Precursor Closes Down Research Brokerage Arm
D.C.-based independent telecom analyst firm Precursor is getting out of the research brokerage business after 6 years, CEO Scott Cleland confirmed Thurs. Cleland said Precursor, which has gotten high marks in Institutional Investor rankings as an independent analysis firm, is downsizing and will concentrate in the future on advising a smaller group of customers in targeted areas.
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“We streamlined,” Cleland told us. “We shut down our traditional broker-dealer division. We're still an advisory service… We're changing our business model, becoming more exclusive.” Cleland declined to discuss the number of layoffs at his firm, which had always been small.
Rumors of a major change at Precursor have been swirling since last month. Cleland, a former Legg Mason analyst, is a high-profile observer of telecom trends who has provided frequent testimony before Congress. Cleland said he planned to continue to testify if called. “I'm not changing what I'm doing,” he said. “This is a business model change, not a change in how I interact with people.” He noted that Precursor turned a profit in each of its 5 full years of operations.
“We founded Precursor in 2000 amidst the dot-com collapse to improve investment performance through our innovative Change Research approach and our conflict-free model,” Precursor said in a note sent to its clients. “The investment research industry is undergoing tremendous change, and we no longer see the business opportunity in traditional research brokerage that we originally saw over 5 years ago.”
Cleland said Precursor’s business model, which based its charges on how it performed in getting ahead of trends, no longer was proving viable. “The market is demanding scale… big firms that offer a wide range of services,” he said. “Whenever it’s a performance model we do very well, however the market place is shifting toward a set fee.”
Recent months have seen a number of changes in the sector. In Dec., Boston Ventures Limited Partnership VI and Castanea Partners announced the purchase of Medley Global Advisors. Also in Dec., Stifel Nicolaus & Co. bought Legg Mason’s capital-markets unit, which includes its D.C. team led by former FCC Chief of Staff Blair Levin.