As the Bull Turns

The executive comings and goings at Merrill appear to have settled down, but how will the moves affect the firm's reps?

With the hiring of Robert McCann, Merrill Lynch managed to quell the discontented grumblings of its rank-and-file, but the peace is unlikely to last long.

McCann, installed as vice chairman only a few months after leaving Merrill for Axa Financial, is a popular figure in the company. With 21 years of Merrill tenure, in jobs ranging from research chief to the trading desk, his hiring is widely viewed as an olive branch from chairman Stan O'Neal to retail brokers who are resisting Merrill's banking-services initiative, called Total Merrill.

A former Merrill insider says that McCann is a kindred spirit of the brokerage workforce. “This was the first optimistic bit that the retail side has been able to read into anything Stan has done since he became chairman.”

But McCann's reappearance does not signal a pending de-emphasis of Total Merrill — the brainchild of O'Neal and private client group head James Gorman — are likely to be sorely disappointed, a Merrill insider says.

Many of Merrill's top producers view Total Merrill as an unnecessary distraction from more productive rain-making efforts, and their disdain for the program extends to its champion, Gorman (though he is said to be well-liked personally). A former consultant who came to his position via the company's top marketing position, some think Gorman lacks credibility with the brokerage workforce. To wit, some attribute the defection of one of Merrill's top brokers, Jack Schecter, to his displeasure with how the private client group was being run by Gorman. (Schecter could not be reached for comment.)

This state of affairs played into the choice of McCann, former Merrill executives say. “The most interesting and telling element is that James Gorman will report to McCann,” one executive says. “No one for a second should miss that.”

As Total Merrill approaches its first birthday, it faces increasing resistance from the firm's best producers, insiders say. “They're trying to be a bank, but they're not a bank,” says one million-dollar producing Merrill rep. “They just don't have the types of services a high-quality bank has, specifically with regards to lending capabilities.”

“Sure,” he continues, “they can set you up with a checking account. What does that matter? My clients, high-net-worth people, and they couldn't care less about Total Merrill. They have their own banking accounts — or even own their own banks. None of my clients use any of those services.”

Merrill reps say they are inundated with inducements from the brass to sell Beyond Banking and other Total Merrill products to their clients. A recent incentive plan involved a sales contest for financial advisors, who would receive a varying number of credits for opening new banking accounts, with the winners receiving Visa Reward points.

Merrill also is building Total Merrill into its recruiting efforts. The company's recruiting package is nominally based on a model UBS Financial Services started a while back, with some up-front money followed by a couple of years of bonuses based on production. However, Merrill bonuses are based on revenue brought in, not just brokerage production. This means Total Merrill services, such as mortgage originations, cash management accounts and estate planning services, take on added significance to incoming reps.

While in theory Merrill's entire brokerage force should be pushing Total Merrill, in practice not everyone is equally compelled. More experienced reps — particularly big producers — currently are allowed significant latitude in deciding which parts of the Total Merrill platform to use (and which to ignore).

But, observers and insiders say, that is unlikely to last much longer.

Any doubts about Merrill's commitment to Total Merrill should be dispelled by its marketing budgets: 79 percent of the firm's ad funds are spent on the program, according to Competitrack, an ad-tracking company. The financial outlays denoted by this figure are not as important as the public commitment the company is making to its new image.

Those expecting a radical policy reversal with the rep-friendly McCann may be disappointed. For as much power as McCann will wield, the company remains in the control of a new guard, headed by a firmly-in-control O'Neal.

“Gorman and O'Neal have been together for a while, and there aren't that many old Merrill people there anymore — that's going to help them with the changes that they're making,” says Guy Manuel, managing director of The CBM Group, a New York based consultancy. And, he points out, “The reason McCann would come back, of course, is because he's quite aligned with what O'Neal wants.”

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