Wachovia's$6.8 billion agreement to buy A.G. Edwards is likely to spur more acquisitions of independent brokerage firms, analysts say.
The reason: banks are trying to bulk up on brokerage services, while traditional outfits like Edwards are dwindling in number and losing clients to cheaper online competitors.
“The deal demonstrates that full-commission brokerages (serving) the mass market segment is very challenging,” said David Trone, a securities industry analyst at Fox-Pitt Kelton. “The smaller clients are increasingly price-sensitive and are moving to places like Schwab or Fidelity,” he added, referring to clients with less than $500,000 to invest.
A.G. Edwards is currently the biggest independent brokerage firm, with nearly 7,000 brokers. Wachovia’s acquitision will create the second-largest retail brokerage behind Merrill Lynch.
The most likely takeover targets among independent brokerages, analysts say, include Raymond James Financial, with has about 5,000 brokers, as well as Stifel Financial and Oppenheimer, which each have roughly 1,000 brokers. Jefferies and the privately-owned Edwards Jones are also potential candidates.