Windham Financial makes leap to Burlington

Vermont Business Magazine, Mar 01, 1998 by J, Kevin

Burlington's emergence as a regional center of the financial services industry gained momentum in early February when a mid-size brokerage house moved its headquarters into a landmark building downtown.

Windham Financial Services -- a full-service discount broker, dealer and registered investment advisor -- moved into the old Burlington Savings Bank building at the corner of College and St Paul Streets. It relocated to northern Vermont from the southern part of the state. Windham's main office was located in West Dover for the past 15 years.

State officials are nonetheless touting Windham's migration from southeastern to northwestern Vermont as a significant advance in their drive to make the entire state a mecca for financial services companies.

With existing branches in Colorado, Connecticut and New York, as well as Vermont, Windham could have moved its headquarters anywhere in the country, notes the Dean administration. A person at a computer keyboard in Hawaii, for example, now has access to the same data, at the same instant, as a trader on the floor of the New York Stock Exchange.

Windham's decision to remain in Vermont, officials argue, thus highlights the state's attractiveness among executives considering new locations for a brokerage house.

At the same time, economic developers do acknowledge that Windham's relocation represents a loss to a part of Vermont that was already flagging behind Chittenden County's brisk pace of growth.

Windham Financial Services president Paul Mendelsohn likewise concedes that the decision to leave West Dover in Windham County for Burlington was "very difficult." Mendelsohn noted that he had served on West Dover's Select Board and helped prepare the region's economic development plan.

His business needed to expand its head office operations, however, and Burlington offered irresistible enticements -- not the least of which was the availability of the handsome, hundred-year-old Savings Bank building. Its brick exterior and mahogany teller cages give the setting "the feel of an old-time Wall Street brokerage house," Mendelsohn says.

And even though "the large majority" of the state's financial firms are situated in Burlington, southern Vermont will eventually attract its fair share, assures Sarah Lelmbach, the state official in charge of financial services development.

"Boston and New York money managers tend to be more familiar with southern Vermont," Lelmbach observes. "A lot of them ski there and some even have second-homes or condos near the resorts. If they're going to relocate to Vermont, they'd probably move there rather than to the Burlington area.

"I believe it will even out over time." Lelmbach's unit within the Agency of Commerce and Community Development is working to recruit financial services companies in accordance with the state's identification of this industry as a key to Vermont's economic growth in the coming years. "This is a clean industry that offers higher-than-average wages," Governor Howard Dean has said.

The state has enjoyed some initial success in expanding its financial services sector. The industry's in-state payroll has increased 22 percent since 1995, and the number of firms doing business in Vermont rose from 68 to 80 during the same period.

Some of these gains are attributable, at least in part, to a tax incentive plan approved by the state Legislature in July 1996. It provides credits of up to 75 percent of state income taxes, based on a formula that reflects both a company's Vermont payroll and its out-of-state revenues. The incentive package will eventually result in an annual loss to the state of an estimated $100,000 in revenues.

But that sum will be heavily outweighed by added tax collections if Vermont meets its ambitious goals for expansion of the financial services sector. State officials are aiming for a $50 million increase in the industry's payroll by 2001. That represents a nearly 150 percent leap over the current payroll total of $35 million.

Mendelsohn, for one, thinks that target can indeed be hit.

He points to his decision to keep Windham in Vermont, maintaining that the factors that influenced his own choice will apply in many other cases as well.

Mendelsohn says he considered moving the company to either the Hanover or Keene areas of New Hampshire, but chose Burlington because its infrastructure is superior to theirs. In addition to the proximity of an international airport and its advanced telecommunications capabilities, Burlington offers "a sizable labor pool of trained securities people," he notes. "All this gives us a strong foundation on which to build our business."

The Vermont Securities Institute at Champlain College provides Windham with further advantages, Mendelsohn says. While making use of the Institute's resources, the company will be helping train 13 Champlain students this semester, affording them hands-on experience in all aspects of working at a brokerage house. And as the Institute produces more and more skilled graduates, the local specialized labor pool will widen and deepen.