DALBAR IN TALKS TO DUMP PUBS: WOULD KEEP RESEARCH ARM, DROP LIMPING NEWSLETTERS

Financial services researcher and publisher Dalbar Inc. is negotiating to sell its marginally profitable publishing business to Newark, N.J.-based Securities Data Co., a unit of Canadian financial media giant Thomson Corp.

A definitive agreement could be several weeks away, but the publishing unit, which includes three newsletters and a quarterly directory and generated an estimated $1.5 million of Dalbar’s $7.5 million in 1997 revenues, could fetch perhaps $2 million, according to a source familiar with the discussions.

The Boston-based firm’s research unit, which conducts annual mutual fund customer service and broker-dealer surveys, isn’t expected to be included in the sale.

Dalbar founder and President Louis Harvey and Securities Data Publishing CEO Bruce Morris both declined to comment on the discussions.

The expected agreement by Dalbar is part of a restructuring of the 22-year-old private company, aimed at focusing its management and financial resources on an ambitious year-old effort to begin evaluating individual investment advisers on the quality of their advice. The evaluations include measurements of customer trust and satisfaction through client surveys.

“Like our benchmarking customer service studies launched in 1986, this too is a big bet,” says Robert Powell, who is editor-in-chief of Dalbar’s newsletters. “We need to focus our time and attention on what we are good at. This is a once-in-a-generation opportunity. In the same way that Morningstar changed the mutual fund industry, this too could change the personal financial adviser industry.”

But the initiative has gotten off to a slow start. Launched in March 1997 as the “Dalbar Excellence in Advice” program, the effort has attracted 1,000 advisers from such firms as American Express Financial Advisors Inc. in Minneapolis and Newark, N.J.-based Prudential Insurance Co. of America. Each adviser paid Dalbar $500 for a customer survey.

Part of the cool response may be due to questions about the credibility of such a survey. “This issue of picking a good adviser is one that comes up constantly,” says Don Phillips, CEO of mutual fund researcher Morningstar Inc. in Chicago. “So far, it comes down to ‘you know a good adviser when you have one.’ Doing (a valuable survey) really well is going to be difficult.”

Earlier this month, Dalbar renamed its initiative the “Dalbar Program for Financial Professionals” and began a new sales effort following a decision by the Securities and Exchange Commission to allow advisers to include Dalbar ratings in ads. Mr. Powell says the firm expects to sign up 10,000 advisers by year-end, generating $5 million in fees.

The expected sale of the publishing unit follows two years of falling advertising pages for the group’s Mutual Fund Market News, a weekly newsletter distributed to about 2,000 mutual fund sponsors, brokers and fund service companies.

The publication, which costs $1,250 a year, averages three ad pages an issue, down from nearly 10 two years ago, a former employee says.

Dalbar declines to comment on these figures.