Wachovia/A.G. Edwards: Marriage Is A Scary Thing

Wachovia/A.G. Edwards at a Glance

Total client assets: $816 billion/$522 billion

Number of advisors: 8,100/6,666

Average annualized revenue per advisor: $702,000/$492,000

Pretax profit margin: 23% / 17%

Surviving mascot: Wachovia's abstract sea wave

Memorable quote: “We are not a wirehouse. I want to make that clear.” — Wachovia CEO Daniel Ludeman

Biggest hurdle: Retaining A.G. Edwards reps

After 127 years of independence, the firm of General Albert Gallatin Edwards will soon be no more, having been swallowed by Wachovia Securities. The deal closed in October, and after January 1, when the two broker/dealers merge into one legally, workers will begin to take a crowbar to the A.G. Edwards nameplate at offices around the country.

This marks AGE's swan song in the 17 years this magazine has been surveying broker satisfaction. Are AGE reps satisfied? Wachovia executives say they are, and expect just 3 percent of the advisors not to stay with AGE/Wachovia. Reps were surveyed during the takeover, and they were still pleased: Edwards' total average rating was 8.7 this year, up from 8.5 last year. The rating was just enough to let it hold onto second place, beating out an increasingly content bunch of reps at Merrill Lynch (pre-write-downs). By comparison, brokers at Wachovia were more somber (7.7), but still slightly more satisfied than last year (7.5), placing them fourth behind Merrill.

Yet, at both firms, the word on the lips of most advisors is “uncertainty.” Even though the AGE name will be retired shortly, reps at the two firms will be operating on independent platforms until full integration is complete (scheduled for February 2009).

Reps and recruiters dispute the management's sunny forecast for attrition, saying low-end Edwards reps have been walking out because they stand to lose a lot on Wachovia's grid, which pays only 20 percent on the first $10,000 in production. But it's important to note that attrition among reps producing $250,000 and above is “low,” according to a company spokesman, a fact recruiters and reps confirm. Still, that could change between now and 2009. As one AGE rep put it, “They have two years to earn our loyalty.”

One top Edwards producer says aside from his $2-million retention bonus, one thing that has made him feel more positively about the move is that Wachovia doesn't force reps to pay “niggling little fees” on certain products like IRAs, or for accounts above $250,000. The rep had this to say to other Edwards reps: “Unless you owed money to Tony Soprano, I can't think of a reason why someone would leave.”

Reps at both firms who were considering leaving cited uncertainties surrounding management and support personnel. Daniel Ludeman will remain CEO of Wachovia Securities, and Jim Hays will be the head of the branch network, but its often regional and branch management that matter most, and some of these jobs at both firms will likely be eliminated. “Some percentage of the managers will be duds,” says one top Edwards producer.

But according to reps, the likeliest place for a train wreck is the support department (IT, HR, legal, compliance, products). The fate of the 2,900 various support personnel at Wachovia headquarters in Richmond, who must now move to St. Louis, is unknown. So the move could cost reps a lot of long-term relationships.

Not to mention that the AGE support people will be using Wachovia's technology, and the shrunken staff will be potentially fielding twice as many phone calls from reps. If it's any consolation, Edwards reps rated their firm's support far better (8.2, down from 8.4) than Wachovia reps did (7.3, up from 6.9). Bottom line: It's wait-and-see time, say reps. “It's as if we've walked down the aisle, the minister has said you can kiss the bride, and then immediately asked, ‘How's the marriage going so far?’” Here's to hoping it doesn't end in divorce.