Profiles In American Enterprise

A.G. Edwards Inc.

The industry for securities is undoubtedly an exciting and fast paced
industry. This means that brokerage firms such as A.G. Edwards and Sons
must always be watching the stock prices on every stock in the market so
that they can give their clients maximum profit. When A.G. Edwards and
Sons’ clients do well then in turn so does the brokerage firm. A.G.
Edwards Inc. is not the biggest corporations in America, but yet it is
still a very large corporation and has great importance in the industry
for which it participates. This paper will give an in depth explanation
about how A.G. Edwards functions as a cor-poration.
Along with competition from the government, banks and other brokerage
firms there is also probably the biggest factor involved of interest
rates. Interest rates are indi-rectly proportional to the activity in
the stock market. This means that when the interest rates fall the
market for securities becomes active. This is due to the fact that
people want the highest yield on there money and when interest rates are
low, investing money into a bank would yield less money then it would
have before at a higher interest rate. So people tend to want to put
there money into something that will give them a higher yield and stocks
are just that.
An example of this inversely proportional relationship is always being
demon-strated and was demonstrated in the past few years. At the end of
1992 to the beginning of 1993 the volume in most businesses was at
record levels obtaining a pre-tax net income for the whole industry of
9.1 billion dollars setting a new record for the second year in a row
(Hoover’s Company & Industry Database, 1993, p. 1 (Hoover, 1993,p.1)).
This trend continued when in the beginning half of 1993 offerings (new
business for the com-pany) exceeded those of 1992 (Hoover,1993, p. 2).
Examples of this are as follows; more than 700 billion dollars of debt
was issued in 1992 and then in the first half of 1993 an-other 440
billion dollars of debt was issued (Hoover, 1993, p. 2). More than half
of this debt was due to asset-backed debt such as credit cards and other
charges made to credit (Hoover, 1993, p. 2). These debts were included
because the debts were more or less sold to banks and other money
lending institutions who were more willing to take the risk for the high
interest rate.
This drop in interest rates did wonders for the brokerage firms involved
and also corporations that had acquired debt over the years. The fall
of interest rates was great for the brokerage firms because of the
increase in business with the public’s desire to invest. So the
corporations used it to issue off more stock to the public to pay off
their debts (Hoover, 1993, p. 2).
As if interest rates didn’t have enough effect on brokerage firms, there
is also the heavy competition that was involved. This competition is
not only from other top broker-age firms such as Merrill Lynch, Morgan
Stanley, Primerica (Smith Barney Shearson), Salomon, and Goldman Sachs,
but there is also competition from big banks and securities over seas.
Banks have a number of ways to compete with security firms, but the most
prevalent and direct is through mutual funds. Since the late 1980’s
banks have been ag-gressively competing with mutual fund sponsors by
issuing there own mutual funds to the public (Hoover, 1993, p. 3).
Mutual funds that are issued by banks are now the fastest growing part
of the mutual fund industry, with 10.6 percent of total assets and 30
percent of new sales (Hoover, 1993, p. 3). There has just recently been
a large amount of compe-tition from markets overseas and this
competition continues to increase. There are a few theories as to what
has caused so many U.S. investors to invest in foreign markets. It is
supposed that it is either individual investors who want to further
their portfolio or in-vesting in foreign markets to try and avoid
interest rates and changes in currency (Hoover, 1993, p. 4). The
investment in foreign markets has also been attributed to technology and
the fact that up to date information can be obtained instantly from any
place in the world (Hoover, 1993, p. 4). But whatever has caused it
global securities have skyrocketed.
Before the organization and structure of the company a brief history
and explana-tion of the company will be discussed. A.G. Edwards & Sons
was founded in 1887 by Benjamin Franklin Edwards making A.G. Edwards &
Son the first St. Louis brokerage