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A rock of stability in turbulent times

Bruce Bates:
A rock of stability in turbulent times

To find out how it feels to be a big- time stockbroker hooked into a Wall Street heavyweight house in a town packed with local, independent investment firms, don’t talk to Bruce Bates.
Bates is big time–a senior vice president of Smith Barney Inc., a giant full-service firm employing more than 11,000 brokers.
But he is as hometown as they come, having spent most of his long career within 50 yards of Rochester’s Four Corners, the intersection of Main and State streets.
“I run my own shop. There’s no doubt I run my own shop,” Bates says. “I just have somebody else pay for it.”
Smith Barney, he says, promotes the idea of the “invisible sign” over each office door. His reads, “Bates Investment Company.”
And as for who hooked whom, the firm or the broker, “I just keep sitting here and they just keep changing the name on the door,” Bates says.
Why not? Bates’ production figures put him in the top 5 percent of all Smith Barney brokers. At 63, he is financial consultant and portfolio manager on $200 million in assets.
He started with George D.B. Bonbright & Co., a Rochester firm founded at the turn of the century.
Bonbright merged into E.F. Hutton & Co. in 1973. Hutton merged with Shearson Lehman in 1988, then Shearson Lehman Hutton dropped the Hutton to become Shearson Lehman Brothers.
Primerica bought the Brothers and merged it with Smith Barney Harris & Upham to create Smith Barney Shearson, which dropped the Shearson a year and a half ago.
Smith Barney now is a division of Travelers, a financial-services-industry giant with a number of arms.
“I haven’t moved,” Bates says, after recounting this history in one breath. “And as long as I am honest, work hard and serve my clients, I am not restricted in what I do.”
Smith Barney promotes his professional freedom, and keeps loads like compliance and tax oversight off Bates. Since he fielded those jobs when he started with Bonbright, Bates appreciates his freedom.
The firm also has liberated its consultants from quota requirements, marketing dictates and the other instruments of torture with which big investment houses are said to afflict brokers.
“How I run my own business is different from anyone else in this (Rochester) office or anyone else in the company,” Bates says.
To Bates, the stock market is merely a forum of human interaction, governed by simple and comprehensible forces.
“The market has no brains of its own,” he observes. “It is just a mechanism to measure shifts in equilibrium between buyers and sellers.”
Take Netscape Communications Corp. If you can get it.
Bates was told not to try to get his hands on shares of the Internet software stock that went crazy right out of the chute last month.
“Crazy” being a relative term, of course, when the stock under scrutiny is 1) software and 2) an initial public offering.
Steep stock valuations–stock prices that are many times projected earnings–are common in the hot, hot, hot software industry.
Teeny operating margins and hyper-growth have made some such stocks pay off. So 15-month-old Netscape, yet to make a dime, did not look so bad on the market for stocks.
IPOs, of course, are the only way to Get In On The Ground Floor, a necessary precondition to Making a Killing.
So on day one of Netscape, some made a killing, some got killed and old hands like Bates watched buyer-seller equilibriums shift from one minute to the next.
“A lot of IPO activity is buying a dream,” Bates says. “Even though there is a lot of interest in communications products related to the Internet, I would have had a difficult time explaining to my clientele why I paid $71 for a stock the day it came on the market valued at $28.”
Positioned where he is, with Wall Street resources and Rochester clients, Bates has a unique perspective on investing as a human and business activity.
Contrary to the standard local line, some people in Rochester have nothing against turning a quick buck on the market.
“For many people, a long-term investment horizon is Friday,” Bates notes. “Rochester does have those kind of investors. It’s no different than any place else.”
It also has plenty of long-term thinkers who know how diversification keeps a portfolio from blowing up. What Bates does, he says, “is what is appropriate to the client.”
Not an easy feat, when the appropriate thing must be accomplished in a forum where money managers cook in the heat of quarterly performance reports and companies pressure analysts on a daily basis.
Smith Barney’s resources help: high- tech data bases and sophisticated research.
Still, Bates says, “99.8 percent of my time (is spent) facilitating the needs of my clients.” For that work, his most valuable resource is his assistant, Arlene Fournigault, with whom he has worked for almost 20 years.
“I have no set story or set of ideas on investing in general,” he says. “Each client is different. It’s their money. My job is to find the appropriate path for them to seek their goals.”
Bates can discuss the ins and outs of market timing and style timing, getting in and out of stocks at critical price points. But the key to successful investing, he says, is simple.
“It seems to me the most important part of getting a good return on investments is being invested,” Bates says. “People have to step up to the plate and swing.”
Individual investing these days, he adds, is not what it used to be.
“In the 1950s and 1960s, the idea was to “own your share of America’ by buying stock,” Bates recalls. “Even with 401(K)s, the percentage of assets held by individuals in stocks these days is lower than it was then.”
Back in 1956, when he was making $55 a week, he saved $40 a quarter to invest. That urge to save and invest, he says, is in decline.
Even in Rochester, small fortunes accumulated by past generations are leaving town or being dissipated, Bates says, and the fault is no one’s.
“You can’t blame people for the sense of impermanence that leads to spending rather than investing,” he insists. “The institutions of life are not as changeless as they were.”
Changes, whether they are the hourly mutations of stock prices or mergers that alter the faces of entire industries, are something Bates seems to neither fear nor admire. He observes them.
He is the son of one of the first female corporate executives in the country–his mother was treasurer of Lifesavers Inc. in the 1920s. When they married, his mother and father, also an executive with the candy company, were “of equal corporate rank.”
His father became president and general manager of Lifesavers Ltd., Canada, and it was in Port Nelson, Ont., that Bates spent his early years.
From the three-room schoolhouse there, he was shipped to Phillips Academy in Andover, Mass., a change meant to equip him for an American university. Like almost half his Phillips classmates, Bates went on to Yale University.
There he studied industrial administration–everything from accounting to engineering. The Procter & Gamble Co. offered him a job. His father persuaded him to turn it down.
“My father said to me, “Everybody has a college degree. You need something to distinguish yourself,”’ Bates recalls.
So Bates went on to Massachusetts Institute of Technology for a master of science degree in industrial management.
Then he went to work for Procter & Gamble. Bates had set his sights on personnel work. In order to do personnel at P&G, the company said, you start in the plant.
Which put Bates, with his degrees from Yale and MIT, in a brown factory uniform and steel-toed shoes, foreman of a crew that made and packed a million pounds of Crisco a week in Ivorydale, Ohio.
He held the job for two years, and, to this day, works in shirtsleeves when possible.
But once he made the jump to personnel, Bates got bored and quit.
“If one is doing a job he likes doing, it is not difficult to go home tired every night,” Bates says, “But not bored.”
Post-Procter & Gamble, Bates stumbled into a job he liked, one where everything changes every day.
Father-in-law Sherwood Smith, a partner in D.B. Bonbright, invited him to help out in the wire room while he looked for work.
That was in 1956 and the firm was in the Powers Building. Before long, Bates was a partner, too.
After more than 40 years, he still is married to the boss’ daughter, Nancy; their children, Todd and Barbara, are in their late 30s and have five children between them.
Alongside his career, Bates worked his way into the fabric of local community life. Close to a hundred faces are recognizable in the oil painting of Midtown Plaza in its heyday that decorates his office wall. He knows, or knew, them all.
Thirty years ago, he says, it was a given that business executives pitched in at the American Red Cross, Rochester Institute of Technology, Rochester General Hospital, the Friendly Home, the Crestwood Children’s Foundation Inc. and other organizations.
Bates has done everything for such groups from going door-to-door to pre-siding over their boards.
“I was blessed with an era and a job that encouraged me to get involved,” Bates says. “I’m not sure today’s more difficult business climate allows the younger executives to volunteer their time the way we could.”
Louis Langie, a retired vice chairman of Chase Lincoln First Bank N.A., has worked alongside Bates on various community boards.
Bates, he says, is filling a critical gap in commitment and giving locally.
“Rochester has lost a lot of the old families that used to contribute,” Langie says. “The Bateses followed Sherwood Smith’s lead in getting involved and are among Rochester’s most committed and generous citizens.”
Bates’ counsel is most sought after by the investment committees of local groups, Langie says. In those spots “he never puts himself in a position of conflict–money managers who come to pitch the board know his integrity is unquestionable and they appreciate his fairness.”
Langie is tougher than Bates when it comes to rating the coming business leaders as community activists: “Maybe it’s time company management started looking at volunteer involvement when it’s time to hand out the promotions.”
For charity groups, Bates says, government cutbacks portend a time of testing.
While he makes no predictions for the market, Bates feels certain that online investing and mutual fund pick-of-the-week rating services do not portend the same kind of testing for financial consultants.
“There is a big difference between service and no-service investing,” Bates says. “I continue to believe I’m needed.”

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