Brown Brothers Harriman closes research business

Fri Aug 17, 2012 5:58pm EDT

Aug 17 (Reuters) - Brown Brothers Harriman has closed a business that allowed its institutional investor clients to outsource aspects of their stock research to the bank, because the operation was not bringing in enough revenue.

The bank is the latest to stumble in the world of research, where investor clients are keen for information, but balk at paying for it. Goldman Sachs Group Inc tried to make money from selling research from analysts outside the bank, and failed, recently shuttering the business.

In the case of Brown Brothers Harriman, the research operation was separate from its investment banking unit or its money management businesses. The privately held bank's roots go back to the 19th century.

One source estimated that 10 to 20 staff members were affected by the business's closure, but another said that only a few analysts lost their jobs.

The bank followed an unusual path: it would research topics or build valuation models that were specifically requested by clients.

Brown Brothers Harriman's clients paid for its research products either by funneling their trading business through the bank, or by paying for the services a la carte.

Commissions from trading stocks have shrunk across Wall Street, making it harder for trading volume to subsidize research, Brown Brothers Harriman said in a statement.

The company said it is maintaining other trading services beyond research that clients use.

Some customers lamented the demise of Brown Brothers Harriman's research arm.

"They actually provided us with quantitative inputs that we used in our stock selection models, so now we're kind of scrambling to come up with another means of generating that analysis," said Peter A. Sorrentino, a senior portfolio manager at Huntington Asset Advisors, which was a client affected by the decision.

The product was expensive, Sorrentino added.

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