Aiming to forestall defections and address merger-related anxieties, Wachovia Securities LLC and A.G. Edwards Inc. announced broker retention packages Friday.
IRVINE, Calif. — Aiming to forestall defections and address merger-related anxieties, Wachovia Securities LLC and A.G. Edwards Inc. announced broker retention packages Friday.
A.G. Edwards reps will get awards ranging from 20% to 100% of trailing 12 months’ production.
The payouts come in two pieces: a base award and an extra incentive based on performance.
The base award is in the form of a six-year forgivable loan. The incentive piece is awarded after five years and vests five years after that.
Million-dollar A.G. Edwards producers will get a base award equal to 70% of production and an incentive of 30%. At the bottom end, $100,000 qualifies a rep for a 20% incentive award.
Reps also can take the base award in equal cash increments over six years, or choose a combination of cash and deferred payments.
Meanwhile, Wachovia Securities reps will receive 10% to 35% of trailing 12 months’ production.
Their awards go into the firm’s deferred-compensation plan. Assets in the plan vest in one-third increments after five, six and seven years.
A.G. Edwards’ reps will get their upfront awards in November. Wachovia Securities brokers will get theirs in January.
The retention package for Wachovia Securities representatives came as a surprise to some.
Although the focus has been on how reps with St. Louis-based A.G. Edwards might react to the merger, which was announced May 31, brokers with Wachovia Securities also have expressed concerns about its effect on their daily work life.
The retention package is “a sign that we respect their concerns” about merger disruption, said Wachovia spokesman Tony Mattera.
What is known for certain is that the combined firm will be based in St. Louis. Details of the relocation still are being worked out, but Wachovia Securities reps expect a large number of support and operations people at Wachovia Securities headquarters in Richmond, Va., to be supplanted by A.G. Edwards staff in St. Louis.
Mr. Mattera said that Wachovia Securities is working through the details of the integration and stressed that it won’t know for some time exactly which departments might be relocated to St. Louis, “although it’s fair to say the bulk of our operations will be [there.]”
Top executives, including Wachovia Securities chief executive Daniel Ludeman, who will run the merged firm, are relocating to St. Louis.
“They made Ludeman move to St. Louis and be there in two weeks,” said a Wachovia Securities rep in the Northwest, who asked not to be identified.
Wachovia Securities brokers anticipate that most of the firm’s back office eventually will be run out of St. Louis, and several said they had heard that research and trading functions could be consolidated at parent Wachovia Corp.’s Charlotte, N.C., headquarters.
Easier integration?
Mr. Mattera called such talk “speculation and guessing.”
Wachovia Securities reps experienced firsthand the technical snafus that plagued the integration of the back-office system of Prudential Securities Inc., after the New York firm’s 2003 merger with Wachovia’s
broker-dealer.
The integration should be easier this time, Mr. Mattera said, because A.G. Edwards and Wachovia Securities are on the same Thomson Beta Systems platform.
“I’d be happy if they move to St. Louis. I understand Edwards has [a] great back office,” said a Wachovia Securities producer in Northern California, who asked not to be identified.
“I heard Wachovia [Securities] has had difficulty staffing in Richmond,” said recruiter Danny Sarch, founder of Leitner Sarch Consultants Ltd. in White Plains, N.Y. “Going to St. Louis made this a perfect fix.”
But part of Wachovia Securities’ support structure will have to be retained, Mr. Sarch said. “There’s no way the [A.G. Edwards] people in St. Louis by themselves can service [the 15,000] brokers” the combined firm will have, he said.
How the back-office integration is handled has some brokers worried.
“Our service levels back East are already marginal, but by the time they merge and move, I don’t see how there’s any upside for us,” said a Wachovia Securities rep in California, who asked not to be identified.
A Wachovia Securities rep in the Southeast, who also asked not to be identified, also is concerned about compliance. “We’ve got it down to the point where [it’s] fairly easy to [deal with and] not too crazy,” he said.
The compliance person that rep likes came from New York to Richmond after the merger with Prudential Securities, and the rep said he doesn’t know if that individual will relocate.
The marketing department, which is “top-notch,” also may have to move to St. Louis, the rep added.
A Wachovia Securities rep on the East Coast said that his biggest concern involves a decline in “collegiality,” a characteristic dating from its regional-firm roots.
“When you create [such a] huge organization, you end up with no real connection [to the company] other than the person you work with next door,” said this rep, who asked not to be identified.
“I didn’t sign up for a 15,000 broker mega-firm,” said the Wachovia rep in California, who left a large wirehouse years ago to go to Chicago-based Everen Securities Inc., which was bought by a predecessor firm of Wachovia.
This broker said that he also has been affected competitively in his small community, where A.G. Edwards is one of the few other firms.
“Across the street are eight or nine Edwards reps, and now their accounts are off limits,” he said.
