Smaller L.A. Regionals Survive by Specializing

In the 1950s and before, they dominated the Southern California brokerage scene. But now they are overshadowed, having lost market share as a group to larger, better capitalized intruders from New York in what is arguably the nation’s most intensely competitive market outside the Big Apple.

They are the Los Angeles-based regional brokerages. And like regionals in other parts of the country, they are surviving--and in some cases thriving--by not trying to be everything to everybody. Instead, they are targeting limited geographic areas or specific market niches, such as providing corporate finance services for small- to medium-sized local companies that the big boys sometimes pass over.

Or they are capitalizing on the advantages of being small, such as providing more personalized service or quicker, less bureaucratic resolution of problems.

“From a management standpoint, we know this area better” than national firms, said Donald W. Crowell, managing partner of Crowell, Weedon & Co., a regional that is thriving by concentrating on its home base.

Still, dozens of regionals here and across the nation have left the business or been absorbed by big New York firms. For some that remain, surviving has not been easy.

Take Bateman Eichler, Hill Richards, the biggest and best known of Los Angeles-based regionals. It nearly went under a few years ago, a victim of poor management, broker defections and other woes that forced it to be sold in 1982 to Kemper Financial Cos., a giant Chicago-based insurance and financial services firm.

But lately, the firm has been mounting a mini-comeback, thanks to changes brought on by John R. Bolin, who Kemper tapped in 1984 as Bateman’s chief executive to whip the sagging firm back into shape. Bolin, industry observers say, promptly fired poor managers, rebuilt the sales force and added products.

For his efforts, Bolin was promoted in January to chief executive of Kemper’s broker-dealer division. Replacing him as Bateman chief is Richard J. Capalbo, former head of marketing at Drexel Burnham Lambert.

Observers expect Capalbo to pursue an aggressive marketing strategy to establish Bateman Eichler as a major regional for the West Coast, not just California. To augment that drive northward, Bateman Eichler recently acquired brokerage offices in Seattle, Portland, Ore., and Anchorage, Alaska, from Denver-based Boettcher & Co., also a Kemper subsidiary.

Morgan, Olmstead, Kennedy & Gardner also has been scarred by bad news.

A stock trading “irregularity” resulted in a $700,000 loss in the fourth quarter of 1986. More recently, Michael H. Fusco resigned in December as president after less than seven months in that post, after losses on his Morgan Olmstead stock and disagreements with the firm over his latitude in changing the focus of its operations.

Morgan Olmstead, which went public in 1986, is now seen as a possible takeover candidate, says Joseph T. Arsenio II, analyst with Birr, Wilson Securities in San Francisco. Raymond, James & Associates, a brokerage based in St. Petersburg, Fla., recently acquired 5.5% of Morgan Olmstead’s stock and could be a possible suitor, Arsenio says.

But not all Los Angeles-based firms have been rocked by management instability.

Crowell Weedon, a privately held partnership that boasts that it has been profitable in each of its 56 years, is a conservative firm with a penchant for strict cost controls and avoiding risky ventures.

One way it keeps costs low is by avoiding layers of bureaucracy. Managing partner Donald W. Crowell maintains an office right next to his brokers and says he personally oversees close to 100 active clients. “What other brokerage head is so close to his customers?” he asked.