Salary Plus Bonus? Krawcheck?
Wondering if any of you think this is a real possibility at any of the brokerage firms, if you've heard rumblings about it, and how you would respond to such a change...would you stick around?
"The future of Sallie Krawcheck, head of Merrill Lynch’s thundering herd, is
suddenly the subject of much speculation. CNBC reported Tuesday afternoon that senior management at Bank of
America wants to push her out for defending Merrill advisors against unfavorable
changes to their compensation, from commission to salary plus bonus.
News’ Charlie Gasparino subsequently reported that CNBC got it wrong, and that after conversations
with Bank of America management, he is convinced that the management infighting
and comp changes are rumors started by rival Bob McCann.
McCann was in charge of Merrill’s wealth management division until
early last year, but is now heading up the advisor force at UBS, and is said to
be looking to recruit from his old stomping grounds. Fox claims McCann has been
pushing this story for months. UBS did not immediately respond to requests for
Registered Rep. obtained a copy of the internal memo Sallie
Krawcheck sent to Merrill FAs Wednesday morning over email that called the news
story “ridiculous.” She wrote, “Please know—I’ve had exactly zero discussions
with Brian Moynihan—or anyone for that matter—about changing the FA comp
structure. It is simply not on the table. Second our business and I have the
full support of Brian and the rest of my partners on his senior leadership team.
Please make no mistake on this point.” (See below for a copy of the actual
Bank of America spokeswoman Selena Morris also denied the rumors and said
Sallie has been a strong leader of the business. “The wealth management
businesses of Bank of America have had strong performance under Sallie, who is a
popular leader here. Sallie has the full support of Brian Moynihan and senior
management. There has been no discussion of FA comp on the part of Bank of
America or Merrill Lynch.”
It’s certainly not the first time Krawcheck
has been said to have locked horns with her bosses, in any case. She departed
Citigroup in 2008 after a dispute with CEO Vikram Pandit.
“It’s quite possible that Sallie Krawcheck may get shown the door at BofA,”
says industry attorney Bill Singer, a columnist for this magazine. “I’ve heard
this rumor from clients for about 6 months. They keep hearing rumors that the
grid’s going to be adjusted, rumors of a management shakeup.”
Would any wirehouse firm dare try to make such a major change to the
compensation structure of its brokers? “It’s not insane,” says Singer. “It’s
economic survival. Brokers are anachronisms. They’re outdated. They’re
Singer speculates that if Bank of America, and other banks, wanted they could
switch to salary and bonus for most of their advisors, and then cut private
deals with their best brokers. These days brokers only take 60 to 70 percent of
their clients with them, anyway, he says, so departing brokers are not such a
huge threat. “Year after year the payouts deteriorate, the qualifying thresholds
go up. Brokers are not unionized, they have no trade group. The industry
fragments the sales force. Imposes upon them whatever rules they want.”
I would be highly apt to defect if my firm modified our comp into a salary plus bonus arrangement. I suspect I am in the majority, and the wires all know this, so I think this change is unlikely Bill Singer sounds foolish, why are the wires paying 300% x T12 for outdated dinosaurs. Wall Street firms are moving in the direction of wealth management, (predictable revenue, low risk, no leverage required!) I have heard the death of the full service broker is imminent for years. With respect to the 30% of clients left behind when brokers split, well lets just say they are never any great catches for the inheriting FA. The broker usually takes his best clients - firms know this too.
I do think the bank owned firms will move in a direction to compress compensation once they have locked in the majority of the reps with retention. That industry is long known for very low compensation levels. Let's face it, most wires are not and have not grown in years. I would look to who is running these firms and if thier comp is structured to grow the earnings or cut costs and increase profits. Only time will tell.