THE headhunters are circling.
Their target: Legg Mason brokers.
Phone lines started lighting up almost as soon as it was reported Wednesday night that Legg Mason was in talks to swap its brokerage business and its 1,500 financial advisers for Citigroup's money-management business.
"The headhunters are pounding; they smell blood," said a Legg Mason broker in a small office on the East Coast. "It is hard. I can't believe I'm discussing it."
There is no word of defections, but emotions are running high inside Legg's brokerage offices. Some brokers are convinced that they will be OK even if the sale with Citi goes through. Others are angry, nervous, unsettled and fearful of what the future holds.
"Whenever you move from something you feel comfortable with to the unknown it is upsetting," said a Legg Mason broker in Maryland who has been with the firm more than a decade. "We are all sitting here with our fingers and toes crossed. We really don't have a vote in this."
"It is the kind of thing that makes you wake up at night," said another broker in an office on the East Coast.
Brokers interviewed would talk only if their names were not used. Legg employees received a terse e-mail Thursday instructing them to refer all calls from the media to corporate communications. Legg doesn't even want the brokers talking to clients about the situation.
Neither company has confirmed that Citi and Legg Mason are in negotiations, despite the leak last week. Some brokers think the companies are far along in their discussions and that there is a good chance a deal could get done.
As they wait, the official silence, the rumors and aggressive headhunters are making it difficult for brokers to focus.
"It just paralyzes the financial advisers the longer it takes," said a Legg broker from out of state. "It is horribly unproductive."
"There is a lot of trepidation out there," said Richard Hunt, managing partner of Sanford Barrows Group in Miami, one of the largest financial industry recruiting firms in the country.
Nearly two days before the story broke, he said, brokers with other firms caught wind of the rumor and started calling him.
"I don't think anyone is really sure what is going to happen," Hunt said. "What we are hearing a lot of is, 'What is out there in case I have got to do something?'"
The most vulnerable brokers, Hunt said, are "middle-of-the-pack people" -- those who have been in the business only a few years and don't have a large book of clients. "The top-ranked guys have nothing to worry about," he said. "There is a squeeze process that goes on."
Competing firms are even trying to lure Legg brokers away on their own.
"Their brokers bring a good experience and a good culture that would be a similar fit to a firm like Folger Nolan," said Christopher Durchanek, vice president at Folger Nolan Fleming Douglas, a brokerage based in Washington. "Any firm would want to look at Legg brokers. Certainly, we have and will be calling out to them."
Brokers could easily feel betrayed by Chip Mason, Legg's chairman and chief executive, who is reportedly negotiating the transaction, but they don't for the most part.
They have seen their influence at the firm wane as mutual funds, especially those run by Legg's star money manager, Bill Miller, soar.
Ten years ago, the brokerage business brought in nearly 50 percent of the company's revenue. Today, it's a little over 20 percent. Also, regulatory pressure has grown more intense on mutual fund companies to dump their brokerage arms because of potential conflicts of interest.
There is little question that Legg's brokers are a loyal group. Some have left to work at other investment houses only to return. Now, many don't want change and they call Legg family.
"I don't know of any firm like it," said the Legg broker in a small office on the East Coast. "Culture is what I love about the place. They treat us like we are professional as opposed to salesmen. I think right now there are a lot of people who are lighting candles and praying."
But even if the deal with Citi doesn't go through, at least one broker thinks the fate of the group has been sealed.
"There is too much anxiety," said a broker in Maryland who has been with the firm more than a decade. "If it does unravel, I am as happy as I can be staying at Legg Mason. The only difference is, now you know you are for sale."
Bill Atkinson's column runs Tuesdays and Fridays. Contact him at 410-332-6961 or by e-mail at bill.atkinson@balt sun.com.