Dain Rauscher Reps React to RBC Merger
Proposed name is RBC Dain Rauscher Wessels. Retention bonuses top out at 35%.
Dain Rauscher reps are weighing promises of independence and a retention package in evaluating their new parent, Royal Bank of Canada (RBC).
"I think I speak for a lot of brokers here because I've talked to many since the acquisition - I feel very good about the deal," says a rep in the South. "Royal Bank has a track record. They took over Dominion Securities [in the 1980s] and gave brokers full autonomy. There were no restrictions on brokers as far as selling proprietary products or doing things that aren't in the client's best interest."
Brokers also note that RBC CEO John Cleghorn has a background as a rep. "He comes from the ranks, so we're comfortable," the Dain broker says.
When Cleghorn spoke to the troops after the merger announcement, he emphasized that brokers will have independence at the firm, reps say.
There are some skeptics, however. One Dain producer in the West doesn't believe management's message that nothing will change. "The reality is that RBC has the power to step in. Why sit here and wait for the changes when there are other offers on the table that are so generous." The rep says competitors' recruitment packages are healthier than Dain's retention deal, which tops out at 35%.
A Midwest Dain broker says some clients have reservations, too. They are not thrilled to have their business go to a Canadian firm, this rep says.
And the broker in the West adds that competitors are using the merger to woo clients away.
But officials point to positives. Broker payout won't change through 2001. RBC will move to expand Dain's product lines and leverage RBC's technology, according to Chris Crosby, Dain Internet/InfoNET director.
Three weeks after the news, Ron Tschetter, president of Dain's private client group, told the annual gathering of Dain's Association of Women Brokers that reps won't loose their identity. "We can still be who we are," he said. "This does not have to be a selling out or a selling our soul."
In fact, the firm will delay any name change until the middle of next year. The proposed name is RBC Dain Rauscher Wessels.
At the same meeting, Tschetter acknowledged that RBC was "not at the center of anybody's target" of potential acquirers. Although the bank is unknown in the states, it owns RBC Dominion Securities, the largest full-service brokerage in Canada, and has a leading position in Canada's trust market.
For sticking it out during the transition, Dain Rauscher reps will receive retention bonuses worth an estimated $100 million, according to Ron Tschetter, president of Dain's private client group.
The four-year plan will distribute bonuses in phantom Royal Bank of Canada stock based on production from October 1999 to September 2000. The shares will be valued at the price five days prior to the closing of the deal in December. A portion of the phantom stock will be paid out in cash at the end of each year (one-quarter vests each year).
The bonuses shown in the box to the right are for reps with five or more years of experience and production of more than $300,000. Reps with less experience can qualify for a 22.5% bonus. And veteran producers with annual gross of under $300,000 are eligible for a one-time 5% cash bonus if they boost production 15% or more in 2001 and crack the $300,000 level.