By Pam Martens: September 20, 2016
Imagine how you might feel if you were part of a distinguished family that built a respected business over 120 years only to see it gobbled up against your wishes by a banking behemoth, Wachovia, which collapsed a year later and was then forced into a shotgun wedding with another mega bank, Wells Fargo. Today, the Senate Banking Committee will put the finishing touches on this tragic tale of how a fine St. Louis family, the Edwards, lost control of their legacy of putting the customer first, to end up as part of a company now being shamed for opening two million fake accounts that were never authorized by its customers.
The Edwards family story will not be part of today’s Senate hearing, but one can easily imagine that five generations of Edwards will be looking down from heaven today on the proceedings and cursing one name: Bob Bagby, the man who orchestrated the sale of the 120-year old brokerage firm, A.G. Edwards & Sons to Wachovia in 2007.
Albert Gallatin Edwards, the founder of A.G. Edwards & Sons in 1887, was the son of Illinois Governor Ninian W. Edwards. The Edwards family shared a close friendship with Abraham Lincoln and he and Mary Todd were married in the Edwards home on November 4, 1842. Before founding A.G. Edwards with his son, Benjamin F. Edwards, Albert Gallatin served as Assistant Treasury Secretary under Lincoln and four subsequent presidents. He knew a thing or two about banking.
Albert Gallatin died in 1892 at age 80 and another son, George Lane Edwards, took the reins. George Lane’s brother, Albert Ninian, was passed the baton in 1919. A.G. Edwards & Sons bought a seat on the New York Stock Exchange in 1898.
A.G. Edwards & Sons ably survived the 1929-1932 stock market crash that wiped out 90 percent of the stock market’s value from peak to trough. By that time the firm was so well respected that its floor broker on the New York Stock Exchange, William McChesney Martin, Jr., only age 31 at the time, was named President of the New York Stock Exchange. (An interesting anecdote about that later.) Martin would go on to become Chairman of the Board of Governors of the Federal Reserve System from April 2, 1951 until January 30, 1970 – serving under five different presidents.
Presley W. Edwards, son of Benjamin F. Edwards and grandson of founder Albert Gallatin Edwards ran the firm through the challenging years of the Great Depression and thereafter until his son, Benjamin Franklin Edwards III, became Managing Partner in 1967. Following the firm’s incorporation, Benjamin Franklin Edwards III became Chairman and CEO, eventually building the retail brokerage firm into the largest independent retail brokerage firm in the country.
I had the privilege to work for A.G. Edwards while Ben Franklin Edwards III was at the helm. After the firm went public in 1971, he regularly penned letters to shareholders admonishing greed and wrongdoing on Wall Street. Copies of his annual letter were posted behind the copy machine in the branch so that employees could regularly remind themselves of the firm’s motto: focus on taking care of the customer and everything else will fall into place. The firm had no proprietary products at all so that brokers could be free of internal pressure and buy what they felt was in the client’s best interest.
The back office had been located in St. Louis for decades with veteran employees who had expert knowledge of how to get things done right the first time. It had state of the art trade processing capability that was far superior to that of many larger firms.
Ben Franklin Edwards III made it his mission to make visits to branches all over the country each year, letting brokers know he was on top of things. On one trip to our branch he told a group of us his family’s humorous version of how William McChesney Martin, Jr. went from floor broker to President of the New York Stock Exchange at age 31. Edwards said Martin would come home at night and take off his floor broker jacket and find trade tickets stuffed in his pockets that he had forgotten to execute. So the stock exchange thought he would do less damage by booting him up to the position of President.
Edwards also shared with us his philosophy on how to deal with a rogue broker: remove him with a scalpel from the organization, making sure to get any cancer he might have spread.
On one of Edwards’ visits to the branch we were celebrating the expansion and remodeling of the office and wanted to host an elegant celebration for his arrival. The St. Louis headquarters office actually had a curator of the A.G. Edwards artifacts dating back to the company’s founding. We had prints made of some of these amazing artifacts, like a handwritten brokerage statement from the early days and artifacts showing the close relationship between the Lincolns and Edwards. Edwards beamed when he saw the attention to detail our office had gone to for his visit.
Edwards announced his retirement in 2001 and it was assumed by his brokers and veteran staff in St. Louis that his son, Ben Franklin Edwards IV (Tad), would take over. But the Board of Directors chose a non-family member, Robert (Bob) Bagby, as CEO. After promising that the company would remain independent, Bagby sold the firm to Wachovia Bank in 2007, earning coast to coast outrage from brokers and veteran employees who pummeled him with hate mail and online posts for months.
Bagby walked away with $7.5 million in vested Wachovia stock and more than $10 million in compensation and benefits when he left Wachovia the following year. Shareholders and brokers did not fare as well. Wachovia collapsed into a forced sale to Wells Fargo during the financial crash of 2008.
Ben Franklin Edwards III died in 2009 at age 77, living long enough to see his son, Tad, start a new brokerage firm to honor the family name. According to the firm’s web site, Benjamin F. Edwards & Co., which was founded in 2008, now has “more than 50 offices and almost 200 advisors in 24 states.”
We have one message for Tad: don’t forget about the scalpel.