Q&A: JACK WHITE "WELL, I’M NOT ABOUT TO DO A FULL MONTY"

A client called Jack White & Co. and asked if he “had reached Jack White.” The receptionist, new on the job, said no and transferred the call to the CEO himself. The unassuming Mr. White picked up his line and tried his hand at customer service.

Granted, it’s not easy telling Jack White from his namesake. He’s become synonymous with his 25-year-old San Diego discount brokerage.

This could change come June, however, when his company is scheduled to become a subsidiary of Waterhouse Investor Services Inc., in turn owned by Toronto-Dominion Bank. He is scheduled to stay on as chairman of the Jack White divisionbut will not sit on Waterhouse’s board.

While the market leader in mutual fund supermarkets is Charles Schwab & Co., No. 3 White was actually the first brokerage to offer no-load funds.

Its latest innovation is an electronic crossing system called InterConnect. The program — to be pilot-tested with shares of 130 San Diego companies — allows shares to come together in a queue and cross at a given time, bypassing a stockbroker. It’s like New York-based Instinet, but for small investors instead of big institutions.

Expanding the program nationally and keeping up with other technological demands will take deep pockets, something Jack White didn’t have before its $100 million deal with Waterhouse.

Q In light of the planned acquisition, what would you say to advisers who trade through Jack White because it isn’t part of a large organization?

A There’s nothing bad about being a big guy if you can give people what they want.

Q Will you stay active in the firm or will you be playing more golf?

A I play golf at my desk. I don’t want to be humbled on the golf course. I am 63, that’s a fact. If I may refrain from being humble for a second, I like to say the firm is going from mature management to young, enlightened management. At least, I hope they’re enlightened.

Q The deal is valued at $100 million and you and your family own the whole enchilada. What do you plan to do with all that money?

A Bill, Hillary and Buddy get their cut first. Then, I hope I can give something back to the community I live in.

Q Do you consider yourself shy?

A Well, I’m not about to do a full monty. My persona is shy and understated, but I’m a pretty aggressive bulldog when it comes to going out for business. I think reserved is a better word for it.

Q Tell us about this crossing network. Do you think electronic crossing is the future of the brokerage business?

A Traditionally, you needed a dealer to provide liquidity and take the other side of the order if there wasn’t a counterorder. Today there’s plenty of liquidity and there’s no justification in many cases for the dealer because electronically you can match up buyers and sellers. If a dealer is not sitting there doing price discovery, what better way to do it than electronically?

Q When would investors typically want to use electronic crossing?

A If you want to do a trade based on a news item after the close, you should have an electronic format in which you can put a bid and offer up and hit it. Instinet still has that to some degree for the public. But very few brokers will route an order after hours to Instinet. We’re one of the few in the United States that do it.

Q Will you be stepping on anybody’s toes if this takes off?

A Were the discount brokers stepping on the toes of the traditional wirehouses? The answer is yes. And the wirehouses changed in ways that made them more profitable and bigger. They now have wrap accounts and all these other things rather than just competing for X dollars on brokerage. On balance it’s been a positive change for the industry. There are some exceptions, bad wraps, which means that the money is way too high for what the broker is doing. But you’re not going to stop progress.

Q Does that include helping customers out with research?

A Yes and no. If someone wants a Standard & Poor’s or Morningstar report, we’ll send it out. But it’s not part of our marketing.

Q Some advisers who clear trades through Schwab get antsy when it expands its research division or they think Schwab is soliciting their clients. What do you think about that?

A It’s a direct conflict with their clients. Schwab is in direct competition in many ways with an adviser if the adviser’s client sees a full-page ad in today’s newspaper saying, ‘come right down to the Schwab office next door for asset allocation and anything you want.’ Schwab has assessed the risk in that direction and they probably have made a decision to go for that great big individual market.

Q So are you seeing Schwab advisers defecting to your brokerage?

A Yes. We’re careful not to compete with our own clients, including mutual funds. Jack White doesn’t have mutual funds, where Schwab has all these mutual funds they’re setting up.

Vitae

Jack K. White, chairman and chief executive, Jack White & Co., San Diego

Employees: 455

Customer deposits: $12 billion

Number of affiliated advisers: 1,200

Company milestones: First discount brokerage on West Coast, first broker to offer no-load mutual funds; $100 million acquisition by Waterhouse slated to close in June.