Magazine article American Banker

First Union Forging Link to Independent Brokers

Magazine article American Banker

First Union Forging Link to Independent Brokers

Article excerpt

First Union Corp. said Friday that it had agreed to buy JWGenesis Financial Corp., a brokerage firm in Boca Raton, Fla., for up to $110 million in cash, to expand its investment services business.

The acquisition would put a new twist on the business for First Union, which employs 7,000 registered representatives. JWGenesis has a network of 500 self-employed brokers.

Rather than focus on potential customers, the Charlotte, N.C., banking company portrayed the deal as a bid to appeal to as broad an audience of brokers as possible.

First Union employs brokers in 365 stand-alone brokerage offices in 43 states, and places brokers in many of its 2,400 retail branches on the East Coast. It also has Internet brokerage capabilities. But it has no affiliations with independent brokers, who run their own offices and use a firm like JWGenesis for clearing, research, and products.

JWGenesis would be managed as a separate National Association of Securities Dealers broker-dealer within First Union Securities.

First Union said independents are proliferating twice as fast as brokers at big securities firms. The deal "reflects our determination and capacity to offer financial advisers a variety of ways to work with or for First Union," said Daniel J. Ludeman, president and chief executive officer of the brokerage group at First Union Securities.

Analysts said First Union will likely continue to pick up small brokerage operations to build scale. The company has also shown a willingness to offer products from other companies through its brokers, rather than to rely on sales of its own investment products to get revenues.

"They want to become more of a distribution conduit than a manufacturer," said Christopher Marinac, an analyst at Robinson Humphrey in Atlanta.

First Union agreed to pay between $10 and $12 in cash for each share of JWGenesis, but the final price will depend on how many brokers stick around. …

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