Thursday, September 8, 2011

Merrill Brokers Next Target for BofA?

The forced departure of Sallie Krawcheck may be a sign of more than just problems at Bank of America - we may be seeing the start of an internal attack on Merrill Lynch brokers.

We all know the contempt that Bank of America has for it's own securities firm employees - witness what it did to its bank brokers when it cut their pay in half, but industry media is speculating that two of the reasons Krawcheck was canned was first, her refusal to force Merril Lynch brokers to push Bank of America products on their customers, and two, her opposition to a move to radically alter compensation at Merrill Lynch by altering the commission structure and putting brokers on a salary plus bonus.

I am sure that she was opposed to the salary and bonus plan, most right-thinking industry executives know that such a compensation scheme does nothing to benefit the broker, and will cause long term damage to the business. Bank of America will undoubtedly wrap itself up in the American flag and claim that it is a move designed to align the broker's interests with the customer, but that is simply nonsense. Wrap fee accounts did that - the broker is compensated for his success in managing the assets. Putting brokers on salary is simply a money grab - taking money from your own employees to shore up your abysmal failure on the banking side.

We all know that Bank of America is failing, and that the only profitable piece of its operations is Merrill Lynch. Again, rather than fix its problems on the banking side, it is going to attempt to cannibalize the brokerage side, and take compensation from its employees.

That is not a coghent business plan. Has BofA really forgotten what happened when it pulled a similar stunt on its bank brokers? They left in droves.

Watch for Merrill brokers to do the same. 

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