Bank of America said in early September that wealth-management head Sallie Krawcheck was leaving the company as part of a major reorganization of the bank and its operations. It also announced plans to cut some 30,000 jobs over the next several years and $5 billion a year by 2014, though it says it continues to hire financial advisors.
On September 6, BofA CEO Brian Moynihan went public with plans to reorganize the bank’s management and operating units around its three core customer groups: individuals, companies and institutional investors. He appointed David Darnell and Tom Montag to the new posts of co-chief operating officers and made them immediately accountable for all operations. Darnell is now in charge of the “individual customer” track, including the 16,240-strong Merrill Lynch advisor force, Merrill Edge advisors and reps with U.S. Trust.
Roughly two years ago, Bank of America selected Krawcheck, a veteran of both Sanford Bernstein and Citigroup, as the head of its global wealth and investment management group, which had just come to include Merrill Lynch. “I am pleased with the work the team has done, in particular the strong performance of the business,” Krawcheck said in a statement. “It has been an honor to lead Bank of America Global Wealth and Investment Management during a challenging time.”
Time to Streamline
“Sallie has led the wealth management businesses through an important integration with the broader franchise,” said Moynihan. “Delayering and simplifying at the scale in which we operate requires difficult decisions.”
Given the need for further streamlining of staff and management at BofA, “Moynihan is doing the right thing,” said Chip Roame, head of the consultancy Tiburon Strategic Advisors in a phone interview. “The super focus on clients and the other associated changes are all good things.”
BofA had to do more delayering in order to boost profits, Roame says. “This means making it smaller throughout the organization — not just at the lower levels but at higher levels, where it’s top heavy, too,” he explained. “And Moynihan really made this organization have some clean lines.”
Darnell joined BofA as a credit analyst in 1979 and most recently has served as head of Global Commercial Banking. He also led the Middle Market Banking Group and the bank’s consumer and commercial banking operations in the central region of the U.S., based in St. Louis.
“Bank of America’s Project New BAC is key to the company’s strategy of focusing all of its resources on serving individuals, companies, and institutional investors,” BofA explained in a recent statement. “The first result of New BAC was the recently announced management reorganization, removing a layer of management and streamlining the company by aligning its businesses with the customer groups.”
“As the decisions are implemented, employment levels in the areas under review during Phase I are expected to be reduced by approximately 30,000 jobs over the next few years,” BofA added. “The company expects that attrition and the elimination of appropriate unfilled roles will be a significant part of the anticipated decrease in jobs.”
BofA says it expects the first stage of its cost-cutting efforts to “lead to net expense reductions of $5 billion per year by 2014, on a baseline of $27 billion in annual expenses for the areas the company reviewed.”
Krawcheck’s dismissal, says analyst Nancy Bush of SNL Financial, appears to be a circumstance that was tied to the loss of the job within BofA itself, rather than any specific shortfall in her performance. “The reporting structure changed, and that position was folded into the new organization under Darnell,” Bush explained. “At the same time, it gave BofA the chance to move someone out who was in a high-earning position.”
Meanwhile, the number of Merrill Lynch advisors has been rising. It totaled 16,241 in the second quarter of 2010, up from 15,299 last year and 15,695 in the first quarter. Sales (or fees and commissions) per advisor on a trailing-12-month basis totaled $894,000 in Q2 vs. $843,000 last year and $931,000 in Q1.