Story updated at 4:21 p.m.
The future of Sallie Krawcheck, head of Merrill Lynch’s thundering herd of retail financial advisors, 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.
Fox 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.
What a mess.
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 comment.
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 memo.)
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 dinosaurs.”
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.”