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Why Was Krawcheck Forced Out? Cross-selling? Salary Plus Bonus? Politics?

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Sep 7, 2011 2:29 pm

There are a bunch of rumors swirling out there this morning about why exactly Krawcheck was forced out at BofA when she was leading the strongest division at the bank, Merrill Lynch, whose performance has been great on her watch. She got Merrill brokers to stop leaving and it has generated healthy profits in recent quarters. One rumor that has resurfaced is that Moynihan and her replacement, David Darnell, want to switch advisor comp to salary plus bonus (though that sounds like suicide) and that Sallie was blocking such a move. Another idea is that she was kind of anti-cross-selling, a strategy that the bank wants to accelerate. Another idea, set forth by Rochdale analyst Dick Bove, is that the bank wants to reduce the influence  of the consumer divisions and increase the influence of its institutional divisions, becaue the former have gotten too expensive and litigious in the new regulatory environment. What do you think? All thoughts welcome!

read our story about Krawcheck's ouster here.

Sep 8, 2011 3:14 am

Coming from Banc of America Investments, I would say her anti-cross-selling stance is the most obvious reason.  I am surprised at how little cross-selling is required or marketed towards Merrill FA's. It's almost non-existent and the only reaon to do it is to qualify for SPA.  At BAI, we had to do it or else we would take an 8% haircut on our trail grid (C share and annuity trails paid at 25% and you can earn it back to 33% by opening checking accounts).

Sep 8, 2011 1:58 pm

Putting a 30 year banker in charge of 16,000 brokers is classic BAC.  It will be the death of MER by 1000 paper cuts.  it will start with banking products and "Partnerships for Growth" being integrated into SPA and that will evolve into bold faced "hold backs" on grid based on referrals to the bank. 

Advisors will leave but BAC will smile at the street and say everything is fine because headcount is steady.  Headcount will stay steady because they will continue to hire Merrill Edge brokers, the bank branch (salary / bonus) brokers and trainees (and label them as MER brokers).  The bank is salivating over the margins at MER.  If they can get in and tweak payouts etc., they will be able to squeeze more profits out of MER to keep life support going for the bank.  training will get cut, comp will get cut, product haircuts will rise, technology spend will cease.  It will happen slowly...

for the good of all the MER advisers and their clients - lets hope BAC just sells Merrill instead.  Sallie held the place together because of her understanding of the former MER culture.  She was the rebound girlfriend.  The gloves are off, the sleeves are rolled up, and New BAC needs to wring some cash out of MER.