Ferris, Baker Watts Inc. has never had a problem taking the path less traveled.
When other brokerage houses rushed to offer clients trading over the Internet, Ferris Baker Watts passed, opting to work with clients face to face.
When firms closed their municipal bond underwriting businesses, Ferris Baker Watts kept its open, though business has been cutthroat.
And as competitors began selling out to giant banks at high premiums, company officials didn't think twice, even though some employees could have cashed in big.
The firm may not be the biggest or flashiest brokerage house in the industry, but on Wednesday, it celebrates its 100th year in business -- a testament not only to management's ability, but to its will to survive even in the toughest times.
While the firm's style might seem a bit old-fashioned by today's standards, Ferris Baker Watts' managers make no apologies.
"We are not a firm made up of Albert Einsteins or Albert Schweitzers," said Louis J. Akers Jr., chief executive officer of the firm, which has headquarters in Baltimore and Washington. "We are just really trying to do a good job for our clients. Maybe that is not Wall Street, but that is Ferris Baker Watts."
Whether the firm will thrive another 100 years, let alone 10, is anybody's guess because regional brokerage firms face an onslaught of challenges.
Brokerages that have teamed with banks can deliver an array of financial products under a single umbrella, ranging from car loans to mutual funds to brokerage to investment banking services.
Large firms, such as Merrill Lynch & Co., Goldman Sachs Group Inc. and Morgan Stanley Dean Witter, have armies of brokers, strong name recognition, and can muscle into markets with well-financed advertising blitzes.
The top five brokerage firms account for 50 percent of all commission revenue, and the top 10 firms reap 70 percent of all underwriting business, said Amy S. Butte, an analyst at New York-based Bear Stearns & Co.
"I think it is tough because you really need economies of scale or some sort of specialty," said Anna Dopkin, a financial services analyst at T. Rowe Price Associates Inc. "In this business you need something special to attract customers to your shop, whether it be a star money manager or the ability to get your hands on some hot new issue."
Despite the challenges, business has never been better for the firm, which is privately held. Customers are streaming through its doors, and profit is at an all-time high, executives said.
Gross revenue jumped 25 percent to a record $149 million in its fiscal year that ended Feb. 25, more than double what it was five years ago. Capital has swelled to $95 million, up 15 percent from the previous year. And the number of employees has risen to 600, up from 573 at the end of last year.
"I think we have tremendous momentum," Akers said. "I think our future is going to be better than the past. I'd like to think that the next 10 years will be great growth years."
Even competitors are impressed with the firm's performance and longevity.
"In order to be in business 100 years, you not only have to be good, you have to be lucky," said James W. Brinkley, president of Legg Mason Wood Walker Inc., the brokerage arm of Baltimore-based Legg Mason Inc. "A lot of things could come along and flip you over. They are nice people, they provide good service and they have a good reputation."
To continue prospering, Ferris Baker Watts must develop its modest investment banking business, executives said. The company relies heavily on revenue generated by its brokers, municipal bond department and trading desk.
By taking more companies public, advising on more mergers and acquisitions and by offering financial advice to corporations, Ferris Baker Watts can generate additional income, and show prospective clients that it has a broad base of products and services.
"My objective over the next eight years is to make Ferris Baker as well known as an -- investment banking firm as it is a -- regional retail firm," said the company's chairman, George M. Ferris Jr., 72, who is spearheading the effort.
He believes that the firm can generate plenty of deals in its back yard -- Maryland and Northern Virginia, which are hotbeds for fast-growing Internet and technology companies.
It is also an area where the Ferris Baker Watts name is well known, especially by small, high-tech companies. George Ferris expects the firm to have few problems attracting clients because big competitors want big deals, while he is content scooping up smaller ones.
"We think that is a niche where there is not that much competition for those companies," he said.
But building the business won't be easy, said Kristofer Williams, a senior analyst at CommScan LLC, a New York-based investment banking research firm.
"It is a very difficult market to penetrate. When there is a company looking to go public -- they tend to go for the big investment bank," Williams said. "They feel like contacts mean everything, and the big banks have contacts with all of the mutual funds and portfolio managers and people who are going to sell and distribute the stock."
In the past five years, Ferris Baker Watts has managed or co-managed 25 deals where companies have gone public. Deutsche Banc Alex. Brown handled 807 deals and Legg Mason managed or co-managed 123 deals, according to CommScan.
Not all of the transactions are panning out for shareholders. If an investor purchased stock in each of the Ferris Baker Watts deals from 1995 to 1999, and held on to the shares, they would have endured a cumulative average loss of 9.1 percent, according to CommScan. Over the same period, deals managed or co-managed by Deutsche Banc Alex. Brown jumped 201 percent on average, while Legg Mason's transactions rose 8.8 percent, CommScan said.
Also, Ferris Baker Watts' performance is well behind the industry's cumulative average return of 117 percent over the five-year period, according to CommScan.
"I think our IPO numbers are probably not that much different than anyone else's," Akers said. "I think our bankers in general have done a good job. We haven't had a company go to zero."
Akers said many of the stocks rose initially, and investors could have sold at sizable profits. The firm has had a couple of blockbuster deals, including Complete Business Solutions Inc., which is up 222 percent since coming to market, and Advanced Communication Systems Inc., up 182 percent.
Nevertheless, performance could be better, he acknowledged.
"It bothers me because I don't want our clients to lose money. But that is investing, investing is not savings," he said.
As the firm builds its investment banking business, it won't be spending money on Internet trading like many other firms.
"We are not interested," Ferris said. "We feel there is a real role for professional advice. We find plenty of people who want advice."
Clients, however, can monitor their accounts online. The decision not to offer Internet trading differentiates the company from the low-cost brokerage firms that offer trading but little service, executives said. "Mercedes dealers don't sell Saturns," Akers said.
The decision is refreshing, analysts say.
"The world does not need another E*Trade," Dopkin said. "It sounds like they are not trying to catch the next hot idea that may be next year's flash in the pan."
Michael Flanagan, a brokerage analyst at Financial Service Analytics in Philadelphia, said investors still want to sit down with brokers.
"I think it boils down to the fact that this is still very much a people business, where brokers and customers have been dealing with each other for some time," he said. "Hey, look, they are 100 years old. They are doing something right."
Surviving 100 years in the brokerage business is indeed an astonishing feat. The Ferris Baker Watts withstood two world wars, the stock market crash of 1929, the Great Depression and a wave of mergers in the 1990s.
It was founded by William G. Baker Jr. and Sewell S. Watts, who graduated from the University of Maryland Law School in 1899.
The friends scraped together $43,500, and on March 1, 1900, opened the doors of Baker, Watts & Co. in the American Building on Baltimore and South streets.
The firm was a cross between a bank and a brokerage house. It took deposits from customers across a long marble counter, and it hired salesmen who traveled Maryland's countryside by boat, horse, buggy and train, selling bonds to banks.
Baker, Watts thrived during the Roaring '20s and it hung on in the bitter depression that gripped the country in the 1930s.
That is when George M. Ferris and two partners started Ferris & Co. in Washington. George M. Ferris was a poor farm boy from Connecticut, but he won an athletic scholarship to Trinity College, where he made a name for himself as a baseball player.
After graduation, he worked in Washington for a New York-based bond house. And in the depths of the Depression, he struck out on his own and started Ferris & Co.
A year after opening, his partners quit, yet he managed to tough out an existence. "He never lost any money," said the younger Ferris.
The younger Ferris joined his father's firm in 1950 after graduating from Harvard Business School, and working briefly for a New York-based brokerage firm.
In 1957, he heard a consultant speak about the "will to manage," and was convinced that the firm needed professional management.
Brokerage houses were typically run by large producers, who advised clients and traded stocks. The brokers were afraid to give up their "security blanket," and run the day-to-day operations.
The theory of full-time management didn't play well with the senior Ferris.
"We had some strong arguments and a lot of it was about building management," the younger Ferris said. "He sort of put up with me."
Eventually, young Ferris prevailed, and the firm's five partners picked him to run the company in 1957.
"'Hell,' they said. 'He's the boss' son, he doesn't need a security blanket,'" Ferris said.
Ferris & Co. and Baker, Watts rode the booms and busts of the stock and bond markets. But it was Baker, Watts that came up limping in the late 1980s.
Unlike Ferris & Co., which had built a management team, Baker, Watts was run by about a dozen partners.
"We had 12, 13, 14 chiefs and no Indians," said Roger L. Calvert, a former Baker, Watts partner, who is president and chief operating officer of Ferris, Baker Watts. "It made reaching decisions on controversial areas quite difficult."
Controversy hit with a vengeance in the mid-1980s, when oil and gas tax shelters that the partners advised their clients to invest in collapsed.
Clients sued for millions of dollars in damages, Calvert said, forcing partners to write personal checks and tap into the firm's capital to cover legal expenses and settlements.
United States Fidelity & Guaranty, the Baltimore-based insurance giant, tried to stabilize the firm by buying a stake in the company. But it was too late.
"We were losing money," Calvert said. "We were perceived as a firm in trouble. That perception really made it difficult for us to do a lot of things."
In October 1988, Ferris & Co. merged with Baker, Watts. The deal gave Ferris & Co. about 80 additional brokers, six additional offices and a large municipal bond business.
"I thought it was a natural fit," said Ferris, who had approached Baker, Watts years earlier.
Today, the firm has 233 brokers and 26 offices in five states and the District of Columbia.
Unlike many acquisitions where out-of-town firms take the top executive jobs and shutter entire units, Ferris, Baker Watts is largely run from Baltimore.
Akers, a native of Dundalk, and Calvert, who grew up in Bethesda, work in the 100 Light St. building downtown. The firm's trading desk, corporate and public finance units and a large group of brokers are here, too, and they have expanded over the years.
George Ferris, the firm's general counsel and a group of brokers work in Washington, and the company's operations center is in Silver Spring.
The firm is also owned by its employees, and George Ferris is the largest individual stockholder with 30 percent of the shares.
Each year, employees receive shares based on their level of earnings. As a result, few employees leave the company.
"That has been the glue that has held the firm together," Ferris said.
Any edge a company can get in this business goes a long way. And Ferris Baker Watts' biggest edge could be that it hasn't followed the crowd.
"I couldn't feel better about our position," Akers said. "We have plenty of capital, we have exceptional people. If we do the right things, we should be extremely successful for the next five to 10 years."