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Trouble in River City

Another tranche of financial professionals from Wachovia Securities has jumped ship to work for a Richmond firm rather than relocate with the company to St. Louis.

Two months ago, four senior investment advisors with Wachovia Securities resigned from the company to launch the Riverfront Investment Group and provide portfolio investment services to financial firms around the country. Now, the company has announced, the founders have been joined by 10 of their former Wachovia colleagues.

The newcomers to Riverfront Investment include portfolio managers, research analysts, relationship managers and portfolio administrators who collectively have over 140 years of experience in the financial services industry.

"We are very excited to be reunited with all of our teammates," said CEO Michael Jones in a press release . "While we've continued to work with this group every day for the past two months, the chemistry and camaraderie that drive our investment process are easiest to achieve when we're working side by side for the same firm. What is most exciting is that our team joins us as partners and fellow owners of Riverfront Investment Group."

In their six years together, the team revolutionized the advice model for the brokerage industry, and in the process, created a series of asset allocation separate account portfolios that are unique in the industry, states the press release. Using a "Glass Walls" approach to clearly communicate their investment decisions, the team attracted nearly $8 billion in client assets into the portfolios. The group now brings that long-term performance track records to Riverfront.

Jones told Carol Hazard with the Times-Dispatch that the firm has landed five clients already and "is in talks with every broker-dealer in the country" – except for Wachovia Securities. But that's a bit touchy. "We would love to start discussions with Wachovia whenever the firm gives us permission," Jones said.

Bacon's bottom line : It's all about the human capital, baby. Moving Wachovia Securities to St. Louis undoubtedly looked good on paper. Consolidating operations with A.G. Edwards would yield significant savings. What the pro forma spreadsheets did not reveal, however, is that a number of talented professionals did not want to make the move. Richmond, for all its flaws, is a pretty attractive community for mid-career executives with families and children. I personally know a number of other Wachovia professionals who would stay in Richmond if they could find a comparable job here. 

So far, Riverside Investment looks like the most damaging defection from Wachovia Securities. If the new company manages to snag half of its old client base, that represents a potential management portfolio of $4 billion. Assuming the usual one percent annual management fee, revenue could amount to $40 million. Ouch.