” Shah said.

Raising Awareness

Shah said a major challenge for corporations trying to practice social and environmental responsibility is the lack of relevant data about the issues. “The information is constantly changing and it is almost impossible to find consistent data.”

To fix this problem, Goldman Sachs invested in a research company to help normalize the data.

Another challenge for Goldman Sachs is training their clients to be environmentally responsible. “We have a lot of bankers who say, ‘My company has an environmental policy on its Web site, so what’s the problem?’”

The problem, said Shah, is that the environmental statement is a ‘check-the-box’ formula—it gives them the false impression that simply having an environmental policy will safeguard them against future problems. “We feel we can be a better advisor to our clients if we can help them avoid the bad environmental issues.”





http://www.mccombs.utexas.edu/news/pressreleases/SonalShah06.asp

Can a Universal Bank be a Trusted Advisor?

Read
Ben Stein vs. Goldman Sachs: Market-Makers, Brokers, and Trusted Advisors
by Charles H. Green posted on Tuesday, December 4, 2007


http://trustedadvisor.com/trustmatters/277/Ben-Stein-vs-Goldman-Sachs--Market-Makers--Brokers--and-Trusted-Advisors

Can you say what your strategy is?

in 35 words as CEO of the company? Can your associates say it?

It is the question raised by David Collis and Michael Rukstad in their Harvard Business Review in April 2008.

The relevance of the article to managers in Security market intermediaries is that it discusses strategy of Edward Jones.

Strategy of Edward Jones in 35 words

Jones aims to grow to 17,000 financial advisers by 2012 by offering trusted and convenient face-to-face financial advice to conservative individual investors who delegate their financial decisions through a national network of one financial adviser offices.

Read the full article from Harvard Business Review, April 2008

Talent Creates a Competitive Edge - Wall Street Journal Article

Home High Performance Business

How Talent Creates a Competitive Edge and Powers Organizations to Success


If companies are able to master the four capabilities of defining, discovering, developing and deploying talent, they too can become talent-powered organizations.



Originally published in The Wall Street Journal, November 15, 2007

You can access this article from

http://www.accenture.com/Global/High_Performance_Business/HowSuccess.htm

Lehman Brothers Spinoff 1994

American Express announced in January 1994 that Lehman Brothers would be spun off. According to the announcement, the spinoff is expected to be completed in May or June,at which time Lehman will become independent, with its employees owning about 10 percent of Lehman's stock after investing $160 million.

Lehman Brothers, a specialist in corporate finance and trading, has been a leading underwriter on Wall Street, gaining considerable business in recent years. It has been owned by American Express since 1984.

Over the last two years, American Express has retreated from the Wall Street securities business to concentrate on its charge-card, travel and financial planning operations.

In 1992, American Express sold the Boston Company, a money manager and specialist in mutual-fund record keeping. In March 1993, American Express sold its Shearson retail brokerage operation to the Primerica Corporation, which owned Smith Barney, Harris Upham & Company, for $1 billion and a share of future profits.

American Express said it would buy $890 million of newly issued common stock in Lehman, then pass that stock to American Express shareholders as a special dividend. It will invest another $200 million in Lehman preferred shares, which it will hold as an investment. It will have no representation on the Lehman board.

In exchange for the capital infusion, American Express anticipates recouping more than $400 million in cash from the deal. It will receive 50 percent of any Lehman net income exceeding $400 million over eight years, with a limit of $50 million a year. It will also receive up to $50 million annually for three years from revenue and earnings-related participations due Lehman from Travelers as part of the Shearson deal last year.

The capital infusion would bring Lehman's equity base to $3.3 billion.

"Our objective has been to bring Lehman Brothers to the point where it could sustain a stand-alone 'A' credit rating based on its earnings, capital structure and management strength," Mr. Golub, Chairman and CEO of American Express said.
With the planned equity fusion, American Express has been assured by the major rating companies that Lehman will receive its A.

The American Express Company had completed the spinoff of its Lehman Brothers brokerage unit to shareholders by 31st May. The travel and financial services company had distributed its 98.2 million common shares in Lehman Brothers through a tax-free dividend to shareholders. American Express stockholders of record on May 20 received one Lehman share for every five of their shares. Lehman stock, which has been trading on the New York Stock Exchange on a when-issued basis since May 2. It closed on 31st May at $18.

Sources:

http://query.nytimes.com/gst/fullpage.html?res=9C00E4D91130F936A15752C0A962958260

http://query.nytimes.com/gst/fullpage.html?res=9402E6D7103BF932A35755C0A962958260

Lehman Brothers - Strategy - 1997

Lehman's story since its spinoff in May 1994 is a lesson in the difficulties of rebuilding a weakened investment bank, even in the strongest bull market in history.

Wall Street is in the throes of a round of consolidation. It is mating season in the brokerage business. Commercial banks, reacting to a loosening of Federal Reserve rules that had limited their securities businesses, are rushing to get into the booming securities markets.

Dean Witter, Discover has merged with Morgan Stanley, Bankers Trust New York is buying Alex. Brown, and Swiss Bank said last month that it would acquire Dillon, Read. Oppenheimer and Montgomery Securities are practically advertising for partners.

While some analysts feel Lehman is also looking for an acquirer, Richard S. Fuld, Lehman's 51-year-old chairman and chief executive, says no such thing is going on. ''We are building a strong independent investment bank.'' ''We are certainly not looking to be bought.''

Under Mr. Fuld, Lehman has sought to bolster its equity, banking and high-yield bond businesses while maintaining and extending its established franchise in the world's bond markets. It is also gathering a new fund of at least $1.5 billion to invest in merchant banking ventures. Two years before, most of its experts in that business left to set up Cypress Partners, an independent buyout firm.


Lehman had historically had the lowest profit margins of all the big firms in New York. They are now trying to get more profit out of the company.

Lehman has certainly made big strides since it regained its independence, raising its return on equity to close to 14 percent for the last year and nearly 16 percent in the quarter ended Feb. 28, 2007, from as low as 3 percent just after it parted ways with American Express. It has also clambered up the industry rankings in some securities markets.

The firm has been able to cut costs. Some of the credit for that goes to Fuld.

But Lehman still lags behind many big competitors in profitability. It is still struggling to recreate franchises that ebbed away after a famous and painful struggle in the early 1980's between its traders, led by Lewis L. Glucksman, and its investment bankers, led by Peter G. Peterson. The struggle is described in detail by Ken Auletta in his 1986 best seller, ''Greed and Glory on Wall Street: The Fall of the House of Lehman'' (Warner publications). In the struggle, the traders triumphed, but Mr. Peterson and other bankers left. The banking franchise became weak. The firm, to insure its survival, had to stagger into a 1984 merger with Shearson-American Express.

Mr. Fuld and his closest partner T. Christopher Pettit (both were proteges of Mr. Glucksman in Lehman's commercial paper department) led the firm back to independence in 1994.

But there were growing tensions between them over the daily running of the firm. Mr. Fuld, wanted to delegate to a larger operating committee made up of several managing directors. He felt that it was important to broaden the ranks of top management and to draw in a younger generation of leaders. Mr. Pettit, the president and chief operating officer, wanted to continue running the firm with a loyal coterie.

In April 1996, Mr. Pettit stepped down from his posts, as Lehman promoted some of its younger tyros, and left the firm altogether last November. He died in February 2007 in a snowmobile accident.

In the present set up, there is no chief operating officer at Lehman, and Mr. Pettit's former duties have been taken over by an enlarged operating committee and to some extent by John L. Cecil, the chief administrative officer and cost-cutter. The firm is struggling to push up profits by building new and existing businesses as well as by controlling costs and making big bets.

Pure investment banks are increasingly going in one of two directions. Some are striving to combine a nationwide retail broking operation with investment banking business in the mold of Merrill Lynch, as Morgan Stanley and Dean Witter are doing. Some others are joining big commercial banks selling out. Alex. Brown and Dillon, Read are following that mode.

Lehman tried the Merrill Lynch route in its marriage to Shearson and its American Express parent, and Mr. Fuld and his colleagues vehemently deny any interest in repeating that experience. The different management styles of the Shearson, Lehman and American Express components did not work well together, and the combined firm never succeeded in generating the expected synergies and profits.

Mr. Fuld adamantly maintains that there is still a place for the independent investment bank serving institutional clients around the globe. As an independent entity focused on institutional customers, he said, Lehman can be more agile and stay better focused on its customers' needs and its chosen businesses and markets.


Lehman is using the bull market to restore its advisory and equity capital-raising businesses. Lehman executives say there have already been some successes. Marc L. Paley, who helps to manage Lehman's stock underwriting business, reels off such recent coups as the $963 million issue for Unibanco, a $660 million issue for Qualcomm and issues of $150 million for Prentiss Properties Trust and $200 million for Premier Parks as examples of fruits of efforts in a much tough market.

Among other efforts, Lehman has broadened its high-yield bond business and its ability to finance acquisitions, seeking to make sure that it catered to more of its clients' needs. The broadening is to provide one-stop shopping. ''There are a number of clients who value one-stop shopping,'' said Robert D. Redmond, a managing director in the firm's high-yield and leveraged finance division.



Sallie L. Krawcheck, an analyst at Sanford Bernstein & Company, projects that in more ''normal'' markets, Lehman's return on equity would be close to 10 percent, rather than the 16 percent of the most recent quarter and they still have to put in more efforts to improve their profitability in line with the industry leaders.



Source:
http://query.nytimes.com/gst/fullpage.html?res=9801E3D6153DF930A35755C0A961958260&sec=&spon=&pagewanted=all
While It's Merger Season on Wall St., Some Question the Firm's Intentions
New York Times, June 3, 1997

For more about Richard Fuld, Current CEO of Lehman
http://nrao-mgmt-smi-handbook.blogspot.com/2008/02/richard-s-fuld-ceo-lehman-brothers-2008.html

For post about recent strategy at Lehman
http://nrao-mgmt-smi-handbook.blogspot.com/2008/02/lehman-brothers-strategy.html

Richard S Fuld CEO Lehman Brothers 2008

Richard S. Fuld Jr

Chairman and chief executive officer, Lehman Brothers Holdings

Nationality: American.

Born: April 26, 1946, in New York City, New York (Reference for Business).

Education: University of Colorado, BA, 1969; New York University Stern School of Business, MBA, 1973.

Family: Son of Richard Severin Fuld and Elizabeth Schwab; married Kathleen Ann Bailey; children: three.

Career: Lehman Brothers, 1969–1984, managing director; Shearson Lehman Brothers, 1984–1990, vice chairman; Lehman Brothers, 1990–1993, president and co-CEO; 1993, copresident and co-COO; 1993–1994, president and COO; Lehman Brothers Holdings, 1993–1994, CEO; 1994–, chairman and CEO.




Richard Fuld joined Lehman in 1969 as a commercial-paper trader and earned his reputation running the firm's fixed-income business. In the early 1980s at the age of 37 Fuld became the supervisor of both the fixed-income and the equities divisions, overseeing all trading at Lehman. Fuld had met with great success as a trader.

when he was given managerial responsibilities, Fuld had 22 managers reporting to him in divisions that accounted for two-thirds of the company's profits. Fuld excelled, and in 1982 his divisions generated record profits.

Fuld, who earned his MBA from New York University at night, was considered by many in the industry as one of Wall Street's supreme traders. One Lehman partner said of Fuld in Investment Dealers' Digest, "This is a very smart guy, tough as nails" (August 24, 1992). As reported by Fortune, a notorious temper earned Fuld, a weightlifter, the nickname "gorilla" (December 11, 1995).

After the 1990 operations split, Fuld became co-CEO of the Lehman Brothers division, sharing the title with J. Tomilson Hill.

The company finally reclaimed its independence in 1994—having been spun off from American Express 10 years after it was first acquired by the firm.

Fuld was named chairman in April 1994.

After regaining its independence, Lehman raised its return on equity to nearly 14 percent in 1996, from the low of 3 percent reached just after the firm was spun off from American Express.

Fuld changed the leadership in each of the company's three major operating units—investment banking, equities, and fixed income. He focused the company's investments in high-margin businesses like mergers and acquisitions and also equities by recruiting several expensive hires. In January 1997 Fuld approved $48 million for additional executive compensation—a full $46 million of that was earmarked for the investing, banking, and equities divisions, leaving just $2.4 million for the fixed-income division's recruits. His strategy was crystal clear: move Lehman away from its age-old reliance on fixed income.

Such a shift could not happen overnight and Fuld had to withstand pressure. In addressing analysts at a 1997 meeting Fuld said, "The process of building our high-margin businesses and shifting our overall business mix takes time. It starts with leadership at the top, then at the next level, then the talent needed to meet client needs and produce revenues. Once all that is in place, it takes time to get the resources to work together properly to build or expand relationships, and create revenues" (August 25, 1997).

In 2001, amid the global recession and stock-market collapse, Wall Street firms felt the economic pains most of all. Lehman at least outperformed the industry; Fuld's reward was a 2001 compensation package worth $105 million, making him the fourth-highest-paid chief executive in the United States. Most Wall Street chief executives—including those at Goldman Sachs, Morgan Stanley, and J. P. Morgan Chase—reduced their pay packages at the time.

Fuld was a long-term player and knew that better days were ahead. Lehman's rebound continued in the first few years of the millennium, as the firm earned a reputation for its stellar management through three primary accomplishments: First, the company kept employees' salaries in line with earnings, with the ratio of compensation costs to gross revenues hovering around 51 percent. Second, Lehman maintained a strong focus on U.S. government bonds, global fixed income, and credit derivatives at a time when the equities and investmentbanking markets were losing propositions. Finally, the firm retained its best managers by handing them substantial portions of stock in the firm. In 1994 employees owned 4 percent of Lehman; by 2004 they owned 35 percent. In 2001 the firm allocated $544 million for stock-based pay, accounting for 15.8 percent of its total compensation expenses, as compared with the 6.4 percent allocated for such purposes at Merrill Lynch. Fuld's message to new recruits: If you join us, we promise to make you rich—perhaps seriously rich. And he delivered on that promise—by 2002 the company was teeming with self-made millionaires.

In October 2003, Lehman Brothers seized on an opportunity to expand its business. In 2004 Lehman Brothers acquired Neuberger Berman in a deal valued at $2.63 billion.

For Fuld the Neuberger acquisition was the realization of a strategy he had been espousing since the mid-1990s: to diversify the company's business and lessen its reliance on the bondtrading market. The company expected the acquisition to increase its percentage of fee-based revenues from 13 percent to 21 percent. The move put Fuld's company on equal footing with Morgan Stanley, Merrill Lynch, and Goldman Sachs, all of which had significant money-management businesses. In Neuberger Berman, Lehman had obtained a firm with $63.7 billion under management, a well-regarded cadre of mutual funds, and a slice of the sought-after business of financialservices provision to high-net-worth clients.

In 2003 Daily Deal awarded Lehman Brothers the "Top 5 Global M&A Announcements of 2003 Deal of the Year" for its consultation with Travelers for the company's $16 billion merger agreement with St. Paul Companies. All told Lehman consulted on $99 billion worth of U.S. mergers and acquisitions in 2003, increasing its market share by 6.2 points to 18.9 percent, according to Thomson Financial. That gave the firm the lead in mergers and acquisitions in the industry, over Credit Suisse First Boston, Merrill Lynch, and J. P. Morgan Chase. Among major Wall Street firms, Lehman claimed fourth place in mergers and acquisitions overall, up from ninth in 2002. In 2003 the company raised $314 billion in debt and equity issues for clients, cementing its position as the number-two underwriter of securities in the United States—behind Citigroup—up from the number-four spot in 2002.

Lehman Brothers' success stories were largely a byproduct of Fuld's focus on offering a complete array of financial services, including advisement on corporate merging, raising capital, hedging risk, and making debt payments. Fuld's transformation showed foresight. As the economy picked up, bond insurance was expected to soften; Lehman's investmentbanking operations would be the counterbalance to the expected downturn in bonds. Blaine A. Frantz, the senior credit officer at Moody's Investors, told BusinessWeek, "It is a much more diversified shop than it was five or six years ago, and it operates in an extremely disciplined fashion" (January 19, 2004).

In January 2004 when Institutional Investor ranked Fuld first in its annual Best CEOs in America survey in the Brokers & Asset Managers category.

In overseas operations. The company was ranked fourth in European M&A work in 2002, with a market share of 19 percent, but it fell from number eight to number nine in the global rankings for announced mergers. As of early 2004 one of Fuld's goals was to improve the company's overseas market share, partly by appointing two top executives in Asia and Europe to the company's executive committee.
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Fuld's Lecture at Harvard Business School (Reported date 16-10-2006)

In the speech he gave as part of Harvard Business School's Distinguished Speaker Series, Fuld described the five critical qualities he believes every leader must have (HBS, 2006).

"Real leaders earn the right to lead by understanding the business and mechanics of one's own organization," Fuld said, referring to his first quality of leadership. To Fuld, this means doing one's homework, connecting the dots and learning how the pieces fit together. "When you know what you are talking about, others will follow you," Fuld said.

A leader must also be committed to a strategy, and show that commitment. To this end, Fuld believes a leader must pick a strategy and stick with it. However, as he pointed out, if that strategy turns out to be wrong, a leader must have the guts to admit it and come out with a new strategy.

Fuld is quick to share the credit for such successes. The CEO's third quality of leadership, knowing how to leverage teamwork, is central to Lehman Brothers' culture and focuses on the belief that one person cannot deliver the whole Firm.

From the failures of Lehman Fuld realized that the firm suffers when teamwork suffers and as a result, when Fuld became chairman, nearly a decade later, the first thing he did was build the current "One Firm" culture, where teamwork is critical and goals are shared. To do so, he follows a very simple formula: hire great people who will work together, give them the tools and training they need to be successful, hold people accountable, pay them fairly, and expect them to think, act and behave like owners. Fuld backs this last step by paying all employees partly in Lehman Brothers stock, creating a culture of ownership.

Fuld believes so strongly in surrounding himself with the best people that he considers it another critical quality of leadership. According to Fuld, a leader cannot be afraid that he or she might look bad when others look good. "When you want an 'A' job done and when you want to run an 'A' firm, 'B' people are not good enough," said Fuld.

Fuld believes that leaders set the tone, which is why his fifth and final quality of leadership is to lead by example. Fuld said that in addition to his responsibility to the client and to the transaction, he has another responsibility-to teach others. He expects his senior people to do the same throughout the Firm, creating a culture of responsibility and driving results.

Fuld concluded by saying that the reward for a leader lies in others' achievements and that a true leader gets people to perform at a higher, more productive level, benefiting the whole organization.
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You can access the speech by Fuld at Leeds Business School in 2006 from the page

http://leeds.colorado.edu/about/interior4.aspx?id=542,585,316,417,2231



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Richard S. Fuld, Jr. Named to Barron's "The World's Most Respected CEOs" List

26 March 2007
Chairman and Chief Executive Officer Richard S. Fuld, Jr. was named to Barron's "The World's Most Respected CEOs" list. Dick is one of 13 CEOs in the world who has been named to the list every year since its inception. (Lehman 2007)

In its March 26, 2007, issue, Barron's writes:

• "A Lehman Brothers lifer who joined the firm in 1969, Fuld brings passion and competitiveness that are powerful even by Street standards."
• "Since its spinoff in 1994, Fuld has made the bond specialist into a rival to Goldman Sachs and Morgan Stanley."
• "Lehman's stock is up 20-fold since '94. That's good news for employees, who own 30% of the company."

In compiling its third annual list of 30 top corporate leaders from around the world, Barron’s looked at financial and stock market performance, spoke to investors, and assessed leadership and industry stature.
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Basic Sources:

Reference for Business, http://www.referenceforbusiness.com/biography/F-L/Fuld-Richard-S-Jr-1946.html

HBS 2006, http://media.www.harbus.org/media/storage/paper343/news/2006/10/16/News/Lehman.Brothers.Ceo.Shares.His.Qualities.Of.Leadership.At.Distinguished.Speaker-2372811.shtml

Lehman 2007, www.lehman.com/who/awards/2007/barrons_respected_ceo.htm



Other References

Auletta, Ken, Greed and Glory on Wall Street: The Fall of the House of Lehman, New York, N.Y.: Warner Books, 1987.

Cooper, Ron, "Can a Troika Take Lehman Up a Level?" Investment Dealers' Digest, August 24, 1992, p. 16.

Horowitz, Jed, "Does Lehman Finally Have It Right?" Investment Dealers' Digest, August 25, 1997, p. 16.

Kerr, Ian, "Fuld's Pay Sheds Light on Lehman," Financial News, March 25, 2002.

Thomas, Landon, Jr., "Lehman to Buy Neuberger Berman for $2.6 Billion," New York Times, July 23, 2003.

Thornton, Emily, "Lehman's New Street Smarts," BusinessWeek, January 19, 2004, p. 62.

Truell, Peter, "Is Lehman Ready to Take the Plunge?" New York Times, June 3, 1997.

Tully, Shawn, "Can Lehman Survive?" Fortune, December 11, 1995, p. 154.