Edwards Finds Best Growth Strategy Is Sticking to Core Brokerage

If you ask small-town bankers who their main competition is, they're likely to point warily at the A.G. Edwards office across the street.

The St. Louis-based brokerage has made a business of stealing customers from community banks by opening up offices near bank branches, as does its fierce rival Edward D. Jones & Co.

But unlike Jones & Co., which is aggressively pushing to expand its banking powers and office network, A.G. Edwards & Sons is taking growth as it comes.

"We've always had plenty of growth," says Benjamin F. Edwards 3d, the company's chairman and the great-grandson of its founder. "We don't want to force it."

Indeed, since its founding in 1887, the Edwards' family business has transformed itself from a small midwestern firm to a national operation with the fifth-largest brokerage office network in the country. A.G. Edwards has 5,484 registered investment representatives selling out of 515 offices across the country.

Still, while A.G. Edwards enjoys a comfortable lead in some areas, Mr. Edwards admits the firm faces stiff competition from other securities firms and banks.

A.G. Edwards used to refer clients to banks for personal trust services. But about eight years ago, the company found it was giving up customers this way, as more and more banks began offering investment services.

"We found we were losing the whole account to them," Mr. Edwards says. "That's why we were pushed into the trust business."

In 1987, A.G. Edwards bought a small St. Louis-based trust company and began offering trust services on its own. Subsequently, the firm has opened trust offices in Florida, Texas, and New Jersey. The company would not disclose the revenues and income it derives from the trust business.

While A.G. Edwards may have been one of the first brokerage firms to challenge banks on the trust front, it isn't the last. In May, Jones & Co. is expected to receive approval from federal regulators for its purchase of a small Missouri thrift. The rival brokerage plans to use the thrift as a launching pad to market a wide range of banking services, including personal trust services and even home loans.

Despite the looming threat from Jones & Co., Mr. Edwards says he's not interested in expanding beyond the limited banking services his firm currently offers.

"The time you spend learning new business is more time taken away from your core business," Mr. Edwards says.

A.G. Edwards may have learned that lesson the hard way. Last year the company made a foray into investment banking and took a hit on its bottom line, according to Nancy Zandell, a stock analyst with Undiscovered Stocks Inc., Palm Beach Gardens, Fla.

The company's earnings fell $30.8 million in 1994, to $124.1 million. The firm has since cut back on its underwriting activity, Ms. Zandell says.

Instead, A.G. Edwards will concentrate more on its retail brokerage business, an area that Mr. Edwards says is alien to the small banks he competes with.

"I don't think (banks) have the foggiest idea of what compliance is in this business, and what some of the risks are," Mr. Edwards says. "Just as I don't have the foggiest idea what the pitfalls are to look for in a commercial loan.''

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