Though the massive Wall Street banks and firms get all the attention on the world’s stage–and often most of the funding, too–it isn’t always better to work with a large financial company. Smaller firms might not get all the glory, but what they do get is a better relationship with their clients, more opportunities to help, and the ability to more easily adapt to changes in the markets. Sometimes small-but-mighty is the way to go.
As Wall Street becomes more fractured and is subject to closer scrutiny, many members of the big firms are leaving to found their own smaller companies. One such person is Marc Lipschultz, who left New York-based firm KKR to start a small private equity company with former Blackstone Group LP executive Doug Ostrover. The pair have already identified a number of firms that could benefit from working with firms outside of Wall Street, as lending becomes more restrained and more heavily regulated.
“We want to be small and niche,” said Ostrover. So far they have hired 12 employees for the new firm, Owl Rock Capital. “We think we’ve found something we can lead in.”
Ostrover might be right. America is experiencing a renewed interest in small brands, and that includes choosing things like local credit unions over the big banks or choosing a small private equity firm over a large one. As technology improves internationally, people no longer have to work exclusively with the big banks to have access to great financial tools.
Additionally, smaller firms are closer to their customers than large firms. People like to feel they have connections with the businesses they need that go beyond the financial. Without so many clients, small firm employees are more likely to have the time to spend with individual customers, strengthening that relationship.
Small firms can also adapt to changes in those relationships more quickly. Policies can be rewritten and implemented easily, since doing so involves fewer people and processes. Products can be changed, strategies can be revised, and new tools can be brought in to keep a small firm ahead of its competition.
There are plenty of reasons to choose a small firm over a large one. Small financial firms are likely to do well as long as people’s preferences tend toward working with small businesses instead of bigger firms.