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Virginia Business
March 2004

Independent brokerage firms are a dying breed in Richmond. Since 1997 a rash of mergers and acquisitions gobbled up the independents. One of the city’s largest brokerages, Wheat First Securities, was acquired by First Union Corp. of Charlotte, N.C., and eventually became Wachovia Securities, following the merger of First Union and Wachovia. Branch Cabell & Co. traded hands twice in one year before being folded into RBC Dain Rauscher of Minneapolis, Minn. And BB&T of Winston-Salem, N.C., acquired both Scott & Stringfellow and Craigie Inc. — two of Richmond’s oldest firms.

When the smoke cleared, the two dominant remaining players in the market were Davenport & Co. and Anderson & Strudwick, companies with a long tradition of independence and with deep roots in the Richmond region. As part of the March banking/finance issue, Publisher Doug Forshey sat down with three principals at Anderson & Strudwick: G. Mark Hamby, president and CEO, G. Lee Crenshaw, chairman, and James “Jay” Donlin, COO, to talk about the industry and the officers’ ties to Richmond.

Forshey: How long have you each been in Richmond?

Hamby: This area has always been my home. My family has lived in Richmond for generations, and I grew up here and attended Randolph-Macon. I had been offered other positions in different cities but never wanted to leave.

Crenshaw: I was also born and raised here. My dad was the chairman of Universal Leaf, and I’ve always aspired to create something of importance, like he did, here in Richmond. After graduating from Virginia Commonwealth University, I went to work at Wheat First Securities and bounced around until joining Anderson & Strudwick almost 10 years ago.

Donlin: I’m from Occoquan, and when I graduated from West Virginia University I didn’t want to return to the hectic Northern Virginia environment. I came here 10 years ago because this area is ideal. It has all the amenities of a large city while retaining a small-town culture.

Forshey: What changes have you seen in the brokerage industry over your career?

Hamby: The number of investment products available today is far greater than when I started in the business 17 years ago. And the amount of investment information, via the Internet, television and print, is staggering. Investors need help sifting through all the information when making intelligent decisions.

Crenshaw: Regulatory changes are definitely having an effect on the industry. Government regulations have tripled and all that paperwork requires additional staffing on our end.

Donlin: The industry has gone nearly full circle. A client relying on investment advisors was the norm many years ago. For a while some clients thought they could go it alone using no-cost or low-cost advice providers. Those same people have learned that there is tremendous value in finding an advisor they can trust to help them navigate today’s complex financial environment.

Forshey: How has consolidation affected the industry?

Hamby: We are seeing many financial advisors dissatisfied with the larger company that bought out their firm. These professionals are looking for an equity opportunity and, consequently, we are able to recruit some very experienced people as we expand our business.

Crenshaw: We are not a huge organization. It is more like a family here. Many of these large mergers are disrupting the cultures that the acquired brokerage firms once had. That is why we are committed to remaining independent.

Donlin: Most regional broker-dealers have been gobbled up by large firms (banks and wire houses). The cultures have been significantly altered within those firms based on what’s driving the bottom line. This can leave both clients and brokers frustrated.

Forshey: What impact is technology having on your business?

Hamby: The Internet had an obvious effect on the market, especially through the late ’90s. People didn’t think they needed a full-service investment advisor once they could trade online. However, the pendulum has swung back, and people are once again seeing the value in a full-service advisor and brokerage firm.

Crenshaw: Today’s customer is a lot more demanding. They are better informed though technology and thus are expecting more from their investment advisor. However, no amount of technology can replace trust and good customer service.

Donlin: Technology has increased the advisor’s ability to quickly determine the benefits and risks of investment vehicles. What used to take hours or even days to research now only takes seconds. However, I believe that this rapid technology has also led to more volatility in the market. With so much news available 24 hours a day, many times emotions can drive the market. A trusted advisor can provide the rationale for thoughtful investing.

Forshey: What is your firm’s greatest challenge in 2004?

Hamby: We plan on expanding in 2004, and our greatest challenge will be to recruit the right talent. We want to remain as flexible as possible when recruiting, but it is difficult to compete (on compensation) with the larger firms.

Crenshaw: Anderson & Strudwick was formerly owned by a few partners who didn’t see the need to change their way of doing business. Our image was that of a “sleepy little investment firm.” We are out to change that perception — to our clients and prospective employees. We’ve rolled out a branding campaign on television and in print and have revamped our Web site.

Donlin: We’ll have our hands full in the coming year keeping support levels appropriate during the rapid expansion we are involved in.

Forshey: What do you see as the greatest challenge for the securities industry in 2004?

Hamby: Maintaining the level of customer service required for managing large and small investors in a very complex financial environment. Large firms are continually raising the bar on what they consider to be an acceptable client. Who will serve the small- to mid-size investors as firms concentrate on their most profitable customers? We take the approach that no client is too small, and that can get lost in today’s larger operations.

Crenshaw: There has been a lot of bad publicity surrounding our business. We need to restore confidence in the market and show people that the surviving firms are being run by committed professionals who can be trusted.

Donlin: Many firms have cuts costs and overhead to survive the recent bear market. Now that things appear to be turning around, the industry will have to invest in infrastructure improvements and staffing to keep pace with the increased business.

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