Wells Fargo & Co. has no intention of ditching Wachovia Securities, according to the brokerage firm's chief executive, Danny Ludeman. "Wells Fargo is totally committed to the brokerage business," he said in an interview Feb. 20. That was the same day that Mr. Ludeman told Wachovia troops that there would be no retention bonus package. Some industry observers speculated at that time that the reason Wells Fargo of San Francisco wasn't paying a retention bonus was that it was looking to sell St. Louis-based Wachovia Securities LLC. Meanwhile, some brokers at the firm were disappointed at the retention bonus flip-flop after being told repeatedly that there would be a meaningful payment. Shortly after Mr. Ludeman gave this interview, New York-based Morgan Stanley came out with details of its own retention package for brokers at Morgan Stanley Smith Barney.
The MSSB "situation is totally different than our situation because what they will go through as a result of integration will result in enormous change," he said.
In May, Wachovia Securities will be renamed Wells Fargo Advisors.
Q. Why the change of heart on the retention bonuses?
A. We put a lot of time and effort into discussing a retention plan, and we've been working hard on doing that. At the same time, we needed to be very sensitive and responsive to the economic and political realities we're facing. We needed to consider our clients' reaction, the public's reaction, to paying retention at the same time they're dealing with losses in their accounts of 20%, 30%, 40%. This had nothing to do whatsoever with how much we value our financial advisers; it's simply a reflection of the environment we're in.
The second reason that led up to this is, it's clear now — having spent time with Wells Fargo and looking at ... the integration side — that there will not be very much change at all in terms of how [Wachovia advisers] work with their clients. We'll have the same management team, the same systems, the same compensation program. So from that standpoint, we're not going through anywhere near the type of change that we went through when we merged Wachovia Securities with A.G. Edwards [& Sons. Inc. of St. Louis].
Q. Rumors persist that Wachovia Securities will be spun off. What do you say to that?
A. No, that's not [true]. This [spinoff rumor] comes up all the time. Wells Fargo is basically in three businesses now: They're in community banking, wholesale banking, and they created a brand-new organizational design — a new division, if you will — called Wealth, Brokerage and Retirement [Services Group], which we are part of.
I've met with the senior folks several times — repeatedly with [Wells Fargo chief executive] John Stumpf — and I was in San Francisco a few weeks back with [Wells Fargo chairman Richard] Kovacevich, and this business aligns perfectly with their focus on retail clients. They understand that the brokerage business is different from their banking businesses, and we like the way they operate from a decentralized perspective. So I feel very good about their commitment to our business.
Q. What do you think the competitive landscape will look like?
A. There will be probably three or four large firms left when the dust settles, and we plan on being one of those firms. Lower [broker] productivity [at regional firms] in a market that could see declines in the next year or so [will cause] continued consolidation [at] the mid-sized regional firms. And then you'll continue to see boutiques pop up. Those few [large] survivors that are left will be able to offer a full range of services, [which leads] to higher productivity for FAs and stronger client loyalty, [and an ability] to weather whatever storm we're going through.
E-mail Dan Jamieson at email@example.com.