As a veteran kayaker, Frans Lindelow, head of equities at Stockholm’s Nordea, the largest Nordic bank, has no problem paddling upstream.
Last month he went strongly against the current and replaced his firm’s in-house analyst coverage of 200 Nordic companies with outside research by Standard & Poor’s. “The conventional response to a problem is often the wrong one,” asserts Lindelow, 42.
The problem, of course, is that fund managers suspect that sell-side research is ultimately driven by the desire for investment banking business. Moreover, European regulators appear poised to unbundle research and execution services -- and fees. “The worst possible option was to do nothing at all,” says Lindelow. To date, however, no other European firms have felt compelled to go this far.
(At least Lindelow had options: Several major U.S. securities firms are required under a legal settlement to provide independent research alongside the labors of their own analysts.)
S&P is installing 20 of its researchers in a new Stockholm office as part of its exclusive (for the Nordic region) five-year contract with Nordea. For its part, the bank will concentrate on providing clients with what Lindelow calls alpha research -- tips on trading and derivatives.
Some of Nordea’s 30 analysts will shift from classic company coverage to this new group; others are likely to join S&P; a few may be let go.
Lindelow has been a notable nonconformist before.
When the onetime equity salesman, who paid his way through college by playing semipro basketball (he’s 5-foot-11), was named CEO of Nordea Securities in 2002, he promptly folded its corporate finance operation back into the parent bank and aligned Nordea Securities with the bank’s capital markets division.
Result: He halved the securities business’s head count and restored it to profitability. One of the jobs he cut was his own -- he scrapped the CEO role.
The new outsourced research arrangement appears to be working out. “I have been in this business for 17 years, and it is very hard to get clients excited about anything,” Lindelow says. “But feedback has been good.”
