-
Bank of America's Montag and Darnell received broad power to downsize the company. They don't plan to blow it up, but will ramp up selective sales of servicing rights, equity stakes in other businesses and undervalued assets.
September 8 -
Bank of America Corp.'s dismissal Tuesday night of top wealth management executive Sallie Krawcheck may point to a deeper commitment to the Merrill Lynch business.
September 7 -
Bank of America ousted prominent executives Sallie Krawcheck and Joe Price on Tuesday as part of Chief Executive Brian Moynihan's efforts to reorganize the struggling company.
September 6
Opportunities are certain to be abundant for Sallie Krawcheck, the former president of global wealth and investment management at Bank of America Merrill Lynch who was shown the door in a management shake-up last week.
For one, she has a high profile in New York, the heart of the world's financial services industry. (Bank of America Corp. is headquartered in Charlotte, N.C.)
"Someone will pick her up, and ultimately she might be better off for it," Bert Ely, an independent bank consultant in Alexandria, Va., said in a telephone interview Wednesday.
It would not be surprising if Krawcheck was courted by the likes of JPMorgan Chase, Ely added.
If Krawcheck does not want to go to another bank, there are plenty of entrepreneurial models for her to emulate, including, perhaps, advisory groups like Cetera and HighTower, a Chicago firm, said Scott Smith, associate director of intermediary practices at Cerulli Associates in Boston.
Krawcheck's departure is not likely to cause many of the advisors left behind to leave, William Willis, president and chief executive of Willis Consulting Inc., said in a telephone interview.
Although the short-term impact of her departure is unclear, the wealth management group might find itself hard-pressed to do more cross-selling of the parent bank's products, Smith said.
Krawcheck did not pressure advisors to cross-sell the commercial bank's products and did not want to risk investor relationships by putting the bank's strategic goals over those of clients, he said.
"That might have been one of the contributing factors here," Smith said.
What also might have worked against Krawcheck, Ely said, is that the bank's management seems to be discussing a change in its compensation structure that would give advisors a salary and bonuses.
"I believe … that she preferred to leave it as salary plus commission," Ely said. "There are others pushing for a change away from so much emphasis on the production-and-commission setup now in place."
The existing financial advisory force is not likely to take her departure as a terrible blow. Within the industry and her own firm, Krawcheck had a reputation as a polarizing figure.
"She is not a deep-rooted Merrill Lyncher," Willis said. "She came from the competition two years ago, and now she's gone."
Advisors at Merrill never felt that Krawcheck was a true advocate, according to Mindy Diamond, president and chief executive of Diamond Consultants.
"My phone started ringing at 6 p.m. last night. Advisors don't feel mournful about losing Sallie," She said 25 Merrill Lynch advisors contacted her in a 20-hour period.
"She was inaccessible," Diamond added.
Diamond said Krawcheck's departure is likely a clear indicator of the direction of Bank of America and its Merrill Lynch unit, and the cultural factors at play in her ouster.
Bank of America's stock price has taken a beating - it is off more than 44% year to date. The change in culture that has made the wealth management unit a more bank-oriented environment is raising concerns, Diamond said.
The fact that David Darnell replaced Krawcheck is more evidence that the prevailing Bank of America culture has won out.
"Darnell is being put in place to shake things up," Diamond said.
Darnell is a Bank of America veteran. According to at least one media report, he supports the idea of changing the company's compensation structure to salary plus bonus.
That, Diamond said, "is the advisors' biggest terror." If such a compensation were to be implemented, "it would be a mass exodus," Diamond said.
"There are two things that motivate or accelerate" advisor movement between companies, Diamond said. "One is the ability to serve clients freely and second is messing with advisor comp."
"Even if it is lowering payout, there will be a mass exodus, because [Merrill Lynch] advisors are at the end of their rope," she said. "They have no faith or trust in B of A management. They don't trust what [Bank of America CEO Brian] Moynihan is saying. They don't know where to get their comfort."
Morgan Stanley Smith Barney will likely be the biggest winner in the aftermath, Diamond said.
"It is institutionally owned and has not changed direction," Diamond said. "There is a 'commitment to brokerage,' plus it has rolled out new technology."
