A day after Bank of America replaced Sallie Krawcheck as the head of wealth management, advisors and observers are asking what other changes can be expected in management and compensation.
Some recruiters say Krawcheck’s departure may be the final straw for advisors already anxious about Merrill’s increasingly bank-centric culture. But the new head of Merrill Lynch–David Darnell–plans no further changes to the unit’s core leadership or its compensation, according to a source familiar with the company.
“Sallie Krawcheck’s departure in not a great loss for the Merrill advisors, as she was not super accessible to them or out a lot in the field,” said Mindy Diamond of Diamond Consultants in a phone interview with AdvisorOne. “But they are concerned that her departure comes on the heels of other developments that have a negative impact on advisors.”
Over the past year and half, the members of Merrill’s "thundering herd" have been complaining about the hierarchy and other aspects of the firm’s bank culture, the tremendous volatility of BofA stock (BAC) and issues surrounding Countrywide, the troubled mortgage firm it bought in 2008, says Diamond (who does recruiting for Merrill-rival Morgan Stanley and other clients).
“I’ve heard for a while, that the bank mandates are not meshing well with the entrepreneurial spirit of the advisors and their desire to offer the best service possible to clients,” she explained. “Now, they’ll be reporting to bankers everywhere they look, and bankers aren’t known to get the advisor mentality.”
In late April, Krawcheck (left) tapped John Thiel, who was in charge of the private bank and investment group for Merrill at the time, to lead the roughly 16,000 advisors. Thiel joined Merrill as an advisor in Tampa, Fla., in 1989.
Thiel remains in place as the head of the "thundering herd," a source familiar with the company said Wednesday, along with other leaders. For advisors, that’s good news, according to at least one New York-based expert.
“John Thiel is very highly regarded by advisors,” said Mark Elzweig of the executive-search consultancy Elzweig & Co. “As a general rule, most advisors are primarily focused on their own practices and take changes in senior management at 20,000 feet above them in stride."
However, while Elzweig doesn’t expect too much movement to take place in the immediate term, Diamond is less optimistic. “Many Merrill advisors we speak with are acknowledging that they may need to leave soon,” she said. “Advisors were surprised by her departure and are now really concerned. It’s been a tumultuous time for them … and with so much going on, it reminds them of 2008.”
Changes to compensation, such as moving from a traditional broker fee-and-commission plan to a salary-and-bonus configuration would “be a death knell,” Diamond adds.
Darnell, though, told his fellow executives that there will be no changes to compensation plans, an industry insider said, and he is said to be keenly aware of the talk on the Street (including rumors) about advisor pay.
For some big producers, says Diamond, “January 2012 is a significant inflection point … when they will receive the last part of their retention bonus,” and that could be a time when some will consider leaving more seriously. “They are white knuckling it at present,” she added.
While brokers tend to assume the worse until proven otherwise, making major changes on the heels of a management change would heighten their anxiety, explains Andy Tasnady. “People love to start rumors in this kind of a situation,” he said.
Advisors are used to management changes, the consultant adds. “There’s ample other management and senior staff in place below Krawcheck,” said Tasnady, noting that the attitude of the new leader will be the crucial determinate in how Merrill’s "Thundering Herd" responds.
In the second quarter, the number of Merrill Lynch advisors rose to 16,241. Sales (or fees and commissions) per advisor on a trailing-12-month basis totaled $894,000, and average assets per advisor were about $95 million.