THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, June 23, 1996 TAG: 9606220358
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
TYPE: Q & A
SOURCE: By Tom Shean
STAFF WRITER
LENGTH: 95 lines
It's been a great time for the nation's brokerage firms as billions of dollars pour into stocks and mutual funds. But regulatory changes and the availability of new technology have fueled intense competition for these investment dollars.
Scott & Stringfellow Inc., which has been in the brokerage business for more than a century, has responded by adding branches, upgrading its research and devoting more attention to managing assets for a fee.
The Richmond-based firm has 28 offices in four states, including branches in Norfolk, Virginia Beach and Williamsburg. Earlier this year, Scott & Stringfellow entered South Carolina by opening an office in Charleston.
S. Buford Scott (at right) joined Scott & Stringfellow in 1958 and took over the management reins from his father in 1973. He is the firm's chairman and grandson of the founder.
During a gathering at the firm's Williamsburg office last week, Scott talked to staff writer Tom Shean about Scott & Stringfellow's expansion and the conditions in the securities industry.
What are your plans for additional offices?
We expect to open a branch shortly in Greenville, S.C., and we're negotiating with people in five locations in Virginia and North Carolina. Some logical places would be Fredericksburg, Alexandria and Newport News. We would like to have 35 branches a couple of years from now.
Are there nearby states that have been excluded from your expansion plans?
We've decided not to go north of the Potomac River unless we are able to arrange an advantageous relationship with an established firm. Our growth will be in Virginia, North Carolina, South Carolina. Perhaps in Tennessee and perhaps in Georgia.
What are your plans for adding brokers?
We have 226 now. We'd like to have 300 brokers by the year 2000.
Several brokerage firms have gotten out of the municipal bond business because of the slim profit margins. But Scott & Stringfellow said last November that it will continue in the business. Why?
A lot of firms have had difficulty making money from underwriting municipal bonds, partly because of the uncertain outlook about tax rates. In addition, there are trading losses when you're sitting there with $100 million or $150 million of bonds and a member of the Federal Reserve Board makes a comment that sends interest rates rising. A lot of big firms had specialists in 50 states, which added to their overhead. But we think we can do a very good job in Virginia and North Carolina.
Millions of households have desktop computers and the software to make their own investment decisions. How will this affect the demand for services from firms like Scott & Stringfellow?
Even for people who want to invest on their own, there's some protection in having an investment professional who knows their situation. If you're sitting there with your machine and the market goes down 500 points, you've got to make a decision. Do you buy? Do you sell? Or do you hold? And what do you buy, sell or hold?
Computer and telecommunications technology is increasingly important for the delivery of financial services. Can Scott & Stringfellow make the sort of investment in new technology that much larger firms have been making?
We're spending $1.5 million on technology just this year. If you're not up to date with your technology, you're going to be less competitive. And those who are not able to compete are not going to be in the game any more. But it doesn't necessarily mean that you have to be big. You have to find a niche for yourself and deliver high-quality service.
A small New York investment banking firm has conducted an initial public offering of stock on the Internet. Now it's seeking regulatory approval to trade stocks on the Internet. What's your reaction?
My first reaction is that it scares me to death. I think that trading stocks over the Internet would open the door for millions of people to make uninformed decisions.
Has Scott & Stringfellow felt any pressure from commercial banks moving into securities underwriting?
Sure. The top 20 banks in the country have essentially been given a green light to do whatever they want. They've become real competitors in the management of corporate financing.
If Scott & Stringfellow is devoting greater attention to managing customers' assets, it's probably less interested in merely taking orders for buying and selling stocks. Why?
The business of executing trades can be done by almost any firm these days, and a good many of them can do it cheaper than Scott & Stringfellow. People who are looking only for the execution of trades probably are not logical clients for our firm.
What's the biggest competitive threat facing Scott & Stringfellow?
There are hundreds of threats. Other brokerage firms, money management firms, anyone gathering assets to manage. I don't think any one of these could put us out of business if we are doing a good job for our clients.
There has been a steady consolidation in the securities industry. What is the long-term outlook for a regional firm like Scott & Stringfellow?
As long as there are people who want to call a broker who knows their situation well and has a selection of investment products to meet their needs, I think there will be a need for firms like ours. ILLUSTRATION: S. Buford Scott
KEYWORDS: INTERVIEW by CNB