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PostJun 03, 2007#126

ST. LOUIS' BIG FOUR BROKERAGES



Wachovia Securities

(after the A.G. Edwards acquisition)

Year started: Coming in 2008

Annual revenue: $8.3 billion

Total offices: About 1,250

Local employees: 4,900 today (which could rise or fall)

Market: Wachovia will be the second largest stock brokerage in the country. Only Merrill Lynch will be larger. Beyond that it will leverage the power of its parent company, Wachovia Corp., to provide a full range of banking services.



Edward Jones

Year started: 1922

Annual revenue: $3.5 billion

Local employees: 4,400

Total offices: 9,700

Market: Edward Jones operates one-person broker offices and employs a literally door-to-door approach to find customers. It has 7 million clients, many of whom don't match the high-net-worth profile sought by competitors.



Stifel Financial Corp.

Year started: 1890

Annual revenue: $452 million

Local employees: 600

Total offices: 152

Market: Stifel is the parent of Stifel, Nicolaus & Co. It offers typical brokerage services, with a strong emphasis on personal service. In recent years, the company has rapidly expanded beyond its Midwest roots. Today it's in 28 states.



Scottrade

Year started: 1980

Annual revenue: $789 million

Local employees: 650

Total offices: 299

Market: Scottrade is a deep discount broker, focusing mainly on Internet trades. In a twist on the model, it also offers personalized service to customers through an expanding network of branches.

PostJun 03, 2007#127

St. Louis should fare better than Richmond in Wachovia-A.G. Edwards combo

By David Nicklaus

ST. LOUIS POST-DISPATCH

06/03/2007



Wachovia plans to cut as many as 4,000 jobs when it takes over A.G. Edwards, but it doesn't look like Edwards' headquarters in St. Louis will bear the brunt of the losses.



Richmond, Va., will.



Wachovia is based in Charlotte, N.C., but its brokerage unit, built through a series of acquisitions, is headquartered in Richmond. It employs 3,000 people there. Wachovia isn't saying where the layoffs will occur, but it will move the brokerage unit to St. Louis when the Edwards deal closes in October.



Industry experts are guessing that a majority of the Richmond jobs will disappear when that happens.



"It looks like St. Louis won," said Charles Roame, managing principal at Tiburon Strategic Advisors in Tiburon, Calif., a consultant to the financial services industry. He breaks down the job cuts this way: "I would say that at least 60 percent of that is Richmond, maybe more. Maybe 20 percent is in St. Louis and 20 percent in the branch system."



The firms have a combined total of 1,512 branch offices in all 50 states, and Wachovia plans to close 230 of them.



In St. Louis, the most vulnerable employees are those who don't work directly with retail brokers. That definitely includes corporate functions, such as investor relations, and it could include stock and bond traders, investment bankers and asset managers. A.G. Edwards Trust, a federally chartered savings bank, is likely to be folded into Wachovia's giant bank.



Some functions, such as research, are less clear-cut. Analysts' research does help brokers and their clients, but the two firms' research departments have a lot of overlap.



"I would assume they will keep the best analysts, industry by industry," Roame said. "Research is a very people-intensive function, but I can't imagine them letting good analysts go."



For the St. Louis employees who keep their jobs, the next question is how dramatically the organization will change. Danny Ludeman, chief executive of Wachovia Securities, is moving from Richmond to St. Louis to run the combined company, but a couple of A.G. Edwards executives already have landed important management roles. Doug Kelly will be chief operating officer, and Peter Miller will share leadership of the financial services group.



Nancy Bush, founder of NAB Research in Aiken, S.C., believes a lot of the Edwards culture will survive. "It was a smart move from a cost and a cultural perspective to move the brokerage headquarters to St. Louis," she said. "I do sense there is a willingness to listen to A.G. Edwards methodologies and adopt the best practices."



Wachovia executives boasted that the deal will create the second-largest brokerage firm, ranked by number of brokers. But if Wachovia doesn't keep most of A.G. Edwards' brokers, it could slip to No. 3.



Executives said Thursday that they'll offer a six-year incentive package to the Edwards brokers they want to keep. "They'll lose some, but I think they will go to great lengths to keep the top producers," Bush said.



Still, it's likely that rival firms already are thinking about how to woo away Edwards' brokers, and maybe some headquarters employees, too. If changes at Edwards help strengthen local firms like Edward Jones and Stifel Nicolaus, that's not all bad for St. Louis.



It will be a sad day when the A.G. Edwards name disappears from the local skyline. But when that happens, remember that things could be worse. In Richmond, they probably will be.



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PostJun 03, 2007#128

We rock!
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PostJun 03, 2007#129

I find it interesting that Edward Jones in 2006 was larger than A.G. Edwards revenue-wise.



A.G. Edwards

2006 Revenues: $2,750-billion

F1000/#687 (dropped 22 spots from #665 in 2005)

Source



Edward Jones

2006 Revenues: $3.19-billion

According to the P-D, Edwards Jones' revenue was $3.5-billion in 2006.

Forbes 400 (Private) #89 (dropped 6 spots from #83 in 2005)

Source



The region's priority should be to do whatever it can to keep St. Louis' next F500 in town.
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PostJun 03, 2007#130

Imagine if downtown had this list--



EdJones

AGE (Wachovia)

Stifel

Scottrade

MetLife (GenAmerica)

GE (former Deutsche Financial)

plus

new Montgomery Bank Tower

BoA Tower

USBank Tower



The St. Louis Financial District would have clout!
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PostJun 08, 2007#131

I don't know if anyone else pointed this out--and I apologize if someone has--but the most recent edition of the St. Louis Commerce magazine states that our hometown has the largest concentration of securities firms in the nation, outside of NYC (of course). Very cool, if true.
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PostJun 09, 2007#132

steve wrote:I don't know if anyone else pointed this out--and I apologize if someone has--but the most recent edition of the St. Louis Commerce magazine states that our hometown has the largest concentration of securities firms in the nation, outside of NYC (of course). Very cool, if true.
I noticed that in the magazine as well. It was ironic to say the least. But yeah, St. Louis has long been known to have the largest concentration of large securities firm headquarters outside of NYC, and that doesn't change despite the new acquistion.



Also, A.G. Edwards had been the largest securities firm west of the Mississippi river until its purchase. Now, according to CNBC, Stifel Nicolaus is the largest west of the Mississippi river. It, of course, is based in St. Louis. Its headquarters are downtown.



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PostJun 14, 2007#133

I havent been paying much attention to this merging, where will the new headquarters be in St. Louis? Will they just use the A.G. Edwards building?
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PostJun 14, 2007#134

St. Louis Texan wrote:I havent been paying much attention to this merging, where will the new headquarters be in St. Louis? Will they just use the A.G. Edwards building?


Yep.
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PostJun 14, 2007#135

By the way, I am hearing and reading rumors about many brokers possibly leaving Wachovia Securities/A.G. Edwards to form their own firm in order to stay independent. Many will take their clients.
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PostJun 14, 2007#136

Arch City wrote:By the way, I am hearing and reading rumors about many brokers possibly leaving Wachovia Securities/A.G. Edwards to form their own firm in order to stay independent. Many will take their clients.


Many (all?) brokers are receiving bonus offers to stay.
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PostJun 14, 2007#137

The Central Scrutinizer wrote:
Arch City wrote:By the way, I am hearing and reading rumors about many brokers possibly leaving Wachovia Securities/A.G. Edwards to form their own firm in order to stay independent. Many will take their clients.


Many (all?) brokers are receiving bonus offers to stay.


That's par for the course in any acquisition like this. Most brokers will receive a percentage of their average production as a retention bonus, and that's what's going on with A.G./Wachovia. I think that they have to sign a non-compete and then have to stay for a certain number of years (6?) or else they'll have to pay a pro-rated portion of the bonus back. I forget what the average attrition rate is when it comes to deals like this, but some guys will go independent and others will jump to other firms. Many firms have subsidiaries for independent brokers - the brokers are their own boss, but the firm handles transaction processing and other back office functions.



The real "losers" in this deal will probably be brokers with production under $300k, but they'll be more welcome at firms like Stifel.
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PostJun 21, 2007#138

Looks like Ben Edwards really isn't happy.



Ben Edwards’ plea for A.G. Edwards future

By Jerri Stroud

06/21/2007 11:37 am



Benjamin Edwards III, former chief executive of A. G. Edwards Inc., the brokerage firm that bears his family’s name, made the following speech at Thursday’s shareholder meeting in which he spoke out against Wachovia’s acquisition of the St. Louis brokerage company.



He received a standing ovation. His speech:



“Joan and I are comfortably retired and probably don’t deserve the many kind calls and notes of condolence we received regarding the devastating news of Edwards’ sale. My heart cries out to those in both Wachovia and Edwards who will lose their jobs. Is being number two worth it? I also feel a deep sense of gratitude for all the Edwards people who helped build the company and who supported me all those years. I certainly couldn’t have retired so comfortably on my own production.



“We thought we had build something special: a company that puts clients first, employees second and shareholders third. Our theory was that if we did a good job for our clients and our employees, our shareholders would have maximum benefit in the long run. Our behavioral guideline was the ‘Golden Rule.’



“I believed we had the people, the client base, the physical plant, the capital and the operating ethic to give us another exciting and enjoyable 120 years. We had no size or profit goals, but I was confident that our people did what each could to avoid waste and work together for the common good. This corporate philosophy worked successfully for the 45 years I was around.



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PostJun 22, 2007#139

MattnSTL wrote:Looks like Ben Edwards (III) really isn't happy.
Not surprising considering this was a family-run company for a long, long time.



I find it interesting that Ben III says,



"We had no size or profit goals, but I was confident that our people did what each could to avoid waste and work together for the common good."




This is what essentially killed A.G. Edwards. You can't be a publicly-traded firm and have no size or profit goals. AGE was not growing in an increasingly competitive market. Edwards was trying to be organic and practical when their industry is in dog eat dog mode.



It seems the conservative culture of some St. Louis-based companies is what gets them devoured.
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PostJun 22, 2007#140

Arch City wrote:You can't be a publicly-traded firm and have no size or profit goals.


That's not true: http://www.berkshirehathaway.com
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PostJun 22, 2007#141

Actually, Berkshire Hathaway is not a good example.



First of all, Buffett and Munger are constantly looking for companies to acquire and things to invest in. With that said, they are a bit more methodical to their approach so they don't make acquisitions for just the sake of getting bigger.



They are sitting on about $40B in cash and in keeping the shareholder's best interests in mind they feel they can generate higher returns by acquiring companies than letting that cash sit in the bank and draw interest.



In terms of specific profit goals, Buffett does not get involved with forecasts/projections. He does do his absolute best to generate the highest possible returns on every investment and acquisition he makes for Berkshire Hathaway.
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PostJun 22, 2007#142

Arch City wrote:This is what essentially killed A.G. Edwards. You can't be a publicly-traded firm and have no size or profit goals. AGE was not growing in an increasingly competitive market. Edwards was trying to be organic and practical when their industry is in dog eat dog mode.



It seems the conservative culture of some St. Louis-based companies is what gets them devoured.


Along those same lines, their huge cash reserves played a role as well. Had they incurred more debt, presumably to finance acquisitions, they would not have been nearly as attractive to outside suitors.
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PostJun 22, 2007#143

TB1000 wrote:Actually, Berkshire Hathaway is not a good example.



First of all, Buffett and Munger are constantly looking for companies to acquire and things to invest in. With that said, they are a bit more methodical to their approach so they don't make acquisitions for just the sake of getting bigger.



They are sitting on about $40B in cash and in keeping the shareholder's best interests in mind they feel they can generate higher returns by acquiring companies than letting that cash sit in the bank and draw interest.



In terms of specific profit goals, Buffett does not get involved with forecasts/projections. He does do his absolute best to generate the highest possible returns on every investment and acquisition he makes for Berkshire Hathaway.


But it is an example of a company that has no size or profit goals.
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PostJun 22, 2007#144

Come on TCS, AGE is not in the same league with Berkshire - in any shape, form or fashion.
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PostJun 22, 2007#145

It does have size and profit goals but not in defined terms such as "Grow 5% a year and have net income increase 10%".
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PostJun 22, 2007#146

DeBaliviere wrote:Along those same lines, their huge cash reserves played a role as well. Had they incurred more debt, presumably to finance acquisitions, they would not have been nearly as attractive to outside suitors.
I agree.
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PostJun 22, 2007#147

Arch City wrote:Come on TCS, AGE is not in the same league with Berkshire - in any shape, form or fashion.


Never said they were. Simply pointing out that your statement...


Arch City wrote:You can't be a publicly-traded firm and have no size or profit goals.


...was demonstratably incorrect.

PostJun 22, 2007#148

TB1000 wrote:It does have size and profit goals but not in defined terms such as "Grow 5% a year and have net income increase 10%".


Yes. Basically his only goal is to get bigger.
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PostJun 22, 2007#149

The Central Scrutinizer wrote:
Arch City wrote:Come on TCS, AGE is not in the same league with Berkshire - in any shape, form or fashion.


Never said they were. Simply pointing out that your statement...


Arch City wrote:You can't be a publicly-traded firm and have no size or profit goals.


...was demonstratably incorrect.


As long as we are picking nits...demonstratably is not a word.
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PostJun 22, 2007#150

jlblues wrote:
The Central Scrutinizer wrote:
Arch City wrote:Come on TCS, AGE is not in the same league with Berkshire - in any shape, form or fashion.


Never said they were. Simply pointing out that your statement...


Arch City wrote:You can't be a publicly-traded firm and have no size or profit goals.


...was demonstratably incorrect.


As long as we are picking nits...demonstratably is not a word.


My use of that word was demonstrably wrong. :oops:
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