Merrill Lynch’s John Thiel, head of the brokerage force, announced in an internal memo Wednesday plans to shake up leadership in the US wealth management and private banking divisions of the firm.
The news comes just two weeks after Bank of America announced a major reorganization of its own leadership, giving the boot to global wealth management group head Sallie Krawcheck as well as Joe Price, president of Global Consumer and Small Business Banking. Bank of America is in the midst of a major cost-cutting plan called New BAC, by which it plans to cut costs by more than 18 percent through the end of 2013. Phase two of that cost-cutting program was to start next month, and would cover divisions that include the wealth management business, but the bank has not yet disclosed the total costs that would be cut in that phase of the plan.
In his memo, Thiel writes that the new structure will help the firm eliminate unnecessary layers of management, create greater synergies between the wealth management and private banking sides of the business, and deliver tailored strategies to each of its client segments— affluent ($250M to $10MM), UHNW ($10MM+), and institutional.
“They eliminated two layers of management,” said Alois Pirker, Aite Group analyst. “There were regional managers before and now the market level folks are reporting straight up to him. This allows Thiel to influence the strategy more directly in each market, and puts him closer to clients. It’s in line with Moynihan’s announcement that he wants to be more client focused.”
Of note for financial advisors: all of the new market heads and client segment heads are former financial advisors, said Pirker. “It’s a good sign that most of the people mentioned in the announcement are former financial advisors, all the heads of the regions and the segments used to be financial advisors. It’s a good signal to the FA that it’s a valued position, and they’re not running it from the bank side, they’re running from within.”
As for whether further cuts should be expected in the wealth management division, Pirker said he doesn't think there is much room for cutting costs. “The distribution side of the firm is set up in a needs-based type of way. Not a lot of fat to cut. It’s a very revenue based model, if you generate production you get more support.”
The global wealth and investment management division has been a bright spot for Bank of America, generating healthy profits. Net income for the unit rose 54 percent to $506 million in the second quarter. In the first half of the year, the group accounted for nearly 20 percent of Bank of America's total revenue, with the brokerage contributing most of that.
The New Lineup
Under the reorganization plan, the wealth management and private banking business will now be divided up into 11 geographic regions instead of four, each led by a single executive who will report directly to Thiel. These "market executives" will then implement market strategies that are clearly targeted to the particular geographic region.
“Within each market, PBIG will continue to primarily serve the needs of UHNW clients, with the PBIG Region Executives reporting into the Market Executives,” wrote Thiel in the memo. “PBIG and USWM will continue to report financial results through quarterly and annual business reviews, led by me.”
Merrill is also dividing its business up by client segments, with four executives reporting to Riley Etheridge, in charge of client solutions and segments, . These are: Bill Cholawa, Head of Capacity and Initiative Management; Ted Durkin, Head of Affluent Client Solutions; Scott Hotham, Head of Institutional Client Solutions; Phil Sieg, Head of UHNW Client Solutions
The executives in charge of the 11 regions are the following (see below for the full memo):
· Brett Bernard, Mid East
· Chris Dupuy, Pacific Northwest
· Linda Houston, New England
· Paul Lambert, Mid America
· Bill Lorenz, Mid Atlantic
· Jeff Markham, Greater Texas
· Sabina McCarthy, NYC Metro
· Don Plaus, South Atlantic
· Jeff Ransdell, Southeast
· Jodi Rolland, Heartland
· Chandler Root, Southwest
The memo:
Dear Colleagues:
Merrill Lynch has done more than any other wealth management business to transform itself to a truly client-centered model, and we proudly pioneered many of the products, solutions and best practices that have shaped our industry for the better. Innovations like CMA; asset gathering; financial planning; the wealth management platform and process; as well as our dedicated resource for serving UHNW clients through PBIG; and our robust platform of investments and thought leadership have all brought us to the leading competitive position we have today.
The new structure reflects months of extensive conversations with clients, advisors and leaders and it aligns to the sweeping progress we’ve made in focusing on the changing needs of clients. It is market-driven, client-driven, and streamlined - bringing leadership closer to advisors and clients. It’s a structure that recognizes the differences from market to market and empowers managers, based on those differences, to design a growth plan that works for their advisors, their clients and, ultimately our Company. It enables us to take a closer look at the real needs of clients across the wealth spectrum and give them whatever they need to reach their goals - taking full advantage of what it means to be part of Merrill Lynch and Bank of America.
US Wealth Management and PBIG Structure:
Goals: The following lays out an integrated operating model, dedicated to serving the needs of our affluent, ultra high net worth (UHNW) and institutional clients. The new USWM/PBIG organizational structure will accomplish four primary goals:
· Develop tailored strategies and tactics to serve each of our client segments – affluent ($250M to $10MM), UHNW ($10MM+), and institutional
· Drive empowerment, accountability and integration across our businesses at the market level and deliver the full benefit of the firm to clients
· Create synergies and integration, while maintaining unique processes as needed across both USWM and PBIG
· Reduce management layers, ensuring our leaders are closer to our advisors, supporting them in delivering a seamless experience to clients
Design: Our wealth management business will now be comprised of 11 geographic markets inclusive of both USWM and PBIG, each led by a
Market Executive who will report directly to me. The Market Executives will be responsible for leading execution and performance against plan through specific segment strategies for affluent, UHNW, and institutional clients in their respective markets. Within each market, PBIG will continue to primarily serve the needs of UHNW clients, with the PBIG Region Executives reporting into the Market Executives. PBIG and USWM will continue to report financial results through quarterly and annual business reviews, led by me.
The 11 markets will be organized under the following key leaders:
· Brett Bernard, Mid East
· Chris Dupuy, Pacific Northwest
· Linda Houston, New England
· Paul Lambert, Mid America
· Bill Lorenz, Mid Atlantic
· Jeff Markham, Greater Texas
· Sabina McCarthy, NYC Metro
· Don Plaus, South Atlantic
· Jeff Ransdell, Southeast
· Jodi Rolland, Heartland
· Chandler Root, Southwest
Greg Franks, Western Division Director, has decided to retire. We thank him for his many years of dedicated service and wish him all the best in his future pursuits.
In a newly created role, Riley Etheridge, currently PBIG Region Executive for Metropolitan & Mid Atlantic will become Head of Client Solutions and Segments, reporting directly to me. In this role, Riley will develop an operating strategy and plan for each client segment. He and his team will partner with field leaders to execute segment specific strategies across each market to drive client acquisition, advisor growth, breadth of relationships and delivery of the firm for our clients. They will also be responsible for coordinating product delivery and other initiatives across the organization ensuring a seamless national delivery.
Now reporting to Riley will be:
· Bill Cholawa, Head of Capacity and Initiative Management
· Ted Durkin, Head of Affluent Client Solutions
· Scott Hotham, Head of Institutional Client Solutions
· Phil Sieg, Head of UHNW Client Solutions
In addition to our key business support partners, my management team now includes Riley, the 11 Market Executives, Tom Fickinger (Head of Advisor Growth and Development), as well as Todd Myers (Chief Operating Officer).
This leadership team represents more than 300 years of combined experience at Merrill Lynch and - with a nearly 20-year average LOS - all of them have served as financial advisors. Please join me in congratulating these leaders on their new positions. I look forward to discussing these changes with you in the days and weeks ahead and to taking Merrill Lynch into the future together.