At a time when the once-coveted job of branch office manager has become an obstacle course of administrative red tape and regulatory stumbling blocks, there may be a new hurdle on the path for branch managers at Wachovia Securities. In June, Wachovia Corp. announced that it was opening its independent brokerage arm -- Wachovia Securities Financial Network (FiNet) -- to qualified reps who currently work as employee brokers at Wachovia Securities. (For more, see the August issue of Registered Rep. magazine, to be mailed the first week of August.)

Many of Wachovia's branch office managers are fearful of losing top-level producers to FiNet, which could cut into their compensation. A BOM on the West Coast notes, "I don't think a lot of advisors know about this yet, because the firm hasn't really made it crystal clear to anyone. But, once they do, I think our advisors will run. The payouts offered to top-producing reps are going to be huge. Branch managers at this firm are really fuming at a time when BOMs in general are as demoralized as I've ever seen."

Currently, only Raymond James & Associates and Wedbush Morgan Securities have channels through which a broker can change from being an employee to an independent contractor. The goal of such programs is to keep valued producers at the firms at a time when the number of independent brokers is on the rise. Last year, for example, Raymond James & Associates, which has nearly 900 advisors, lost only eight people, versus a 10 percent to 15 percent turnover rate in the rest of the industry, a company spokesperson says. Asset growth in the independent channel is also outpacing asset growth at the full-service firms: Over the last 10 years, independent advisors -- including RIAs -- have enjoyed asset growth of 16 percent a year, versus just 11 percent at full-service firms, research from Calif.-based Tiburon Strategic Advisors indicates.
Though rumors of such a move have abounded for years, Wachovia and FiNet finally plan to start allowing reps to switch channels at the end of the summer, says FiNet's CEO John Peluso, Jr. The new policy comes at a time when FiNet is making its mark on the independent contractor broker/dealer industry. The firm reported revenues of $140 million last year -- up 28.2 percent from 2004.

Some BOMs say they haven't even been informed about the details of Wachovia's program. "I've only heard rumors about this and am still 199 percent in the dark," a Wachovia BOM based in the Southeast says. "I was under the impression advisors could only leave in a way that's 'revenue-neutral' for the branch. If that isn't the case, this is going to be horrible." Wachovia declined comment on the issue.

One New York-based BOM speculates that Wachovia will try to compensate its BOMs for lost income with some kind of stipend in the first year. "But, they'll never come close to paying us how much we're going to lose by virtue of this move. The company is essentially telling us that it's going to be taking the benefits of our recruiting labor. There's no respect for BOMs at this firm anymore," he says. Wachovia declined to comment on details about how its BOMs would be compensated It's not clear, however, if hordes of Wachovia employee brokers will actually decamp for the independent network. Take Raymond James' experience. "When we opened those doors to our advisors," says Jim Fulp, executive vice president/director of sales for Raymond James Financial Services -- Raymond James & Associates' independent arm -- "people in the industry told us too many of our reps would be running to the independent side. We haven't had a huge shift at all. Some people have moved, but certainly not enough to make a wrinkle in our corporate culture."

Wachovia spokesman Tony Mattera says he doesn't expect a mass exodus, because independence is not for everyone. "We don't anticipate a mad rush of advisors to the independent side," he says. "The responsibilities are huge. Wachovia reps are able to move once they qualify and have done their due diligence, but most haven't yet, nor do we expect a huge transition."

Will other wirehouses follow Wachovia's lead? So far, creating independent channels for brokers within full-service brokerage doesn't seem to be a trend, says Chip Roame, president of Tiburon Strategic Advisors. "I think Wachovia's unique in this regard," he says. "I think the other wirehouses will try to avoid doing this because of the upheaval it will create -- particularly with management. But, I also think that the independent world is growing so quickly that it may just be a matter of time before the others follow suit." Offering reps a variety a ways to do business shows them that they are valued and may help firms retain them, he notes.

FiNet is a distinct b/d registered separately from Wachovia Securities. It evolved from JW Genesis Financial Services, which Wachovia acquired in 2001.