You gotta love Lloyd Blankfein, it’s true. The Financial Times on Thursday named him its Person of the Year because: “He has led for three years, not only navigated the 2008 global crisis better than others on Wall Street but is set to make record profits and pay up to $23bn in bonuses to its 31,700.” But what about the cohort of retail financial advisors who gather assets and, in general, don’t blow up firms?
The story notes his humble origins (A Bronx bred son-of-a-postal worker, public school and his winning his way into Harvard) and his “mastery of risk,” since GS didn’t fare nearly as badly as other financial institutions. None of this is in dispute. GS rocks, as does Blankfein.
Some other worthy names? Charlie Gasparino might suggest JP Morgan Chase’s Jamie Diamon (Morgan pioneered the credit default swap but also managed to keep from over doing it, if you read Gillian Tett’s book on the subject), or Larry Fink, who is literally regarded as Jesus on Earth for his guiding of BlackRock. See Gasparino’s new book, “The Sell Out.”
But — and I am only half kidding here — How about John Thain, who managed to get Merrill Lynch sold over a weekend, saving the 90-plus-year-old firm a certain death. This Time article is critical of Thain, but he got the deal done.
(See my September 2008 edit letter, in which I note that ML had destroyed 80-something percent of its book value in a mere two quarters; an aside, ML called me up and said how I was wrong to entitle the article, Merrill Lynch: A Near-Death Experience That Isn’t Over . . . and that call was made AFTER ML had to be rescued. Here is a passage from my note:
“In trying to fathom the amount of capital that financial firms have destroyed since last summer, I called an acquaintance who used to work at Merrill Lynch. I was trying to get my brain around the big numbers, put the losses into context. Through the second quarter, Merrill wrote down about $50 billion in the credit crisis. That sum wiped out about 4.5 years of the company’s earnings (not including the three-straight quarterly losses) — or 86 percent of its book value.
“‘So, when you think about it,’ I said to my friend, ‘Merrill Lynch basically went bankrupt and recapitalized itself all at the same time — it’s just that Merrill did so without having to file Chapter 11.’
‘Absolutely,” my former-Merrill friend responded. ‘They almost brought the firm down. Thank God for Singapore.’ (Temasek, the sovereign wealth fund of the government of Singapore, bought $6 billion in common equity in December, and invested nearly $4 billion more in another offering this summer.) It should be noted that my friend had an insider’s knowledge about the firm’s risk and hedging strategies.).”
You might also name Ken Lewis as a person of the year, but he is too busily being vilified for saving ML and paying bonuses to ML employees, even as they were busy destroying the firm. But Lewis created a beast of a financial institution, has paid back TARP and is still probably the best person to run the company, according to some BoA employees and Rochdale Securities analyst Dick Bove. Besides, the ML transaction may actually work. By and large, ML financial advisors are a happy lot; please see our 19th Annual Broker Report Cards, an advisor satisfaction survey. http://registeredrep.com/advisorland/career/finance_merrill_lynch_thundering/
Each August we publish a list of the Ten To Watch, the financial services players who will have the biggest impact on the industry in the coming 12 months. We used to joke in edit meeting that we should do a story that said, “You, The Broker.” We were only kidding, but in 2009 management really began to appreciate the beauty of the retail brokerage business. And, sure, some firms lost retail financial assets (UBS is the poster child for this loss of confidence by retail investor and advisor alike), but 2009 was a literal feeding frenzy for the best financial advisors (those offering true financial planning advice for HNW clients for fees based on AUMs. This year, and perhaps, 2010, the retail financial advisor is truly the Person of the Year. Make that Persons of the Year.