FIRMS REINVENT THEMSELVES

S THEIR BROKER-DEALER CLIENTS STRUGGLE and their own revenue drops, big clearing firms are targeting new — albeit…

S THEIR BROKER-DEALER CLIENTS STRUGGLE and their own revenue drops, big clearing firms are targeting new — albeit less profitable — lines of business and reassuring clients of their financial strength by leveraging the brand names of their parent companies.

At the same time, they’re investing in new technology and services for clients — a perpetual cost in the clearing business that consultants say is straining their profit margins.

National Financial Services LLC, a unit of Fidelity Investments of Boston, which is losing three of its biggest bank-owned-brokerage clients due to mergers, hopes to offset some of the losses by providing “outsourcing” services to firms that are self-clearing, said National Financial’s president, Sanjiv Mirchandani. Such firms should be eager to reduce costs by outsourcing such non-core activities as cashiering, corporate-action monitoring and data reconciliation, he added.

NFS is soliciting Ameriprise Financial Services Inc., the Minneapolis-based financial planning giant, as its benchmark outsourcing client, said consultants and several clearing-industry executives.

An Ameriprise spokesman declined to comment but did confirm a major operational change that could presage an agreement.

The firm is moving its brokerage processing to Thomson Reuters Beta systems and providing its approximately 10,500 advisers with New York-based Thomson’s Wealth Manager desktop system.

Ameriprise currently uses Phase 3, the securities-processing system offered by Sungard Data Systems Inc. of Wayne, Pa., and its advisers use a variety of workstations.

“The new brokerage platform is more industry-standard and will help us integrate recent acquisitions and make it easier for experienced advisers to move their business to Ameriprise,” said Paul Johnson, a company spokesman.

NFS, for its part, is linking its Streetscape broker work flow platform to Thomson One, a set of broker workstation tools.

Mark Healy, executive vice president of client management at NFS, declined to comment on Ameriprise. But he acknowledged that the new arrangement will make it easier for NFS to gain business from Thomson One users.

Ameriprise, which is retaining control of its core trade execution, credit and other self-clearing functions, last year bought Kansas City, Mo.-based H&R Block’s broker-dealer operations. Block’s approximately 950 advisers use the Thomson Reuters workstation, Mr. Johnson said.

Pershing LLC, the largest correspondent clearing firm, isn’t pushing aggressively into outsourcing services for self-clearing firms, said Richard Brueckner, the company’s chairman and chief executive.

However, the Jersey City, N.J.-based subsidiary of The Bank of New York Mellon Corp. is “responding to the market” by focusing more attention on its Direct Brokerage Services unit for small and startup broker-dealers, encouraging its brokerage clients to accept more fee-based business and — like National Financial — pouring money into developing or expanding its international multicurrency services.

Both Mr. Mirchandani and Mr. Brueckner said they are actively looking at ways to market the financial strength of their parent companies to reassure broker-dealers and their clients in the wake of the demise of such major brokerage firms as Lehman Brothers Holdings Inc. and The Bear Stearns Cos. Inc.

LLBH Private Wealth Management, an advisory firm in Westport, Conn., that was launched last October by four former brokers from Merrill Lynch & Co. Inc. of New York, picked Pershing as its custodian primarily because of Bank of New York Mellon’s lineage as the oldest national bank and its record of having avoided serious capital problems.

“We reasoned: What could be better than saying we have Alexander Hamilton as our custodian?” said LLBH partner Jim Pratt-Heaney, referring to Bank of New York’s founder.

LLBH, which has $600 million in assets under management, uses a small Westport broker that clears through Pershing for its commission business.

National Financial, which historically has downplayed its affiliation with Fidelity because its parent’s discount-brokerage business competes with NFS clients, knows that broker-dealers “are looking for established names and is continuing to look for ways to leverage its association with Fidelity,” said Stephen Austin, a Fidelity spokesman.

E-mail Jed Horowitz at [email protected].