When Merrill Lynch announced that it would replace James Gorman, head of the firm’s brokerage group, with his boss, Robert McCann, tongues wagged: Was Gorman simply moved into a sinecure, put out to pasture? Or was he moved into a real post with real responsibilities?
The leadership change was welcomed by brokers but is unlikely to shake things up at the brokerage unit. Gorman, who has been president of Merrill’s Global Private Client group since 2003, and headed the U.S. Private Client business for two years before that, will fill the newly created position of executive vice president of Corporate Acquisitions, Strategy and Research.
Merrill Lynch declined to comment on what exactly Gorman will be doing in the new role, or what kinds of acquisitions the firm is interested in making, but Gorman himself said in January that Merrill expects consolidation in the retail brokerage industry, and is looking for expansion opportunities in the U.S. and abroad. The company has recently announced plans to purchase a 401(k) record-keeping business and a Dutch investment manager, and has signed a joint venture in China.
A Real Job
Industry veterans and Merrill employees say that, yes, Gorman was actually given a new challenge and is not being forced into a quasi-early retirement. “Gorman’s finally got something that he’s better at,” says one former employee, who in his new job remains in close contact with former colleagues. Gorman, who put the Total Merrill stamp on the brokerage unit, was not an especially popular manager, having come over to Merrill from McKinsey, the consulting firm. Brokers felt he didn’t understand their business, having never been one of them. McCann, on the other hand, is highly regarded and has more credibility with advisors, in part because of his long tenure at the company; he joined Merrill in 1982.
“From an FA-sales-force kind of position, everyone is just nothing but tickled pink to have [McCann] running our side of the business,” says one Merrill FA, based in Pennsylvania, who spoke on the condition that his name not be printed. “Nobody was unhappy with James’ leadership role, but likewise we’re not going to be unhappy that he leaves because they’ve brought in McCann.”
The changing of the guard does not mean Total Merrill is going away, analysts and brokers agree. While some top producers expressed frustration with the program early on, they have since embraced it, FAs say. “This has nothing to do with Total Merrill at this point,” says Guy Manuel, managing director of the CBM Group, a New York-based consultancy. “Even if it might be viewed this way.”
Some say Gorman was first demoted when he was required to report to McCann. Shortly after Stanley O’Neal took over as CEO from David Komansky in August 2003, he added another level of management between himself and Gorman, hiring McCann as vice chairman of wealth management, with oversight of the private client, investment management and research units. McCann had left the company a few months earlier to work at AXA Financial, but O’Neal felt it was a mistake for the company to let him leave.
Russ Alan Prince, an industry consultant at Prince & Associates in Shelton, Conn., thinks moving Gorman out of the private client group really handicaps his chances at taking on a top leadership position. “What’s clear is that with private client growing and becoming more substantial, whoever is running it has a better position to move up the ladder at Merrill Lynch,” he says. “It’s becoming a more significant factor in the entire financial services industry. And success there will propel whoever is in charge to become the new CEO.”
But one broker with access to management says McCann has long been at the front of the line for chairmanship of the company, and that this lateral move actually gives Gorman room to spread his wings. “There’s nothing new in the issue that Gorman may not immediately be the next chairman,” he says. “Broadening [Gorman’s] portfolio gives him opportunity, so that if McCann does move up, he can have an even higher position than he would have had. [O’Neal] is simply broadening the depth and strength of the leadership team as he has been doing all along.” It’s part of O’Neal’s management style, the broker says. In his new position, Gorman will report directly to O’Neal.
Guy Manuel agreed. “They’re making sure people get experience in different areas of the business. And this way Gorman can work directly with Stan,” he says.