Stephens Inc. Runs with Bulls

The Fayetteville office of Stephens Inc. handles about 7.5 percent of the firm’s $10 billion in assets under management.

Not bad for a branch that just six years ago was above a pizza joint.

Between 1998 and 2001, Stephens’ Fayetteville outpost moved from an office above Tim’s Pizza on the downtown square to temporary digs on Gregg Avenue, then to a two-story, 25,000-SF building bearing its name on Futrall Drive.

“We’ve grown significantly,” said Dennis Hunt, Stephens’ senior vice president and manager in Fayetteville.

Now the branch’s meeting room overlooks a never-ending blur of vehicles on the Fulbright Expressway and the ongoing development of the CMN Business Park, which is some of the most valuable real estate in Fayetteville.

Hunt was the first Stephens employee in Northwest Arkansas. He manages Stephens’ public finance work in the region and has overseen the firm’s underwriting of bond issues from Branson to Mena, on everything from wastewater facilities to schools.

Since January 1, 2003, Stephens’ Fayetteville office alone has closed on 65 public finance projects in Arkansas, Oklahoma and Missouri worth a combined $487.5 million.

But, most of the office’s growth has come from the addition of the private client group in 1999. That’s brought in at least 11 additional employees and a total of 1,850 accounts, said Tim Hynes, vice president and manager of the group’s Fayetteville shop.

About 50 of the accounts managed by the Fayetteville office are institutional clients, Hynes said.

The branch has about $750 million in total assets under management, or a calculated average of about $405,405 per client. But clients range anywhere from the $50,000 individual to the $150 million super-credited corporation, Hynes said. So an average is just speculation. He did say, however, the Fayetteville office has about a 50/50 mix of individuals and high-net-worth individuals.

High-net-worthers are usually those who have more than $5 million in assets to manage, Hynes said.

Stephens Inc., which has 18 offices from Los Angeles to London, had $1.25 billion in managed assets as of Dec. 31, according to Stephens’ uniform investment advisor registration. Investment firms must file the document annually with the U.S. Securities and Exchange Commission.

But Frank Thomas, a spokesman from Stephens’ Little Rock office, said the firm has about $10 billion in assets under management when all customers, including corporations and institutions, are taken into account.

The investment bank’s parent company, Stephens Group Inc., is privately owned by the Stephens family of Little Rock. Estimates from several years ago put annual revenue of the company at $900 million, but it’s anybody’s guess now. The company has its hand in natural gas production and publishes more than 23 newspapers from Hawaii to Tennessee.

Private Eyes

Hynes said the Stephens family, and Stephens Inc. by association, believes in maintaining wealth for generations.

That translates into strong relationships with customers and the ties that have held with the company for its two generations, he said.

Because the Stephenses have a track record of maintaining wealth for themselves and their clients, Hynes said, he and the employees within the private client group genuinely want to do the right thing for their clients.

Hynes, a Jonesboro native, was with Worthen Banking Corp. in Little Rock through the early 1990s and moved to Fayetteville when Worthen purchased the First National Bank of Fayetteville. He joined Stephens in June 1999 as the firm’s first private client group employee in the area.

He and Hunt both point to the accessibility and the entrepreneurial atmosphere within the company as reasons for its success.

“I recall when I first moved up here, it was basically, ‘Here’s a lot of rope — you go out and try to do the best you can,'” Hunt said. “The bottom line is they want to give you the flexibility to try and be successful. I think that empowerment of their employees is one of the reasons for their success.”

“We are able to get things expedited in a manner of minutes,” Hynes said. “There’s two people between me and Warren Stephens.”

Hynes said private client employees begin the day reading the Wall Street Journal and as many financial publications as they can.

“Then we sit down with our clients and help them meet their financial goals, concerns, dreams and aspirations,” he said.

Hynes said financial consultants in his office usually meet with three to four clients a day.

Recruitment of quality financial consultants is a high priority for Hynes. Since he started with the firm, he has hand-picked the consultants now working out of the Fayetteville office, he said.

Hynes is bullish. He speculates he will add another four consultants in the next two years. He thinks the Fayetteville branch will double its assets under management to about 1.5 billion within the next three to five years.

Of the nine consultants in the private client group and two in institutional sales, all came from other firms with operations in Northwest Arkansas: Edward Jones, Morgan Stanley, Merrill Lynch and Morgan Keegan, he said. Stephens isn’t interested in pulling registered reps from out of the market, though, Hynes said. He wants to continue to fill his stable with Northwest Arkansans.

“We have a great mix of people, from different firms,” Hynes said. “We take the best attributes from all those firms and see how they fit with ours. We feed off each other.”

“Stephens has been a great move for me and my clients,” said Amy Knight, a vice president and financial consultant in the Fayetteville office. She was recruited away from Edward Jones over two years ago.

Because of the move, she is able to offer about 95 percent of the bonds sold in Arkansas to her clients, she said.

“Stephens is the only firm in Northwest Arkansas to basically provide investors with a full range of investment options specifically with companies that we are taking public and specifically with Arkansas bond issues that are concentrated within this particular office,” Hunt said.

“In some respects, we have totally different objectives. My objective on a bond is to get the lowest possible interest rate for that issuer,” Hunt said. “Tim’s objective is to try to find a bond that provides the highest possible return for his investor.”

Public Places

Stephens Inc. — the Arkansas financial institution that helped corporations such as Bentonville’s Wal-Mart Stores Inc., and Lowell’s J.B. Hunt Transport Services Inc. go public — didn’t have an office in Northwest Arkansas until 1993, the same year it turned 60.

Prior to that year, the firm had developed a solid reputation in the state for underwriting public finance projects.

Hunt said despite the slim margin in public finance, the company’s function has remained extremely important to the Stephens family. They are committed to helping Arkansas cities, schools and the like, he said, because that is what originally helped build the firm.

Rebecca Garner, principal and owner of Garner Asset Management in Fayetteville, occasionally purchases some municipal bonds from Stephens for her clients. She said public finance is a low-margin, low-fee concern.

Over the years, many companies have gotten out of the game to focus on more lucrative corporate financing, so Stephens gets a majority of the spoils. But “the spoils aren’t much,” she said.

Hunt, a southwest Missouri native, started in public administration in 1979 after he earned his master’s degree in that field from the University of Arkansas. He spent about a year in Fort Smith, then a year in Peoria, Ill., before returning to Fort Smith.

He was the assistant city administrator for Fort Smith for 10 years before a representative of Stephens approached him about a job. Hunt said discussions went on for about six months before he made the switch.

The transition was relatively easy, he said, because he knew what the other side of the coin looked like. He knew what city administration had to go through to get financing for projects.

The largest deal done out of the Fayetteville office so far has been for a combined $130 million — a dual $90 million and a $40 million project — for the Lake Fort Smith water expansion project in 2001 and 2002, he said.

Hunt is familiar with what seems to be the latest fad in public area enhancements — tax increment financing districts. He said he’s been involved in a number of them, mostly in Missouri, and he thinks they’re an effective financing tool. But, he said, “it will take a well designed financing structure” to effectively market all the TIFs on the table in Northwest Arkansas.

Of the nine TIF districts under development or in the works statewide, five are in Northwest Arkansas.

Basically, he said, there’s little or no historical Arkansas-based data on TIFs working here, and they’re so dependant on the private sector, investors may consider them too risky.

Ray Gosack, deputy city administrator for Fort Smith, said Stephens Inc. and Hunt have helped that city immensely with timing debt issuances to hit the market when the interest rates are advantageous.

Stephens has been a proactive advocate, notifying the city of refinancing opportunities, too, he said. One refinance for the city’s sanitation department recently saved Fort Smith about $100,000 a year over the next 11 to 12 years, Gosack said.

“They’ve had a good track record at getting our bonds sold,” he said. The city tried a consortium between Stephens and Morgan Stanley a few years back, he said, but Morgan Stanley didn’t do as well selling the bonds.

What’s more, Gosack said, Stephens Inc. has at times committed to purchase the remainder of bonds not picked up by buyers a few days after their offering, allowing city planners to breathe a sigh of relief and know the money for a particular project would be available.

Hunt said he is proud of all the transactions he’s accomplished during his time with Stephens, but he’s particularly fond of work he’s been able to do with Fort Smith because of close relationships and his personal history there.