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Regional firms succeed by focusing on areas that are underserved by larger competitors and giving their sales forces effective strategies to employ. Using these tactics, regional brokerage firms in the financial industry are getting a jump on larger competitors that have firmly created their brand images in the minds of prospective and current clients.
Most large brokerage houses, such as Merrill Lynch and Smith Barney, invest the bulk of their research dollars following large, well-established corporations. Regional firms typically allocate a portion of their budgets to researching local companies that receive little, if any, attention from analysts at the big firms.
The payback can be more than just unique sales ideas for the regional firm's prospects and clients.
"Once you establish a relationship with a company, it is more likely to turn to your firm for guidance when they require financial services," said Ian B. Davidson, chairman and chief executive officer of D.A. Davidson & Company, a regional brokerage firm based in Great Falls, Mont.
Davidson said his company is involved in about 90% of all municipal securities issued in Montana. The firm's emphasis on serving local government and Montana-based companies are the main reasons it captures such a large share of this market, Davidson said.
Underserved locations
Finding an underserved location also has proved to be an effective strategy for D.A. Davidson. "There are 750 major brokerage firms in the United States," he said, but only 13 are in the company's principal region, the Northwest, and the Dakotas, Utah, and Alaska.
Regional firms have more difficulty finding an underserved need, since large brokerage firms are usually on the cutting edge of product innovation or the...