Interview: Baird CEO Paul Purcell on running a private financial services firm

Robert W. Baird & Co is one of the largest and oldest privately-held investment banking and asset management firms in the United States.

It fared relatively well during the financial crisis and actually took advantage of layoffs in the industry to hire talented people from other firms.

For this and other reasons, it was ranked the 25th highest paying company and the 11th best company to work for in the U.S. in 2010 by FORTUNE Magazine.

Baird CEO Paul Purcell speaks to IBTimes about his firm's performance during the financial crisis, navigating the financial services industry after the crisis, and the advantages of being a privately-held financial services firm.

IBT: Can you tell our readers a little bit about Robert W. Baird & Co?

Purcell: Our business has over $800 million in revenues.

We have a private wealth management business with $60 billion under management. We have an asset management business, which manages $17 billion in institutional assets primarily in fixed income. We have an equity capital markets business, which is equity research, institutional sales & trading, and investment banking. We have a fixed income capital markets business, which is sales & trading and underwriting.

We also have about $2.8 billion in private equity and venture capital.

IBT: How do you think the investment needs and psychology of your clients have changed after the global financial crisis?

Purcell: Both institutional and individual investors are much more cautious because of the vicious downturn in the markets. They are even more conscious of asset-allocation and risk, in terms of both how and where their assets are allocated. They are more conservative.

IBT: As a financial services provider, how did you position yourself for this trend?Did you see an opportunity in this?

Purcell: There are always opportunities in trends like these. We have been in business for 91 years. We are very long-term oriented. We are very asset-allocation driven in all of our businesses.

All of our businesses tend to be advice businesses. So we get paid on advice rather than transactions.We are privately-held and employee-owned. This allows us to have a much longer view of the business.

In the downturn, when many of our competitors were laying people off from the end of 2008 to the end of 2010, we have increased our headcount from 2,400 to 2,675 people. We have increased our headcount by about 12 percent while the vast majority of the industry has become smaller.

We have done that to strengthen our capabilities to provide better client services.

IBT: What do you think about the concept of publicly-traded financial services companies? It wasn't always this way. [Indeed, in 1971, Merrill Lynch became only the second Wall Street firm to go public.Goldman Sachs remained private until 1999.]

Purcell: We have very strong views on that. If you look back at Wall Street 30 years ago, it was primarily a group of partnerships putting their own money at risk everyday.

That's what we do. We think financial services companies provide much better services when they're playing with their own money rather than other people's money.

When people ask us how and why we didn't get into trouble in the financial crisis, we tell them it's because it's our firm, our reputation, and our money, so we protect it carefully, thoughtfully, and we're very long-term oriented.

IBT: What segment of your business has done surprisingly well after the financial crisis?

Purcell: The fixed income business took us over the fall. In 2009, it was the best fixed-income environment in the last 40 years. So in 2009, it was good to every firm.

In 2010, the private wealth management and the institutional underwriting and investment bankingbusiness, including M&A (mergers and acquisitions), have gotten remarkably better, especially in the second half of 2010.

IBT: In the future, is there any segment of business you want to expand or concentrate more on?

Purcell: We have expanded aggressively in the private management side and on the capital markets side because there have been a very large number of talented people who have been looking to switch firms.

[Also,] for capital markets, the markets are getting better. We serve the middle market, and as the larger firms get larger, that makes the middle market larger, which is very helpful to us.

IBT: Is there any grand strategy Robert W. Baird & Co is pursuing?

Purcell: Be good at what we do and take care of clients. If we do that, good things will happen to us.

IBT: The same thing you've been doing for 91 years?

Purcell: Yes. I know it's boring, but it works.

IBT: Regarding the U.S. economy and markets, some have been saying economic growth and financial asset returns will now be much lower than before, certainly when compared to the emerging markets. What do you think of this?

Purcell: If you're talking about China, India, parts of South America, they are going to grow much quicker. I think the U.S. is in the 2 percent growth mode, not the 4 to 6 percent that would be typical of expansions coming out of severe recessions.

IBT: Any outlook for the U.S. financial markets?

Purcell:Our view of the stock market's [annual] returns is going to be in the 9 to 11 percent range for a number of years as long as interest rates stay as low as they are right now.

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